Paul Craig Roberts says that Wall Street is targeting the retirement money held by the elderly. Along with Big Government looting Social Security, you must be diligent in watching the behavior of politically powerful institutions.
Hank Paulson, the Gold Sacks bankster/US Treasury Secretary, who deregulated the financial system, caused a world crisis that wrecked the prospects of foreign banks and governments, caused millions of Americans to lose retirement savings, homes, and jobs, and left taxpayers burdened with multi-trillions of dollars of new US debt, is still not in jail. He is writing in the New York Times urging that the mess he caused be fixed by taking away from working Americans the Social Security and Medicare for which they have paid in earmarked taxes all their working lives.
Wall Street’s approach to the poor has always been to drive them deeper into the ground.
As there is no money to be made from the poor, Wall Street fleeces them by yanking away their entitlements. It has always been thus. During the Reagan administration, Wall Street decided to boost the values of its bond and stock portfolios by using Social Security revenues to lower budget deficits. Wall Street figured that lower deficits would mean lower interest rates and higher bond and stock prices. [click to continue…]
If economists took a wider view of the history of their discipline than they generally do, they might have noticed that what most of them consider a fundamental feature of all economies worth studying – the centrality of money – is actually a unique feature of an economic era defined by cheap abundant energy. Since the fossil fuels that made that era possible are being extracted at a pace many times the rate at which new supplies are being discovered, current assumptions about the role of money in society may be in for a series of unexpected revisions.
In an ironic way, this process of revision may be fostered by the antics of the world’s industrial nations as they try to forestall the Great Recession by spending money they don’t have. The economic crisis that gripped the world in 2008 was primarily driven by a drastic mismatch between money and wealth. When the price of a rundown suburban house zoomed from $75,000 to $575,000, for example, the change marked a distortion in the yardstick rather than any actual increase in the wealth being measured. That distortion caused every economic decision based on it – for example, a buyer’s willingness to go over his head into debt to buy the house, or a bank’s willingness to lend money on the basis of imaginary equity – to suffer similar distortions. Now that the yardsticks have snapped back to something like their proper length, the results of the distortion have to be cleared out of the economy if the amount of money in the system is once again to reflect the actual amount of wealth.
Yet this is exactly what governments and businesses are doing their level best to forestall. Governments are scrambling to prop up economic activity at a pace the real wealth of their societies can no longer support; banks and businesses are doing everything in their power to divert attention from the fact that a great many of the financial assets propping up their balance sheets were never worth anything in the first place and now, if possible, are worth even less. Both are doing so by the simple expedient of spending money they don’t have. As government deficits worldwide spin out of control and the total notional value of the world’s derivatives market climbs steadily above one quadrillion dollars, the decoupling of money from wealth is even more extreme than it was at the height of the real estate bubble.
As average American citizens lose their jobs by the millions, become mired in financial distress and are crushed by the largest debt increase in the history of civilization to pay for government bailouts and fiscal stimulus programs, several Wall Street firms, in actions so arrogant they beggar and defy belief, have announced that they will pay record bonuses in 2009. These bonuses commonly amount to 20 – 200+ times the median American wage, in other words, 20 – 200+ times the earnings of the citizens whose taxes were spent only a few months ago to keep the Wall Street firms from imploding.
Nurses, police officers, school teachers, store clerks, truck drivers, gas station attendants, firemen, flight attendants, ambulance drivers and everyday workers of every other description, many of them struggling to provide only a humble, basic lifestyle for themselves and their families, were asked to reach deep into their pockets to help Wall Street survive. Now that Wall Street has taken their money, it will use it to lavish huge bonuses upon itself, in a callous Roman orgy of excess.
