But why do foundations try for more than the intake of donations? Why should they try to to earn? If the work was important enough to garner donations, Wiesel should have just kept in bonds or CDs. Since there is no such thing as "enough" money, why is somewhat less a problem?
I make this argument about pension funds and other non-profit functions like my employer.
Ponzi persuasion can be pretty disarming when it comes with references from friends. That may be one reason for the pie-in-the-sky risk.
Tom, we have our pension through PERS in California, and my understanding is that w/o growth in the PERS contributions, they would be unable to keep up w/ demands on the system. Sort of like SS, you can't get enough out the current workers to take care of the old farts. We pensioners are just living too long!
My guess would be that these foundations see others making a ton of money and want in on it. I suspicion they will be more careful in the future.
It is not a hard and fast rule that contributions are insufficient, and growth at X percent necessary. Contributions can simply be mandated by law, so the problem is political, in that cheapskate lawmakers hope to fund the system without asking people to pay for it.
The advantage of low-but-safe growth is that a defined rate of contributions will absolutely deliver the right capitalization. The cross-your-fingers-and-hope system has failed repeatedly.
I once heard the advice that when getting started in building up a nest egg, one simply saves. The rate of return is essentially infinite, since one goes from zero to something. That was and still is a way that most people planned to buy their first house---they saved. Waiting for an investment windfall was foolish, and if it works to start why doesn't it still work when there is more in the form of a pension fund fund?
Of course it would work, even at zero interest, if the contribution rate was appropriate. A hint of Ponzi, in that new contributions pay for retirees, but the only reason it would collapse would be a decline in population and therefore fewer employees. The SS worries are mainly, these days, about the demographic bump, with an expected surplus of retirees and a smaller crop of employees contributing. But that process would hurt market-dependent systems, too, if the bulk of the fund is in a volatile market. Only if the bulk is sheltered in safe stuff, with a small amount in the high-yield/high-risk area would the system escape the glut of claims. But that would also mean very small increases from that high-yield area.
Isn't it better to simply budget the required amount honestly instead of hoping your state cashes out ahead of the others?
Mike,
Thanks for this. I think it's a good thing we are reminded about the destructive ripple effects of this scheme.
While I agree that it wasn't/isn't wise or even fiscally responsible to put all 'eggs in one basket', whether an individual or other entity - these organizations exist to provide services for those in need and are motivated to 'get more to do more'.
Query: Have you heard status of Madoff's request to be released from prison until his sentencing date (June I think).
Appreciate.
He had the gall to request that?
What a horrid, horrid excuse for a human being.
Makes ya feel superior doesn't it? Haven't heard of any of yours stealing all the eggs lately. So, sit there on your high perch and flap your feathers around in righteous indignation... and if there are any rotten eggs (from others of course) you know where to aim them....
It was denied. I guess the judge kinda realized that when Bernie said he needed time to "get ready" to go to jail, that was a warning bell. He probably wanted to tell the lovely missus which mattress to pull apart.
Thanks - I actually think that after he saw his new lifetime environment, he wanted out so he could either a.) run or b.) kill himself.
I don't think he'll last long in there and sure there will now be an appeal of the motion to let him out.
Thanks to you for being here. This news added to the rest of it in the past year or two seems to have Americans feeling jittery.
"How we got here" would make a valuable documentary.
Who ought to produce it?
Yep, yep, Madoff's like a funeral crasher.
Scary how self-possessed in the scam he seems.
To see a human being in that state of being is a spooky thing.
To be forgiven, a person has to accept the need. And then accept the forgiveness. For that they have to trust the forgiveness.
True.
But why do foundations try for more than the intake of donations? Why should they try to to earn? If the work was important enough to garner donations, Wiesel should have just kept in bonds or CDs. Since there is no such thing as "enough" money, why is somewhat less a problem?
I make this argument about pension funds and other non-profit functions like my employer.
