The US should use assets it has already acquired and others it will add in the future, from the troubled asset relief programme as well as other sources. The goal should be to meet the shortfall of pension provision from 2030, when the proportion of retirees will be close to 25 per cent of the population aged 16 and over. One mandate could be to either replace or augment the Social Security Trust Fund and the Federal Old-Age Survivors Insurance Fund, resulting in beneficial outcomes both in the short and long term.
Restoring confidence . Collecting assets that represent long-term value to pay the pensions of future generations is better politics and public relations than bailing out individual banks and companies to prevent economic meltdown. As a credible long-term government solution, it would also boost confidence, itself a crucial first step toward recovery.
Breaking the liquidation cycle . Redemptions and deleveraging mean that even if asset managers see value in risky assets they are unable to act. In this crisis, only government, acting as a stabilising speculator, can take the necessary long-term perspective. But, if the government ploughed billions of dollars into CDOs, CMBS, mortgage-backed securities, asset-backed commercial paper, preference shares and outright equity, it should make other investors think twice.