A Little Rant

Friday, March 13, 2009

A little rant here; 

What was ever wrong with simple interest? Banks for centuries made plenty of money off of what is called in the industry as the "spread." They took deposits, paid interest on it, and lent it out to businesses and individuals for a premium usually around 2%. If enough people deposit their money and enough people borrow it, you have capitalism ad infinitum. Our country was built on this; how do you think the 50's, 60's and part of the 70's happened? Money was deposited and lent out to businesses who invested the money in businesses who produced jobs, which paid workers who saved more money and deposited it. It is a beautiful cycle and did not need to be broken. But it was. Many charts point to around 1979- 1980 when things start to change. Instead of being savers we became spenders and we financed our habit (debt). Then wall street got smart and securitized it. Who is to blame in all of this? Good question I was only a babe in 79', but I do know we need to change our ways, laws and society if we want this century to be another "American Century." 

We can blame the bankers all night long, but in the end if it wasnt for our appetite for debt they would have little to play with. Blame can also be heaped on the government they helped this caboose seperate as well. Another source of all this capital wall street has to play with is our 401k's. These evil little "retirement accounts" were created by the IRS to replace employer funded pension plans. While pensions are inefficient and costly, the replacement is TOXIC. We can debate all day long about free markets and laisse fair economics, but when it comes to retirement we as a race have a responsiblity to ensure that older people are not destitute. Now this does not mean giving hand outs. What it means is that there should be regulations in place that protect retirement savings and make sure that the public's savings are in instruments that are safe. If people who had put their money in 401k's had only invested in certain things like cd's orgovernment bonds they would have made a killing. 3% - 4% a year was scoffed at for the last 20 years, but people who made that, are WAY ahead of those who invested in the stock market. 

I am certainly not in favor of onerous regulation, only smart simple regulation. With this administration and the last "simple regulation" may be a oxymoron. But this is my rant and I can be as irrational as I like. 

Now a separate point. Our government is about to spend 1.7 trillion dollars bailing out rich bankers and fools who bought houses they could not afford. I have to admit I getting really angry about this. They should let these idiots FAIL. It will be painful for everyone, but in the end necessary to move on. The money being spent on these losers should be spent on things like education. We are the richest country in the world because of investments made in the 40's, 50's and 60's on education. The baby boomers had cheap and high quality education available to them. My generation (GEN X) got the shaft. Teachers unions have a huge part in this but also society and government bear a lot of responsibility. Education is always the first thing to get cut. Needed improvements to infrastructure, curriculum and modernization have been set aside, while teacher pay and job security have gone up. We rank near the bottom in industrialized countries in education. This cannot last. Eventually our uneducated public will drag down the economy. You could say it is already happening. A naive public bought into snake oil salesman on wall street without doing their homework, because they didn't know how to do their homework...