In reality you need money and capital to have an economy.
Pension funds such as CalPERS are capital. They make capital work for retirees. Imagine how much harder it would be to fund retirees if participating employers had to pay retirement benefits directly out of annual budgets, or had to set aside money that could not be invested and earn a return.[/quote]
Imagine how much cheaper everything would be if “investors” weren’t able to leverage up and buy all the existing assets/commodities like land, housing, food, etc. (and regular buyers, like the idiotic FBs…if they couldn’t use credit to push prices up). Again, it’s one thing to buy up raw materials if you’re going to add value and sell finished goods on the open market; it’s another thing entirely if you simply hoard goods with the intention of selling later for a higher price.
You do realize that capital is created by labor, right? It is labor that creates, and capital comes about because of that labor, not the other way around. The only exception to this is ownership/control of raw land and untapped natural resources — both of which are pretty worthless unless you DO something with them, and that, once again, requires labor to give it value.
BTW, it used to be the case that CalPERS and other pension funds did indeed rely mostly on savings and very safe bonds to fund their retirement. I would love to go back to that system again.
More:
“Attorney General Jerry Brown, the Democratic candidate for governor, mentioned the change in CalPERS investment strategy twice as he announced a civil lawsuit filed in May against the former CalPERS officials, Villalobos and Buenrostro.
“CalPERS in former times operated on a more steady, slow-return, extremely safe investment,” he said, “and over the decades this has been changed to a more risk-tolerant environment. I think they are going to have to move it back to a more balanced portfolio.”
Brown attributed the change to the emergence of a “casino economy” and widespread pressure, not just on pension funds, to “earn more and more.” He later acknowledged that he had forgotten about the little-known ballot measure.
Proposition 21, approved in 1984 two years after Brown ended eight years as governor, lifted a lid that allowed only 25 percent of pension fund investments to be in blue-chip stocks.
Public pension funds like CalPERS, which began operating in 1932, were only allowed to invest in bonds in their early years. A ballot measure in 1966, Proposition 1, took the first step away from bonds.
The measure placed on the ballot, without a single “no” vote in the Legislature, was said to be needed to lift a 94-year-old prohibition against stock investments, which were being successfully used in 30 states.”
