Anthony wrote:
On Nov 16, 2007 4:41 PM, Lars Aronsson
<lars(a)aronsson.se> wrote:
Should
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.
Of course it would be unwise to not consider the tax consequences. Any
concrete proposal must be viable in its own right before we even
consider the tax effect. Once we get that far we need a clear
evaluation of the tax effects and the possible mechanisms to avoid them.
When did the community ever have the power of the purse?
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.
Sure, but let's not deal with forever until we get there.
(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.
I agree that planned investment can do
better than 4%, and still be
relatively safe, but needing the funds in the very near future severely
limits investment options.
Ec