On this day in 1901, a 63-year-old schoolteacher named Annie Edson Taylor becomes the first person to take the plunge over Niagara Falls in a barrel.
Yes, is IS possible to survive a barrel ride over Niagara Falls. And it IS possible to manage an annuity or defined benefit pension plan successfully. Folks have been doing all these things for a long time.
But not without RISK.
So who bears the risk? And why?
I say the person who takes a ride over Niagara in a barrel should bear the risk. If it works out, they get the glory.
If it doesn’t work, well …
Of course there are ways to mitigate the risk: a stronger barrel, an analysis of water currents, etc. We know a lot more than we did a century ago, and folks have probably gotten a lot better at managing these risks.
In August 1995, Steve Trotter, and Lori Martin took a barrel ride over the falls. They survived the fall but their barrel became stuck at the bottom of the falls, requiring a rescue.
Seems there are black swans swimming in the Niagara River.
The real estate crash that is the basis for this website occurred for one fundamental reason: We thought we could eliminate risk, or at least reduce it to the point that we could ignore it.
The financial theory behind mortgage CDOs is not much different than the ones used by annuities and pension funds. Smart people running highly diversified portfolios, actuarial planning based on historical statistics, etc. And it all works, most of the time.
But there is still risk.
So how do we eliminate the risk of dying when riding a barrel over a waterfall?
There’s only one way to eliminate all risk: Don’t ride a barrel over a waterfall.
So how we eliminate the risk of a defined benefit pension crisis?
There’s only one way to eliminate all risk: Don’t use defined benefit plans.
That’s right, just don’t do it.
One can live a happy, fulfilling life without ever riding a barrel over a waterfall.
It IS possible.
In fact, that’s how most people live.
And we can have a government that provides necessary services while compensating employees fairly without ever using a government-guaranteed defined benefit pension plan.
It IS possible.
In fact that’s how most people live.[/quote]
The government guarantees all kinds of things: GSE mortgages, student loans, farm loans, agricultural crop prices, FDIC insurance, Section 8 rent…and much more.
If you want to eliminate government guarantees, great; but lets eliminate ALL government guarantees and entitlements.
Once again, we ALL have to pay for things we don’t like. Some of these things we really HATE to pay for. For me, it’s wars, drones, the NSA, the “drug war,” subsidies for Walmart and others who underpay their employees so they have to use food stamps, Medicaid, etc. Some don’t want to pay for sidewalks, libraries, parks, or schools that they will never use. The list goes on and on. That’s the price of living in a democratic, civilized society. Why do you feel that you shouldn’t have to pay for things you don’t like when everybody else has to do so?