March 22, 2009 1:03 AM | Reply | Permalink
Ponzi persuasion can be pretty disarming when it comes with references from friends. That may be one reason for the pie-in-the-sky risk.
March 22, 2009 3:03 AM | Reply | Permalink
Tom, we have our pension through PERS in California, and my understanding is that w/o growth in the PERS contributions, they would be unable to keep up w/ demands on the system. Sort of like SS, you can't get enough out the current workers to take care of the old farts. We pensioners are just living too long!
My guess would be that these foundations see others making a ton of money and want in on it. I suspicion they will be more careful in the future.
March 22, 2009 12:31 PM | Reply | Permalink
It is not a hard and fast rule that contributions are insufficient, and growth at X percent necessary. Contributions can simply be mandated by law, so the problem is political, in that cheapskate lawmakers hope to fund the system without asking people to pay for it.
The advantage of low-but-safe growth is that a defined rate of contributions will absolutely deliver the right capitalization. The cross-your-fingers-and-hope system has failed repeatedly.
I once heard the advice that when getting started in building up a nest egg, one simply saves. The rate of return is essentially infinite, since one goes from zero to something. That was and still is a way that most people planned to buy their first house---they saved. Waiting for an investment windfall was foolish, and if it works to start why doesn't it still work when there is more in the form of a pension fund fund?
Of course it would work, even at zero interest, if the contribution rate was appropriate. A hint of Ponzi, in that new contributions pay for retirees, but the only reason it would collapse would be a decline in population and therefore fewer employees. The SS worries are mainly, these days, about the demographic bump, with an expected surplus of retirees and a smaller crop of employees contributing. But that process would hurt market-dependent systems, too, if the bulk of the fund is in a volatile market. Only if the bulk is sheltered in safe stuff, with a small amount in the high-yield/high-risk area would the system escape the glut of claims. But that would also mean very small increases from that high-yield area.
Isn't it better to simply budget the required amount honestly instead of hoping your state cashes out ahead of the others?
March 22, 2009 1:01 PM | Reply | Permalink
Mike,
Thanks for this. I think it's a good thing we are reminded about the destructive ripple effects of this scheme.
While I agree that it wasn't/isn't wise or even fiscally responsible to put all 'eggs in one basket', whether an individual or other entity - these organizations exist to provide services for those in need and are motivated to 'get more to do more'.
Query: Have you heard status of Madoff's request to be released from prison until his sentencing date (June I think).
Appreciate.
March 22, 2009 11:20 AM | Reply | Permalink
He had the gall to request that?
What a horrid, horrid excuse for a human being.
March 22, 2009 11:38 AM | Reply | Permalink
Makes ya feel superior doesn't it? Haven't heard of any of yours stealing all the eggs lately. So, sit there on your high perch and flap your feathers around in righteous indignation... and if there are any rotten eggs (from others of course) you know where to aim them....
March 22, 2009 12:20 PM | Reply | Permalink
It was denied. I guess the judge kinda realized that when Bernie said he needed time to "get ready" to go to jail, that was a warning bell. He probably wanted to tell the lovely missus which mattress to pull apart.
March 22, 2009 2:30 PM | Reply | Permalink
Thanks - I actually think that after he saw his new lifetime environment, he wanted out so he could either a.) run or b.) kill himself.
I don't think he'll last long in there and sure there will now be an appeal of the motion to let him out.
March 22, 2009 4:49 PM | Reply | Permalink
Thanks to you for being here. This news added to the rest of it in the past year or two seems to have Americans feeling jittery.
"How we got here" would make a valuable documentary.
Who ought to produce it?
March 22, 2009 8:23 PM | Reply | Permalink
Yep, yep, Madoff's like a funeral crasher.
Scary how self-possessed in the scam he seems.
To see a human being in that state of being is a spooky thing.
To be forgiven, a person has to accept the need. And then accept the forgiveness. For that they have to trust the forgiveness.
Would he be able to do so if it came his way?
March 22, 2009 8:21 PM | Reply | Permalink