Everybody,
Anybody who studies the history of the American south is led to wonder why the many non-slaveholders in the south were led to defend slavery with such ferocity. (The inability of a population to see and act on its own best interest is not a new phenomenon) So why did we in the middle class been so stalwart in our defense of wall street for the last 40 years? The answer, it seems to me, is that we are all stockholders. I am a member of a pension plan for academics called TIAA-CREF. Why the hyphen? Because it started as a pension plan, TIAA, with a partially defined benefit; sometime along the way it added a stock fund, CREF. CREF had no defined benefit, but it tracked the SandP very closely. You could decide, whether you wanted to put your money in a place with a certain outcome, or whether you wanted to gamble it. We were advised to start out in CREF and shift our investment over to TIAA as we got older. But many of us forgot to make the shift and got SCREWED in the .com bust. Over the years CREF, which started out as a sturdy conservative fund, became a "family of funds", and you could invest your retirement money in any crap you felt like. In short, many academics lost a large proportion of their retirement. Thus, the gradual erosion of our retirement institutions in the 50's into INVESTMENT institutions has turned us all from people trying to guarantee a minimum dignified retirement income to people trying to make a stock-market killing. I am as guilty as anybody else. I could go out tomorrow and buy an annuity that would pay most of my last salary, inflation adjusted, for the rest of my life. But there is no upside! Something in me is unwilling to give up the upside for the safety of avoiding the downside. So, even though I am solidly in the middle of the 99%, I have the psychology of the one percent. I am coopted. As Pogo used to say, "We have seen the enemy, and they is us!" (Does anybody on this list even KNOW who Pogo was?) I wonder what would happen to Wall Street if every one of us who has a pension took the annuity option. The market would crash in a day, right? Don't all rush for the door at once! Nick From: [email protected] [mailto:[email protected]] On Behalf Of Owen Densmore Sent: Saturday, October 22, 2011 9:56 AM To: The Friday Morning Applied Complexity Coffee Group Subject: Re: [FRIAM] Next Dictator On Sat, Oct 22, 2011 at 9:09 AM, Alfredo Covaleda <[email protected]> wrote: After Gadaffi's death a local newspaper wrote : "who is going to be the next dictator to fall?". Well, my answer is: Wall Street. -- Alfredo I certainly agree with the sentiment. And I do believe the core signal in our noise is the lack of a robust middle class, thus I find very troubling the divide between the wealthy and the "rest of us" and our immense struggle just to get by nowadays. But I don't think the problem is wall street per se. After all, wall street funds companies who build things that are useful. I think the problems are 1) in the financial sector 2) caused by too-big-to-fail, including monopolies. The financial sector is "different". It makes money by manipulating money. Sometimes that's fine, for example futures markets help stabilize the price of components of products we buy. Hedge is not a bad word here. Even lending is important when it too relates to real things like houses and companies building products. I think the disconnect is when real products and people are abstracted out of the financial world, when we're building bundles of loans, slicing and dicing, and nothing real in sight. Or when we are trading in currencies. Big is different too, distorting markets and dangerous if they fail. As much as we hate them, regulations are important. But they are very hard to manage, and with the global economy, they need to be balanced world wide. And we don't really know which ones will really build the right incentives. We have, however, just learned by experiments gone wrong, that letting banks also be insurers is a mistake. And that banks and companies are too large, they distort the economy, and worse, need rescuing when they err. So yes, let the financial dictator fail next. Now lets figure out how! -- Owen
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