As we enter the year 2010, the Pollyannas are out in force again trying to do their hand waving and sooth saying while they seek to convince one and all that things aren’t so bad. Case in point is Peggy “Pollyanna” Noonan in her Wall Street Journal piece ‘Look Ahead: With Stoicism and Optimism’ (Jan. 2-3, p.A11). Of course, this is the same Noonan who, in an appearance on George Stephanapoulis’ Sunday morning show some months back insisted we must also “whistle past the graveyard”. Yeah, right, Peggy!
In this piece, she at least agrees that her brand of optimism is “mindless” since she endorses the quoted attitude from an attorney, on what he brings to the new year: “stoicism and mindless optimism”. As she later put, “he meant it about the optimism too”. Adding: “You know things get better” which is such utter vacuous codswallop one wonders which planet Noonan is living on.
She may have missed the well researched article in the Tuesday Financial Times ‘Aging Population Will Pile on Pain in the Future’, noting how all the demographics for all developed nations point to much older populations in the next 20-30 years, to the extent the cost to pay for their benefits and pensions may reach 85% of GDP by 2040.
According to the IMF the average projected annual government deficit for 2010 is 8.3% of national income. This is, of course, an average. For any war waging nations on the scale of the U.S. it will more approach 16% of national income, if the true military spending deficits are reckoned and no smoke and mirrors accounting is used. Like boring into the Social Security surplus and monies and using it to pay down military expenditures.
The FT article poses few solutions, only the usual we have come to see from the think tanks: much higher taxes, or cutting benefits. They do, to their credit, mention and note the financial wreckage arising from the reckless Bush tax cuts passed in 2001 and 2002 to the tune of over $2.2 trillion, essentially demolishing the surpluses Clinton had left the nation with. Those tax cuts plus Bush’s bogus wars based on invasions directly led to the financial mess we’re now in and will hardly climb out of anytime soon. Hell, there isn’t even the money to repair the nation’s crumbling infrastructure (which the American Society of Civil Engineers puts at $1.7 trillion, minimum). But no mind! The DOW is heading back up to 11,000 so all is well.
Of course, the demographic disaster is only one small part of what confronts us, and still unmentioned are the runaway greenhouse effect and Peak Oil. The interesting and ironic thing is both these disasters will accrue from the overuse of fossil fuels, but the latter will ultimately be the capper that snuffs all future use. Alas, it will also reduce the existing population to probably half the pre-Peak Oil numbers, see:
But Noonan clearly doesn’t have these on her mindless radar, nor is it evident she wants to. You can see that from how bereft of moorings she is regarding the current role of Wall Street, as when she avers:
“Wall Street the past ten years truly and profoundly lost sight of its mission. It exists to be the citadel of American finance. Its job is to grow and invest and enrich, thereby making the jobs possible that help families exist”
What she forgot to mention here is that the current incarnation of Wall Street exists ONLY to pad the profits and purses of its thousands of shyster traders and mutual fund managers – who year after year rob small investors blind with their over charging of fees, burning yields, churning accounts and other nonsense. Thus, Wall Street exists only to enrich itself and THAT was the message learned- or what ought to have been in – in the credit default swaps mess last year.
Truth be told, Wall Street became the enemy of Main Street in the Reagan 80s, via usurpation of the productive economy. By usurpation of the productive economy’, I mean the gradual hegemony that speculation has now assumed over the entire American economic system. This has been documented in a number of books, among which the best is perhaps William Wolman’s and Anne Colamosca’s ‘The Judas Economy: The Triumph of Capital and the Betrayal of Work’, 1997) This article provides a broader context to this theme.
G.P. Brockway ('The End of Economic Man', Harpers, 1991) has noted that before about thirty years ago one had a 'productive' economy and a 'speculative' economy (based in Wall Street).Real productivity kept growing because real investment was made in hands-on materials, plant, research and labor. Most everyone benefited, including workers - via real (defined benefits) pensions (not '401ks') as well as higher wages, and companies that produced REAL goods.Sometime after Reagan was canonized, in the 1980s, the speculative economy - which up til then had been kept in the background- began to take control.
A number of steps instituted by Reagan led to the Michael Milkens, Ivan Boeskys and that lot. This also probably laid the fertile soil for our own WorldComs, Enrons, and Arthur Andersen type funny accounting. One step was the Bank Holding (De-regulation) Act of 1984, which sped the way to speculative excesses resulting in travesties such as the S&L scandal in the late '80s. (And the Bush brothers - at least Neil, of Silverado fame - was in the middle of that too). One would have seriously thought the legislative infrastructure would have learned from that - but oh no, they didn't.
