STAFF NEWS & ANALYSIS
Let Our Debt Scrub Our Brains
By Staff News & Analysis - October 25, 2013

Most Americans accumulating debt faster than they're saving for retirement … A majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation's troubled system for old-age saving, a new report has found. Three in five workers with defined contribution accounts are "debt savers," according to the report released Thursday, meaning their increasing mortgages, credit card balances and installment loans are outpacing the amount of money they are able to save for retirement. – The Washington Post

Dominant Social Theme: We need to do something about this savings problem.

Free-Market Analysis: This is kinda out of the blue. Individuals who are broke tend to borrow on the off chance that they'll be able to reimburse the money next time round. Usually that doesn't happen, which is why it is a bad reason to borrow when you're already not making it. Better to pull in your belt any way you can.

What this does illustrate is the utter bankruptcy of the current system, certainly in the United States.

It is absolutely incredible. After umpteen glossy magazines circulating to millions, cable investment channels seemingly by the dozen, stock gurus purveying investment systems at expensive seminars around the country, people marching in by the tens of millions to consult with their brokers, financial advisors, financial planners, investment advisors, registered representatives … this! This is the end result.

Brokenness. Bankruptcy. Foreclosures. 90 million unemployed. People putting off retirement not just for a few years but forever, and grateful if they can grab a job at McDonald's or Walmart.

And now: Even when people are put on savings plans their debts are STILL outrunning their savings. Incredible.

No one is taking the time to remind people about what went before. Nobody wants to provide a frame of reference. The law of "omerta" rules. We're simply supposed to go along.

We're supposed to nod our collective head and say, "Gee … things are bad. Maybe they'll pick up next year."

We're like the tiny birds, the ones that don't remember what happened a day ago, an hour ago.

But we do remember.

Start with post-World War Two in the United States, when the idea of independence through investing was pitched by a variety of interest groups including of the New York Stock Exchange. People had lost so much after the great crash of 1929 that they were quite skeptical about equity investing of any kind.

Eventually, the NYSE went on a kind of road show, with officials traveling throughout the country to explain the positives of equity accrual over time. It worked so well that people clambered into the market and there was a boom that went on until the early 1960s, when there was another crash.

But that wasn't a really big one. The market resumed soon enough and charged forward until 1969, as people had discovered a "sure thing," investing in the "Nifty 50" – the US's largest stocks that represented the profitability of a post-war nation that was the most powerful in the world. You couldn't go wrong with a Nifty 50 investment – until you did.

And in 1969 people did all at once. The terrible costs of the Vietnam War took their toll and a few years later Richard Nixon decided that the nation could not honor its debts and removed the US from the remnants of the gold standard.

At the same time, Henry Kissinger journeyed to Saudi Arabia to explain to the Saud family that they had been selected to enforce a petrodollar standard whereby no country would buy oil from the Sauds without using dollars. This set the scene for the next stage of US economic greatness.

It would not come for a while, however, as the 1970s would prove rocky, indeed, afflicted with stagflation, rising interest rates that eventually reached 20 percent, and a very rocky stock market. Gold traveled upwards considerably during this time, as did silver.

Eventually, Tall Paul Volcker rode to the rescue, breaking the back of inflation at David Rockefeller's request, though not before allowing short rates to reach about 20 percent. This murdered both the employment market and the stock market.

It must have been BusinessWeek that turned the economy around in the early 1980s by declaring the US stock market was dead … at which point the market took off like an express train, fulfilling certain people's perceptions that one ought to assume the opposite of whatever BusinessWeek wrote.

It is difficult to recall the seamlessness of 1980s memes. The Baby Boomer generation was coming out of its haze just enough to realize that socialism was not the answer. Ronald Reagan was elected and tens of millions realized that capitalism was indeed the answer. The "Yuppie" was born and spawned a thousand horrid Hollywood movies.

