RE: The Issue of Size

[Michael Jones <powderfinger99@yahoo.com>]

<<<
But what is the size of the pool that's needed?  Any pool of capital 
big enough to throw off earnings worth 2.5% of GDP has to be pretty 
darn big.  And it will be big regardless of whether it's held by the 
Trust Fund or held by PRA's.  Simply to close the gap between
4.5% and 7% of GDP, the pool of capital has to be worth roughly
65% of GDP. 
>>>

Steve,

I'm with you until we get to here.

I would, in general, agree that adding a significant amount of
capital to the markets might make one wonder what, if any, effect
there would be to the markets. 

It doesn't have to be a zero-sum game, as is the case with
the current Social Security program. Our economy can consume
much more capital than it currently does. More capital means
more businesses, more jobs, and more wealth. If there is any
limitation in our economy going forward, it's probably the number
of workers and the skills of workers.  

The 65% of GDP calcuation ignores capital appreciation. If one
were to fund their retirement only off of earnings, then the
65% number would be correct. However, income can also be created
by realizing the appreciation of the asset. The appreciation of
the assets are usually significantly greater than the earnings.

Here's an example:
Assume you bought $10,000 of Mobil stock in 1982. Over the years,
the stock would have paid somewhere about 2-4% in earnings.
This is right in the neighborhood of the amount required given
in your calculation.

The stock today is worth about $200,000. There is over $190,000
of capital appreciation which could be tapped for income. 

Michael