In 1995, congress repealed the right of investors, shareholders to sue companies. That essentially removed the last private solution that would’ve kept the criminal speculators (we see today) at bay.Too much big money from the corporate campaign contributors iced it. Just as their money has been desperately trying to cook up a perfidy of a bankruptcy law- and has left a corporate "reform" law that isn't worth much more than the paper it's printed on. (Since it excludes independent audit provisions, and still refuses to count stock options for CEO maggots as expenses).
But I digress. By 1987 and the October Market crash, the speculative economy had sucked nearly $1 trillion from people who had invested, and could least afford to lose money. However, they were constantly besieged with the 'buy and hold' mantra to ready them for the next plucking. Meanwhile, a host of factors contributed to the speculative frenzy and fed it such as:- the passage of the 401k as a substitute 'pension' plan which would replace defined benefits (in real money) that had been received until then.
Thus, workers were now expected to place their savings - whatever they could muster - at the mercy of a market that was anything but merciful. Basing future retirements on 'phantom money' and the shenanigans of shysters on Wall Street (see e.g. 'License to Steal: The Secret World of Wall Street Brokers and the Systematic Plundering of the American Investor', 1999).Then add to this morass the constant shrinkage of bank (pass book) interest rates, as well as CDs - forcing vulnerable people to chase yield in risky vehicles for which they were never prepared. These items drove millions of average Janes and Joes into the 'market' who otherwise may never have ventured there.
Just as, before 1929, millions of ordinary folk were driven into the infamous 'investment trusts' that caused them to lose everything. These 'investment trusts' were the forerunners of today's mutual funds) and then - as now - touted as "the little guy's way to enter the stock market".The more recent piling into the market with 401ks, IRAs, etc, resulted in a never-before -seen phenomenon.
What mass speculation did was to drive P/E ratios (the price to earnings of stocks, and averaged out, for mutual funds) to incredible overpriced magnitudes. Some stocks and funds were trading at over 30 times earnings just before the '87 crash, and all during the 90s the average was at 45 times earnings. This was nuts, disclosing grossly overvalued stocks- and (as we now know) a speculative bubble.. At the same time, one beheld the essential disappearance of dividends. Their amounts diminishing in inverse proportion to the soaring P/E ratios.
Some 1998-99 stats cited dividends of barely one cent on the dollar for each dollar of return- perhaps portending the decade ending last month when stocks overall barely earned 1.1% a year. You can't make any money like that - and all you have left is bogus money, or phantom money. Which is nothing to base a future on. As prices rose ever higher, with ever more people hoping to strike it rich. Many even taking out second mortgages. They actually thought they could grab the proverbial 'free lunch'. (Since their share prices were so much in excess of what their holdings were actually worth).This chasing of phantom gains by speculation in the stock market - in fact - caused the underfunding, under-investment in the REAL economy. Not the speculative one.
Thus, as money was removed from the spending stream and injected into speculation, real corporate infrastructure - including for better (improved) plant, research, labor was removed. Instead it was put into the hands of Wall Street’s denizens who used it to generate their own profits and enrich themselves. (Since each exchange added to their commissions). At the same time, companies - trying to adhere to the Wall Street line and tempo- sought to jack up yields. Not by any REAL increase in production, but by using financing tricks, smoke & mirrors- such as we beheld at Enron. (Which set up over 400 dummy companies offshore so they could transpose debt and hide losses).
In effect, the speculative economy had intruded into and contaminated what ought to have been Main Street business. Now, added to this, the specter of Social Security privatization – pushed avariciously by Wall Street, cynical politicos, media drumbeaters, and all those determined to finally kill FDR's program of social insurance. That’s not all. They know any privatization will convert remaining public funds into total speculation and a total speculative economy. For years- hell, decades- the Street’s parasites will feed off commissions. After all, it regards the folk of Main Street as “chickens to be plucked”. (‘The Street’s Dark Side’, Wall Street Journal, Dec. 23, 2002, p. C1)
Lest people forget how we arrived at this sorry pass- where privatization could even be remotely considered- recall it was Reagan that voraciously began raiding the Social Security trust funds to cover the deficits he was creating by his inflated military spending. (Even so, in its wake, the U.S. mutated from world's foremost creditor to number one deadbeat....er debtor).
Nothing will improve, as Brockway notes, until we regain the equilibrium that once existed between speculation and actual production. Until the REAL productive economy is restored - including re-ascendancy of labor in relation to capital. (See e.g. 'The Judas Economy- The Triumph of Capital and the Betrayal of Work' by Anne Colamosca and William Wolman). Right now, with corporate campaign financing of elections still engrained, I see no one in the political arena with the inclination to do what's needed.
Worse, cheerleaders like Peggy "Pollyanna" Noonan – with their mindless optimism – continue to make citizens believe they can still trust Wall Street and the markets and invest their future security with them. Markets that also thirst relentlessly after the next war, to thereby appropriate scarce resources- under the pretext of "defense" - to convert into further capital for the stocks of defense contractors and their innumerable lackeys and parasites.