The $4.7 Trillion Pyramid, Why Soc.Sec. won't be enough to save Wall St.

This is the title of an article by Michael Hudson, Distinguished Professor of Economics at the Univesrity of Missouri, Kansas City,published in the April 2005 issue of Harper's Magazine.That article makes it clear why Bush is intent on getting his hands on Social Security. Hudson says that having failed to generate the boom he has been promising through his tax cuts,he is intent on using the last safe pile of money in America to generate a "bubble" of prosperity before it goes bust.That way he can claim to be a Reagan type of optimist that turned America around ,both militarily and economically. This is the classic Ponzi scheme,promise of free money for all Americans in the stock market, if only they will put up their safe SS money to the con man.

Coming as it does from a Professor of such impeccable credentials, it would be foolhardy to dismiss that our con man in the White House is capable of such a scheme to defraud our people. He is in desperate straits.His war that he expected to be a cake walk, is dragging on costing more and more each day that he spends in Iraq. Having swaggered his way into that sandtrap,he has no real way to extricate himself, and given his level of arrogance and folly, may not even feel it is necessary so long as he can dominate the information and keep Americans compliant through promises of more utopias to come.In the worst possible case, he can engineer another of his "incidents" a la 9/11 to create a foreign bogeyman.

The other point Professor Hudson makes is that while Social Security is sound, it is the corporate pension funds,led by GM's massive fund that are broke. Bush is trying to infuse some money into those funds by creating a stock market "bubble" using the Social Security funds he calls "personal investment accounts".That money in a massive dose will prop up the moribund Corporate Pension Funds.When that buuble bursts, Social Security will be put in dire straits and Bush can then proudly proclaim that government institutions don't work.


What a guy!

carries it. If someone has a link, please provide. I only have the paper issue to which I subscribe.

Kick!

I was able to Google what appear to be the original article to here: http://www.mindfully.org/Reform/2005/Social-Security-Wall-Street1apr05.htm

I'll probably go out and buy the magazine, in case the original article is more complete. But I plan on posting that on my union BBS & listserves. It may or not come as a surprise to you guys at DU, but there are more than a few union members who have bought into Bush's snake oil (really litrtle more than social climbing, using "holier than thou" cultural values as pretext). It's not difficult to shoot them down, but it has to be done in a fraternal manner.

I may quote freely from your own summary, since it looks pretty good. It's difficult to make proper attribution from DU postings, so please excuse me in advance if I don't.

pnorman

of this Ponzi scheme the better off we the people will be.

I think Bush's snake oil scam has run out of steam, if not blown up in his face. But he must NOT be permitted to scam any "moral high ground" out of this, as he pulls back and cuts his losses. (eg: "A prophet unhonored in his own country" ... sniff).

pnorman

We've been discussing this article in the economy, jobs & taxes forum.
There's a link to the full article in the original post:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x14733

Much of Wall Street isn't buying it.

pension funds which are nearly broke. According to this essay, the cost to GM is $675 per car simply to pay out its pension obligations. If Social Security money becomes available to prop up GM's stock, it would help pay for GM's problems with pensions.In the process many Wall Street firms will derive huge incomes.I am sure some Wall Street firms will not be in on the action and they are probably going to scream.

is divided. The "Walmart" firms like Schwab want it. Others dislike it because they don't want to administer tens of millions of small accounts under heavy regulation with liability risks.

Some also think it's stupid because it pushes up already high PE ratios at a time when capital is abundant and good investments are rather scarce.

GM isn't ultimately on the hook for pensions. The PBGC is. That's the real problem - we may be looking at another S & L bailout.

a bailout from the PBGC, it will have to pay usurious interest rates which will further impact its bottom line. As it stands, GM's product lines need huge rebates to be moved out of dealer lots.Additional debt service burdens will just about eviscerate its profits.Time will tell whether it is capable of surviving. In another post here I have talked about the scuttlebutt from Michigan that has GM getting rid of nearly one third of its workforce of 332,000 people ( i.e. over 100,000) before the year is out.

Now I know why the so called analyst have become cheerleaders. Kick, kick and kick again! This is must reading.

(1) privatized social security accounts and (2) investment in equities with some FICA revenues.

Bill Clinton proposed that 15 percent of FICA should be invested in equity index mutual funds, but NOT inside privatized accounts. Instead, Big Dog advocated centralized investment through a Social Security Administration agency with an independent advisory board, much like those of state employee pension funds in California or Wisconsin.

Privatized accounts would drain away about 20 percent of equity returns in unnecessary brokers' commissions and fees, according to Prof. Peter Diamond of MIT, THE leading specialist in the economics of social insurance.

In contrast, Dubya's so-called Social Security Commission was INSTRUCTED not to spend any time debating the merits of privatization. That was a GIVEN--their report HAD to advocate privatization, and would merely concern itself with various details of privatization.

IMO investment of some FICA revenues in equities is both desirable and inevitable, but privatization is highly undesirable and eminently avoidable. In other words, I agree with the broad outlines of Bill Clinton's plan for Social Security.

For more on the distinction between privatization and equity investment, and some useful URL links, see http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1686140 , especially post #2.

thought of as an insurance plan, an income protection plan and not as an investment vehicle, is the correct take on this problem. If we think of it in these terms, it is clear that, it represents a floor and individuals are free throughout their working lives to build on this floor with other vehicles such as IRAs and 401ks and the like.

With that approach, it becomes clear Prof.Hudson's characterization of the Chimp's plan is correct. The Chimp wants to save the hides of the corporate Pension Funds that are broke. He wants to get his dirty hands into the Social Security cookie jar. His whole intent is privatization.So, this would be the wrong time for us to even consider Clinton's plan regrdless of its merits. That concession will open the doors to the wrecking crew intent on destroying Social security.

I don't need the government's investment advice. If SS is changed to allow private accounts, I want to make my own decisions and I want to be able to invest in anything from gold to shoo-fly-pie. How can the Republicans justify their "ownership society" and then have big government making the decisions on where to invest? It goes against their own argument.

"Giving a person the right to choose between a handful of alternatives may be more pleasant for that person than telling her or him precisely what to do, but it is not the same thing as actually
respecting that person's right to liberty."

institutions don't work. That may be their plan, but it won't work. I wish folks would describe the situation without proclaiming such craziness will work. They are *trying* do impliment this. They *hope* that will be the desired effect.