Wealth Inequality on Steroids!

Do you know how much of the total US wealth the top 1% of households controls? A staggering 34% (as of 2004). Which means that as a nation we onlly have 66% of the total wealth to address the needs of the other 99%. No wonder why we have the health care and other social problems that we do.Think about it -- if the top 1% of HHs only controlled 17% of total net worth, the rest of us would have 27% more resources to attend to basic needs.

How Much Will Boomers Have to Retire On?

I did a little analysis and keep up with some interesting figures. Let's assume you are a 53 year old boomer today. Based upon the average value of a 401K for this age group, the average net equity in your home, and social security payouts, here's what it looks like:

IF YOU SELL YOUR PRIMARY RESIDENCE:
- And retire at age 62, you'll have $3494/mo to live on
- And retire at 65, you'll have $4,655 to live on
-And retire at 67, you'll have $5852 to live on

IF YOU DON'T SELLL YOUR PRIMARY RESIDENCE:
- And retire at age 62, you'll have $2352/month to live on
- And retire at age 65, you'll have $3109/month to live on
- And retire at age 67, you'll have $3,946/month to live on

Not draconion, particularly in some areas of the country, but definitely eye-opening!!!

What do Baby Boomers think government's role should be?

We asked our online panel of 150 boomers their thoughts on the role of govt. vis a vis the economy and social issues. Here's what they told us (they were allowed to chose more than one response):

• 46% - “I’ve seen the flaws of unregulated capitalism and I’m for more government intervention.”

• 20% - “I am dedicated to the principles of capitalism now more than ever.”

• 32% - “I think it’s the government’s role to make sure that all people have equal access to housing, healthcare, education and a dignified retirement.”

• 9% - “People should fend for themselves. The smaller the government, the better.”

• 45% - “I’m disgusted with government’s role because it’s rewarding failure and bailing out people who made mistakes.”

• 6% - “I think Socialism is a good idea and it will help us solve some of today’s problems.”

Is Social Security the largest Ponzi scheme going?

That's exactly how a prettty knowledgeable friend of mine described it.

Actually, I thought it was a compelling question, so I did a little research. Here are the facts:

* Right now, the total amount of money taken in through payroll taxes EXCEEDS the benefits paid out to retirees. The excess is put in a trust fund invested in US bonds

* In 2017, the amount taken in will not cover benefits paid. It will have to be supplemented by interest from the trust fund.

* By 2027, the amount paid in plus the interest will not be sufficient to cover benefits. Hence, the government will have to dig into the principal to fund the benefits (a mortal sin according to rich WASPs)

* By 2040, the entire trust fund will be depleted.

The Good News?Social Security will be around for most of our lives. Well, on second thought, maybe not good news, but at least it doesn't suck!!!

Jewelry or Gall Bladders?

I remember when I took Econ 101, in one of the early chapters there was this tradeoff chart that depicted macroeconomic decisions that government had to make during WWII: guns or butter? In other words, in a finite world you could only produce so much guns or butter -- the more guns, the less butter and vice versa.

This sort of reminds me of the dilemma we're facing now and makes me wonder why there's so much resistance to this "millionaires" tax to fund universal health care.

It seems to me if someone is making in the range of a million dollars a year, that 5.4% tax (or whatever it is) on marginal income will definitely not be used for life's necessities. So for lack of a better term, let's say it would be used on a luxury item, like jewelry.

So, put in more basic terms, some of the politicians who are oppossed to the tax on the wealthy are saying they'd rather have their rich constituents buy jewelry than one of their poorer constituents have his or her gall bladder surgery.

What's wrong with this picture?

On Bonuses....

Who deserves bonuses?
Any teacher who inspires a student to love learning, any hardworking volunteer at homeless shelters, soup kitchens, EMT crews -- not to mention police officers and fire fighters -- the little league coach who plays the fat, uncoordinated kid even if it means blowing a game, Sully and his entire flight crew, single moms who work two jobs to raise their kids and send them to college, and a bevy of others...

Who doesn't deserve bonuses?
Any of the already overpaid geniuses at AIG who got us into this mess and their other Wall St. bretheren, Alex Rodriguez and Roger Clemens (not for lying or giving themselves an unfair advantage, but for what it says to the kids of the world), and, last but not least, any member of the 2008 Detroit Lions.

The only good thing that come out of this Wall St. crisis is that it is underscoring the unfair disequibilbrium of income and wealth in this society, exposing a skewed system of wealth "entitlement," and is driving a new wave of populist revolt that might just change things for the better long term.

The Best and the Brightest.

It seems to me that one of the causes of our current economic malaise lies in how we've deployed our very best talent.

Instead of getting into industries that innovate, create, or manufacture real stuff, they went to Wall St.

And what did they do there?