Of course, in reality, what Reagan was offering was more of the same – Empire Lite. His heart may have been in the right place but Leviathan stayed firmly in place. Reagan faced down the Evil Empire and people believed Western-style capitalism was the greatest system in the world.

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But it wasn't. It was a cleverly designed jigsaw of interlocking dominant social themes designed to further internationalist designs. The globalists were simply playing for time, putting the systems in place that have now borne fruit. Increasingly, globalized central banking, internationalized commerce and justice and "preventive" military action occurred around the world. It is today the age of internationalism – of global surveillance and communitarian diplomacy – and the localized ideas of yesterday may be abandoned like the ephemera they really were.

We won't rehearse the rest. We've written about it before. You know. There was the gradual buildup to the tech blow-off of the 2000s and then another buildup to the mortgage blow-off that has left the entire Western world puzzled, uncertain – and certainly poorer.

It was never meant to last. It was, as we have explained before … a dreamtime. And here is the result, as the Post article explains it:

The imbalance is expanding even as policymakers are encouraging people to set aside more by offering generous tax breaks and automatically enrolling workers in retirement accounts that in some cases automatically escalate the amount of money over time.

… "Policy has tunnel vision. It tends to tackle problems on a piecemeal basis. The impact of policy on consumer finances is a bit like playing a game of Whac-A-Mole," said Matt Fellowes, founder and chief executive of HelloWallet and a former Brookings Institution scholar. "We raised the victory flag as people increased retirement contributions, but in reality the ability of people to retire is a function of lots of different variables, most important of which is what they are doing on the other side of the ledger."

… A growing number of researchers are concerned that the nation is on the cusp of a shift in which more Americans are on a track that will lead to a decline in their living standards when they retire. The report says that debt is among the biggest culprits. The amount of money that households nearing retirement are dedicating to pay down debts has increased 69 percent over the past two decades, the report said.

Households headed by people ages 55 to 64 now spend 22 cents of each dollar to pay off old loans — about the same percentage as younger people, the report found. The problem is not confined to the poorest Americans, many of whom have no retirement savings. Most of the people with accounts who are accumulating debt faster than retirement savings are older than 40, college educated and earning more than $50,000 a year, the report said.

The article continues, but we'll spare you the rest of it. It has "suggestions," of course, from "policymakers" and various strategies derived from consulting "experts."

But why should we believe them now? Look at where we are. Look at how people have ended up. The "greatest generation" is at the end of its tether, leaving truncated estates to Baby Boomer children drowning in debt.

The Social Security program is broke, the Great Society is a withered husk of what was promised and President Barack Obama has just begun implementing a health care program so bad that it can't even be coaxed into existence in an alternative, technological reality.

The failure of Obamacare to operate as planned is symptomatic of the larger cynicism of the system. These programs are not meant to operate properly. They are meant to further destabilize what's left of functioning industry in the US so yet more impossible policies can be developed and implemented. Eventually the whole thing is supposed to topple over into the IMF's lap. At least that's probably the idea. World government on the way …

There will be one final blow-off, or so it seems now.

The stars are aligning and the elites are scheming. We'll continue to cover it. Maybe there will be a chance to gain back some of what you've lost.

Yes, hopefully some will take advantage of it, ride the market averages up one last time and avoid the inevitable downturn. But it is certainly a kind of last gasp. The damage has been done. The suckers have taken the bait. Two additional generations have been doped with an entirely false worldview – that government and government experts can take care of them, handle their money, organize their retirement savings and generally make the world safe.

Now the locusts are moving on, leaving behind a hollowed out husk of a country. The Great American Exceptionalism has withered away, its nutrients choked by false promises.

Articles like this one are supposed to provide us with confidence that there is yet another fix, another way of organizing prosperity that will actually last beyond a couple of years.

The technocrats will save us – as they have before. Only they haven't and they won't.

After Thoughts

Welcome to the 21st century. Hopefully, we shall face it with our eyes open and our clearing brains shedding the final hazy shards of our previous elitist dreamtime.

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