The American psychological landscape has been parched by the searing winds of financial desperation, surging inequality and dying hopes. And the tinder of the desiccated American Dream, once the great calling and aspiration of a nation, is now piled so high that a spark igniting it would unleash raging flames reaching up to and scorching an astonished Sun. Yet politicians and the press are so divorced from reality that when the people express at town meetings and other venues their deep, legitimate frustration over the loss of their hopes and nation, they are viewed as whiners, or paid political activists. As noted earlier, denial is very dangerous drug. [click to continue…]
John Mauldin provides some insight into the muddy economic forces that dominate the financial arena in 2009. Lessons from the past do not fit perfectly, so we must listen to wise and objective people to give us some perspective in investing our retirement money. Excerpts below.
Deflation is a major economic game changer…. We face the deflation of the Depression era, and central bankers of the world are united in opposition…. If we don’t have a problem with inflation in the future, we are going to have far worse problems to deal with.
Saint Milton Friedman taught us that inflation is always and everywhere a monetary phenomenon. That is, if the central bank prints too much money, inflation will ensue. And that is true, up to a point. A central bank, by printing too much money, can bring about inflation and destroy a currency, all things being equal. But that is the tricky part of that equation, because not all things are equal. The pieces of the puzzle can change shape. When the elements of deflation combine in the right order, the central bank can print a boatload of money without bringing about inflation. And we may now be watching that combination come about.
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For instance, inflation always seems to be accompanied by higher wages. That makes sense, as workers want more to justify their labor if prices are rising. But today we have wages dropping over time. Yes, even though wages went up this month by 0.3%, it was all due to a one-time increase in the minimum wage. Without that government mandate wages would have been flat or falling. Look for wages to fall over the rest of the year. [click to continue…]
Just months before the start of last year’s stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.
Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds. [click to continue…]
We have identified three scenarios for the post finanical crisis period: Recovery, Mediocrity, and Instability.
In the video below, denial about the current financial crisis is illustrated and the dangers down the road are described by Peter Schiff, who predicted the financial crisis.
Charles Hugh Smith at the Of Two Minds blog delivers an unpleasant message in End of an Era: What Isn’t Coming Back. He says the financial crisis is the just beginning of some tough times caused by overspending instead of saving, at all levels. We can ignore his message, evaluate the message, or believe the message. Charles makes some important points here, so I don’t recommend that we ignore the message or kill the messager. Instead, let’s see if we can learn anything that is worthwhile.
Below he identifies six conditions which underpinned the bogus prosperity of the past decade have changed for good.
1. Permanent decline of the assets which supported rampant consumerism. Having gleefully swallowed the fiction that real estate could rise indefinitely, and thus fund not only a plump retirement but a never-ending consumer binge, the American middle-class is now coming to grips with the reality that real estate valuations were a bubble which has burst. The bust is taking down the primary asset of the Baby Boom generation (housing) and the equity-extraction-machine of home equity lines of credit (HELOC).
… the entire superficial surface of jewelry, lavish cruises, huge suburban homes, etc. was based not on a foundation of savings and productive real wealth but on astonishing increases in debt. It was never sustainable, and the fantasy that it was sustainable, and perhaps even “deserved,” was always visibly absurd.
But it’s not just housing which has plummeted; it’s all assets classes. And that decline hasn’t just shattered consumer borrowing, it’s also wiped out much of the retirement wealth of the Baby Boomers. (Physical gold has risen in value, but other commodities have seen boom-bust cycles of appalling volatility.)
2. With their assets diminished, Boomers must now save rather than spend. The decimation of Boomer assets and retirement funding is documented in this report sent to me by longtime correspondent J.F.B., who has been presciently pointing out the risks to the Boomer retirement for some time: [click to continue…]
JT Grenough recommends a macroeconomic view of adapting to the financial crisis. You have to consider macroeconomics before you reposition your assets. You have to reposition assets. You have to close all major risks. Exit the majority of money funds and currency time deposits, step up gold and oil positions, and move into non-US government [...]
David Rosnick and Dean Baker at the Center for Economic and Policy Research released a report in February 2009 that provides a sobering picture of the retirement prospects for many baby boomers. Key excerpts are included below. Link: The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble Workers have a limited [...]