At first, M&A was the hot thing. They'd stick two companies together -- in many cases two companies that had no business being stuck together -- they'd fire middle and upper level managers (in many cases the very heart and soul of the companies) to bring expenses down and profits up so that they could become very wealthy.

The expense? Failed companies, a compromised middle class, and lots of money for the very few.

Lately, they've been into hedge funds and these mortgage backed security "things." To read about some of these deals is mind boggling. They'd take a mortgage backed security, pick off its most risky pieces, put them and others like them into a mutual fund, then another mutual fund would buy the riskier pieces of those funds. All mired in a foggy soup of derivatives, credit swaps and a bevy of indicipherable instruments.

Well, the best and the brightest finally outsmarted themselves.

In their quest to impress themselves with the brilliance of all their financial slight-of-hand, they've created nothing, absolutely nothing -- other than a financial crisis of epic proportion.

Back to my original point: when our country succeeded we were driven by real innovation -- not the contrived innovation of CMOs, derivatives, and credit swaps -- innovation, that created value, jobs, and productivity gains.

The industrial revolution was fueled by steel mills, automobile factories, and electric generating stations. The sixties were driven by housing starts, the NASA program, shopping malls and supermarkets. The nineties by Microsoft, Intel, Cisco, the dot.commers. Real products. Real value.

And, yes, for all those expansions, Wall St. was there -- serving its proper function: providing captial for the mills, factories, shopping malls, microchips factories and software companies. Whenever Wall St has tried to get fancy, it's failed miserably.

Perhaps the best and the brightest of the next generation should concentrate on creating real value rather than the illusory value of Wall St.

The Exploitation of the Many by the Few

I noticed an article the other day.

Apparently, Goldman Sachs owns a major piece of Burger King.

The article basically made the point that if you took the total bonus pool of Goldman Sachs and extended it to all the Burger King employees, they each would have received an $18,000 bonus, which is in excess of the average BK salary of $14,000.

Significantly, Goldman Sachs took billions in federal bailout money and still gave out bonuses. Several years ago I remember reading that the average total compensation at Goldman Sachs -- including secretaries, administration, clerical -- was $600K. We can only imagine what people at the most senior levels got.

So here's my point: are we better off with the few making so, so much and the many struggling just to survive. Yes, of course, there are different levels of talent and it takes a lot more education and smarts to put together an M&A deal than flip burgers, but I have to question the over-exaggerated skew towards the very wealthy.

The Goldman Sachs bonuses, I'm sure, bought a lot of expensive Coops in Manhattan, McMansions in Fairfield County, Summer Homes in the Hamptons and Nantucket, yachts, exotic luxury cars and many things I can't even imagine.

Wouldn't the money have been put to better use by bringing those BK employees up from poverty levels to income levels which begin to border on adequate?

What if they gave a depression and no one came?

I took a lot of economics courses in my time (not that I remember much!)

But, despite the few things I can remember about Keynesian economics and Milton Freidman's monetary theories, I'm more confused than ever now.

What happens when almost everyone has NOTHING?

What if we just kept on doing what we're doing now -- going to work, the grocery store, the movies, everything -- but we just didn't use money.

It's a beautiful idealistic thought (I've never been accused of being a pragmatist).

The one problem, though, is some people would try to take advantage of it and the whole thing would become unglued before it got started.

Oh, well......

Is it just me or....

are advertising people the most abused class of people in the world?

It's a tough business, you put all your energy and passion into what you do, and then you get fired for trivial reasons without any regard to the quality of work you do.

I think we're all masochists!

I Don't Understand the Republicans.

They voted against the stimulus bill, calling it unnecssary spending.

In California, they won't help balance the budget.

Don't they get it?

Spending creates jobs!!!!!

If you spend $10 million to build (or repair) a bridge, that could potenially hire 100 people at 50K a year who will spend most of that at WalMart, Target, StopNShop, A&P, Ralphs, Home Depot, etc which will cause all of those stores to hire more people and their vendors to hire more people to manufacture their goods. Their's a multiplier effect of about 1.7 times the actual investment.

What do the Republicans think we should do?

Sink into a morrass of poverty?

Will Our Generation Ever Be Able to Retire?

I was thinking the other day (always dangerous!).

Our parents generation had for the most part pensions and social security.

Our generation -- unless you're a public employee or one of the dwindling number of unionized workers -- for all intents and purposes, has no pension.

If you were to look at everyone over 50 years old and cut out the top 5% in terms of net worth, I bet you (and this is strictly a guess) that the average liquid savings is less than $100K.

Social Security, as we all learned in Econ 101, is not in actuality a trust, but a transfer payment. Our generation funded the social security payments of our parent's generation. But the problem is, there were more of us than them. The situation reverses itself with the next generation.

So....

No pensions. Not a lot of savings. Dubious prospects for Social Security.

Yikes!!!!

Socialism here we come.