A question - would a true conservative not also be a staunch constitutionalist?

[Lanius]

Lanius, I am talking long-term across multiple cycles. This is within my field of expertise. If you want to learn, ask good questions. Don't aimlessly argue circles.

http://pages.stern.nyu.edu/~adamodar...histretSP.html

This is only one source, and only one view, but this source shows the annual geometric return on stocks 1928-2011 at over 9%.

http://www.investorhome.com/history.htm

This source suggests 10%-12%.
http://www.simplestockinvesting.com/...al-returns.htm

This source is also interesting.
So, relatively modest contributions compounding over 40 years makes for big money.

Multiple cycles during times of high economic growth. (20th century)

Economic growth isn't a law of nature, it's conditional on new technologies and cheap energy.

In the past 30 years, in developed countries it's been mostly tied
to large increases in debt.

I believe you're overly optimistic when you say 10%.

[pmeisel]

Multiple cycles during times of high economic growth. (20th century)

Economic growth isn't a law of nature, it's conditional on new technologies

And if you look that kind of growth (new resources, new technologies) has been going on for large periods of recorded history. If you didn't already know that, go read some history.

People have been investing and making money since accounting and banking started allowing more efficient exchange in the Middle Ages. There is ample literature, and if you're really curious and ask, I'll share some with you. But I suspect you really just want to argue -- and don't know enough to argue well.

[Lanius]

Return on investments, such as stocks used to be 5%. That is, lower. And it was deemed satisfactory, I believe.

Remember a 19th century UK quote on that.

Also, look here:
http://online.wsj.com/article/SB128000197220920621.html

2 "Stocks on average make you about 10% a year."
Stop right there. This is based on some past history -- stretching back to the 1800s -- and it's full of holes.

About three of those percentage points were only from inflation. The other 7% may not be reliable either. The data from the 19th century are suspect; the global picture from the 20th century is complex. Experts suggest 5% may be more typical. And stocks only produce average returns if you buy them at average valuations. If you buy them when they're expensive, you do a lot worse.

With the growth, I should've specified 'high'(above 1-2%) growth is, I believe, conditional.

[pmeisel]

19th century history is useful for some economic discussions. It's not particularly applicable to this one.

Distinguishing between real (inflation adjusted) return and nominal return is appropriate, but many people just use the nominal rate -- accepting that there is some inflation included in that.

Typically, you evaluate rates in this context:

• At the base of the structure, there is the "risk free" rate -- typically offered by the Bank of England in the olden days, and the US Treasury for the last 70 years or so.
• That rate includes some inflation expectation which is implicit and undefined. Investors have to guess at it, economists can analyze it retrospectively.
• The risk free rate has a term structure -- usually it gets higher as the terms get longer.
• Atop that you establish risk premiums for various types of investments:
• High quality bonds usually being the lowest -
• Then lesser quality debt obligations, according to credit and security
• Then more speculative debt that may have some conditional equity attached to it, like mezzanine capital
• Then equities, stacked in order from least to most speculative (or if you prefer, from most secure to least secure).

IOW you get less return from guaranteed bonds from the local water authority than you do from cyclical companies or start ups.

So the range of available returns is very wide. And market averages fluctuate.

5% real return may be acceptable to some. Not to me. And I'm in the business of evaluating that (like, I mean, they really pay me to do that... good money, even.....)

[Lanius]

I'm not arguing with you.

But I believe people who think every retiree could, if laws allowed it, find an investment that'd allow him a 10% yearly return while not being too risky are just too naive.

[Selena]

19th century history is useful for some economic discussions. It's not particularly applicable to this one.

OK, completely off topic but a matter of curiosity and no more. IIR my dinner table econ lessons around 1890 there was a panic that many blamed on the Sherman (?) silver coinage act. Other's blamed the machinations of banking interests in the east, particularly New York. My "teacher" claimed it was from (among other things) the Fed spending gold for certain expansionist policies of the time. If you have a take on the causes I would appreciate hearing it.

[bunkerguy]

I consider myself to be Jeffersonian libertarian. I think the government should not involve itself in the private lives of citizens. I also believe that you can't buy friends, so we should cease giving money to countries that don't like us (aid to Africa to make some tin-horn dictator richer or money to Egypt to finance Islamic terrorism or money to the UN to put Syria and Iran on the board of the human rights commission).

I firmly believe that a citizen should be able to go to Western Auto or Pep Boys pick up an M60, silencer and 1,000 belted 7.62 rounds along with a new brake-light and tires.

I believe GM should have armored humveess with turrets next to the Suburbans and Tahoes.

I am confused by liberals who fight for the lives of death row inmates and call for the deaths of the unborn.

I also believe that the minimum wage enslaves people and reduces opportunity while increasing inflation.

if they ie the collectivist dont like liberty, leave, why dont they?

[pmeisel]

Selena, I missed this question in post of August 2nd during my move.

My library is not unpacked yet but I will circle back to this. I have some vague recollections but your intellectual curiousity deserves better.

[pmeisel]

Selena -- re 1890 and 1893 banking panics --

Quick read is that the 1890 panic was related to the Baring's bank failure in the UK and was unrelated to the silver issue.

In 1890, there was legislation (Sherman Silver Purchase Act) to require the US government to purchase more silver.

Background -- from founding of US until 1873, the money was backed by a dual metal standard, both gold and silver. 1873 based the money on gold, but did not eliminate the use of silver.... and most farmers and rural people favored the return of silver to the official money standard. The Silver Purchase Act was intended by its supporters to loosen money, create some inflation (or reverse disinflation), and stimulate the economy. Sound familiar?

This caused over time pressure on the Treasury, as more and more gold flowed out (people preferred holding the rarer gold to silver). The S.S.P.A. was repealed in 1893 and there was a banking panic, so many people believed the repeal was the cause.

However, the more commonly accepted and sounder belief is that the bankruptcies of several overextended railroads caused the panic and that it was underway before the repeal of the SSPA.

Railroads were the dotcoms and financial titans of that day. So think of Lehman and Bear Stearns collapsing with AIG and a couple big banks right behind....

See, there is not a lot that's new here.

[Selena]

Selena -- re 1890 and 1893 banking panics --

Quick read is that the 1890 panic was related to the Baring's bank failure in the UK and was unrelated to the silver issue.

In 1890, there was legislation (Sherman Silver Purchase Act) to require the US government to purchase more silver.

Background -- from founding of US until 1873, the money was backed by a dual metal standard, both gold and silver. 1873 based the money on gold, but did not eliminate the use of silver.... and most farmers and rural people favored the return of silver to the official money standard. The Silver Purchase Act was intended by its supporters to loosen money, create some inflation (or reverse disinflation), and stimulate the economy. Sound familiar?

This caused over time pressure on the Treasury, as more and more gold flowed out (people preferred holding the rarer gold to silver). The S.S.P.A. was repealed in 1893 and there was a banking panic, so many people believed the repeal was the cause.

However, the more commonly accepted and sounder belief is that the bankruptcies of several overextended railroads caused the panic and that it was underway before the repeal of the SSPA.

Railroads were the dotcoms and financial titans of that day. So think of Lehman and Bear Stearns collapsing with AIG and a couple big banks right behind....

See, there is not a lot that's new here.

Interesting, Then essentially it was an industry supported by the US gov in the form of grants collapsing. That does sound familiar.

[pmeisel]

Something else interesting I ran across.... Friedman, a fairly conservative monetarist, concluded later in his career that the 1873 act eliminating bimetallism and putting gold first was a mistake, that the US should have retained a floating two metal standard.

A more modern view is that no one commodity can effectively back money --