On Nov 16, 2007 4:41 PM, Lars Aronsson <lars(a)aronsson.se> wrote:
the WMF set up a long-term fund and move some of this year's money
there, as a reserve for future meager years?
Not to any significant extent, for at least two reasons.
1) There would be negative tax consequences to doing so.
2) The only remaining check the community has on the power of the
board (the power of the purse) would disappear.
Incidentally, 2 is actually the reason for 1.
If the interest rate
is 4% then a fund which is 25 times bigger than the budget can
support it in whole for ever.
If there's never any inflation or taxation, maybe. But in the real
world, no, a much larger fund (or a much higher interest rate) would
be necessary to support the foundation forever.
(Some people would claim they can easily earn more
than 4% annual
interest. Obviously, they should start savings banks.)
Too many regulations, unfortunately. It is easy to earn more than 4%
annual interest, in US dollars, though. Even long term treasury bonds
can do better than that. Use something like prosper.com
and you can
probably get at least 8%. Don't know about other currencies, except
that interest rates vary greatly among them.