Where Are the Baby-Boomer Nest Eggs?
The Daily Bell
myth ... Nearly half of today's older Americans receive no income
from assets such as stocks and savings accounts. As the debate over
the federal deficit heats up, Americans are going to hear a great
deal about "greedy geezers" who are supposedly bankrupting
the nation with Social Security and Medicare. Politicians will no
doubt be more circumspect than former Wyoming Sen. Alan Simpson,
who, as the Republican co-chairman of the federal deficit commission,
described Social Security as a "milk cow with 310 million tits."
The myth underlying these attacks (including Simpson's misogynist
bovine metaphor) is that most old people don't need their entitlements
that they are affluent pickpockets fleecing younger Americans.
~ LA Times
Social Theme: Invest wisely and well.
Analysis: Can one "invest" one's way to prosperity?
Some people are very good at stock picking and others can use Austrian
business cycle analysis to generally figure out what side of the
market to be on during its great turnings (gold and silver would
seem to be appropriate for now). But most people have no more success
picking stocks or generally investing than they do with other parts
of regulatory capitalism.
Let's try to
put this long-running power elite promotion into perspective. We
don't agree with the LA Times' perspective (see article excerpt
above). It's not nest-egg versus Social Security (which the US cannot
afford, especially because there are no SS funds, only fancy IOUs).
There is a third way, which is to get rid of central banking entirely
and let tortured Western economies gradually deflate.
undistort without the endless goad of monetary stimulation, people
would gradually begin to be self-sufficient again. Nuclear families
would collapse and extended families would reappear; this is the
logical solution to old age, not frantic investing leading to the
selection of an old-age home where one is likely to be abused before
was financial planning or even "investing" there were
stock drummers so-called customers' men. It is in America,
predictably enough, where the idea of putting money into stocks
became most popular. It never really caught on in Europe or Britain,
where social class stratified opportunity. But in America, a large,
freewheeling democracy, the idea of participative capitalism was
out slowly, under a Buttonwood tree in New York where brokers gathered
to trade securities in an auction-like setting that mimicked a French
bourse. When brokers went indoors, others gathered at the curb outside
to trade smaller lots. Thus the "curb" exchange was born,
which later became the American Stock Exchange.
didn't really take off until after the Civil War. It was then that
the backers of the New York Stock Exchange, presumably the big New
York banks themselves (with their European ties), went on a buying
spree, purchasing numerous other auction-like exchanges throughout
the city and consolidating stock trading downtown.
We have already
recited in these pages the evolution of stock trading, from an auction
once or twice a day to all-day dealing. The "uptown" boys
had developed the new system and the NYSE was so desperate to merge
with them that they offered them lucrative franchises in certain
stocks if they would agree to a partnership. Thus the specialist
system was born.
time, as well, analyzing what this amounted to. We still remember
an Economist article in the late 1980s that solemnly proclaimed
the system had emerged naturally as a result of a broken leg that
one floor-trader had suffered. Supposedly he couldn't walk around
and thus began to "specialize" in a single stock. Others
gathered round finding his exclusivity to be both liquid and efficient,
and thus was history made.
In fact, as
we've just pointed out, the system was a bribe to effectuate a merger.
As soon as the merger was made, the NYSE, too, switched to continuous
trading, which was far more lucrative for the broker. It was also
enormously lucrative for the specialist, who was exposed to the
volume and liquidity of his assigned companies in far more detail
than anyone else.
the specialist's advantage was whittled away by various rules and
regulations, but the advantages remained nonetheless. Even in the
late 20th century, just before the system was basically abolished,
specialists still had an advantage, especially in the morning when
they had to set the opening price and could do so based on
the volume of trades and indications of interest from the day before.
It was like shooting fish in a barrel and it was LEGAL. Specialists
were OBLIGED to make trades (basically front-run their own book)
to keep an "orderly market."
Of course it
was never exactly clear how small Mom-and-Pop specialist shops with
limited capital were supposed to keep such a market in hugely capitalized
stocks like IBM or Exxon. The buying and selling would inevitably
overwhelm even the most courageous small-time specialist during
times of crisis. But logic never mattered on the NYSE; the larger,
intricate presentation was set up to take advantage of the buying
public and to sell a concept of wealth and potential riches that
could not be obtained anywhere else except in a casino or lottery.
It was built
deliberately in America bit by bit. The consolidation of the NYSE
was buttressed in the late 1800s by the advent of the first, great
"wirehouses" so called because they allowed customers
to buy and sell stock via telegraph. Then came the advent of the
Federal Reserve, which could by printing endless amounts
of fiat money create great capital surges that could send
American equity markets soaring.
The 1929 Crash
shattered the system and it took until the 1950s for Wall Street
to get it back on track. Eventually the braintrust at the NYSE grew
so desperate it mounted a series of road shows around the country
to convince Depression-scarred, war weary Americans that stocks
could be a profitable adjunct to bonds. The road shows and America's
growing prosperity fueled stock trading once again.
money-printing and the post-war strength of the dollar began to
drive marts upward, ever upward. There was a glitch in 1963 and
then a major crash in 1969, but the combination of Fed money printing
and consolidated stock trading continued to carry the day, especially
after the US went off the gold standard and the Fed was freed to
print money at will.
The 1970s were
an up and down time for stocks in America, but in the 1980s the
Fed/NYSE combination drove stocks up to lofty valuations. The 1987
crash derailed things for a while, but the 1990s and the tech-boom
put stock trading back on track. The system worked well until later
in the first decade of the 2000s when the incessant money stimulation
finally caught up to both the markets and the larger economy. As
we have long pointed out, the dollar-reserve system died in 2008,
along with the popular belief that one could count on "investing"
It was never
a reality; it was fiction. Stock markets go up because of the way
the system has been built. Central banks and modern stock markets
are the two halves of an efficient, middle-class money-extraction
mechanism. Prompted by money stimulation, markets run up and
in America anyway suck consumers' money into "opportunities."
Then the market crashes, the valuations are diminished, jobs are
lost and the contraction begins. Many who cannot stand the losses,
psychologically or otherwise, sell out at the bottom much
as they have bought at the top and the contraction of the
middle classes continues apace. Lives are destroyed and families'
hopes and dreams are ruined.
The late 20th
century saw myriad elaborations on the "invest your way to
wealth" dominant social theme, especially in the States. Cable
news programs incessantly propounded buying opportunities, as did
dozens of magazines and newspapers. Stock-picking gurus became national
heroes and various kinds of strategies were offered to the general
public, from technical investing to financial planning. All of this
was merely froth on the waves of systemic money stimulation; but
it is hard to remain cool and uninvolved when your neighbor has
just purchased an expensive car with some of his winnings.
And yet ... it was a Dreamtime, a fantasy propounded deliberately
by the elite to continue the process of centralizing Western economies
without being too obvious. This is not to say that "investing"
and stock manias are going to go away. The latest round of exchange
mergers shows us clearly that the game is still afoot and that those
behind it have ever-larger plans. But something has changed in our
opinion. The certainties of the 20th century have given way to the
skepticism of the Internet era and it will take an enormous reliquification
of global markets to spark another mania worldwide or even in America.
It may even take a new monetary system.
with permission from The
© 2011 The