Tuesday, January 22, 2008

Here's The Funny Part

A Tiny Revolution: Attaturk points to a commenter here, who quotes a letter yesterday in the Minneapolis-St. Paul Tribune:

We should be glad that our Social Security money wasn’t in the privatized hands of Citibank, Merrill Lynch and the other financial ‘wizards’ as President Bush had so strongly urged.

That's true as far as it goes. But in fact, the further the stock market drops, the less bad an idea privatizing Social Security becomes. (More precisely, the further the price/earnings ratio drops, the less bad it is.) That's because stocks have been comparatively expensive, historically speaking (as measured by the P/E ratio). That means privatization would have led to lots of people buying high and likely selling low. Privatizing Social Security would be a bad idea in almost all circumstances, but the least bad moment to enact it would be just after a stock market collapse.

That's the funny thing about privatization. It will be politically most popular during a stock market bubble, at the exact worst time to do it. And it will be politically impossible when it makes a little more sense. If there's a giant stock market crash this year, don't look for Bush to seize the opportunity to roll out his privatization plan again.

Granted, this isn't all THAT funny. But at a time when much of the world is about to get kicked in the nads even harder than usual, I'll take what I can get.

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