Capitalist Social Security

The macro idea is to build societal wealth by having a giant fund that buys into every stock that pays dividends. Call it a Dead Weight Fund. As the fund grows, from additions and mandatory 50% dividend and interest reinvestment, It would act as “dead weight” to the stock market. This dead weight would dampen the panic selling and manic buying. Everyone would know that there was a floor. (Once the Fund grew to a large enough size) and a drag on LSD inspired upswings.

When this dead weight fund buys into a stock, be it one share or a million, the fund never sells the stock. The stock would forever be on the books of the fund. If the company were sold out and the stocks forced to be liquidated the money would be reinvested in another dividend paying firm or AA rated bond. Reinvestments would be weighted, to stocks that reliably pay high dividends, or are new at paying dividends (to encourage companies to pay dividends).

The fund would endeavor to buy all stocks that pay a dividend. No stock should be excluded unless it is a means for defrauding the system. The advantage of this is that it would naturally support entrepreneurs as soon as they started paying dividends. Giving those companies an incentive to begin paying dividends. That would give also them a base level of stock that is reliably there.

Another advantage is that the system would naturally gravitate towards paying dividends, early, and projected for the future. That would dampen wild speculation… Or give it some security, time will tell (if it is ever put into practice).

On a more personal level the fund would pay anyone his or her portion of the dividends his or her portion of the Fund made. Remember the total dividends would be 50% to the investor or their heirs, and 50% reinvested. The investor would also get the additional investment dividends that, the investor and their heirs, made, ad infinitem. The investment would be handed down through generations as accumulated wealth. Any family could participate by buying in at any time without penalty.

Parents could invest in their children’s names directing all the dividends reinvested until the child reaches 21, or whatever. The child, and his or her heirs would have income from the Fund… forever. Or I could invest in my family portfolio and increase my families portion of the Fund and the resulting dividends.

Once a large portion of the population had regular income society would be in a position to be more entrepreneurial. People would always have something to fall back on. The Fund would be outside of the bankruptcy court’s jurisdiction. Untouchable, the income would protect a young entrepreneur, so he or she could take chances. Growing the economy and both society and the entrepreneur reaping the rewards. Generation after generation.

Like trees give a forest gravitas but take decades and sometimes centuries to grow, the Fund would grow eventually to act as a dead weight on the stock market giving it more moment of inertia. Making the stock market a more reliable place to invest ones hard earned dollars. The alchemist’s dream of turning base metals into gold is the same as the economist’s that seeks to erase the boom bust cycle. But this could help, over a few generations…

The fund would be administered by a board of trustees (directors) that will be assigned by some soon corrupted means or other. That is unfortunately a fundamental flaw in all human organizations. The Principle Agent dilemma. I guess a possible means would be to have the board of directors elected by the stockholders…

It would act like capitalist social security. But it would also provide for the heirs of the investors and their heirs and so on and so on… As long as there is a n economy the fund will exist. Dampening the highs and softening the lows a Dead Weight Fund may help every one. Classic win win…

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