Make your deposits here!
Make your deposits here!

Mr. Bush wants people to abandon reliance upon Social Security and place reliance upon the Securities and Exchange Commission for oversight, or non-oversight.

The common feature of failed Savings & Loans was the injection of large sums of money from Deposit Brokers, followed by wasteful reckless investments. Deposit brokers are in the business of brokering deposits so as to obtain the 100,000 federal insurance, up to 9800 times, on behalf of their investor clients. The 100,000 guarantee is not per person in total and cumulative of all their bank deposits where ever they might be located. Rather it only applies per person per bank.

George Bush's experience in Colorado should have been enough for him to realize this mechanism for raising cash. It likewise should have given him the ability to recognize that when a financial institution is flush with cash, that the riskiness of investments goes up, fast.

The hybrid-bank, the confined set of investment options, for investment-in-lieu of Social Security should be looked upon as if it were a normal run-of-the-mill bank. Imagine if your banker told you that he was willing to take receipt of your deposits but that you could not access those funds until you reach 65 years old. Would you not tell him he was flat out crazy, and then go somewhere else to make your deposit?

The New York Times ran an article entitled The Drexel Diaspora, written by JENNY ANDERSON, that looks at where all the former employees of Drexel Burnham Lambert have gone.
http://www.nytimes.com/2005/02/06/business/yourmoney/06drex.html

Michael Milken was the junk bond king at Drexel. And like with any king pin, there is always someone that is willing to take their place at the head of the table.

We should take a look too at the new positions held by all the Savings & Loan scoundrels, inclusive of George Bush himself, and ask Where Have They All Gone? This branch of scoundrels have emerged in the residential home finance business, again, in new sheep clothing. Except they do not run Savings & Loans with guaranteed deposits they work there magic by offering loans on your house, again, with a government guarantee. Your house, even if you are not borrowing a dime, is considered an asset that will not go down in value (quite contrary to any free market principal known to me). As the home prices hyper-inflate it is matched by more government guarantees on the mortgage instruments that are considered nearly as secure as Federal Reserve Notes (the green paper we call cash).

There is a one-two punch that is on the horizon, 1) housing is out of whack with the carrying capacity of mortgagors' ability to pay and 2) stocks have a long way to go downward. The “talk” of Social Security reform that involves investments dedicated to Wall Street can stall the stock market drop because it offers the prospect of a greater fool with whom to trade. Alan Greenspan is hog tied (of his own accord) into keeping interest rates low lest the hyper-inflated housing prices implode, leaving him with no more tools, other than wholesale currency devaluation, to stimulate the economy.

What could I offer as a remedy . . . from the perspective of an Oregonian?

First, all labor should demand an alternative to the current Consumer Price Index (CPI) so as to reflect the new reality that both stocks and home prices are treated as de facto currency. Do not look at the price level of a small basket of goods but look at the other side of the money supply equation. By this I mean, if stocks are presumed to grow (not fall) and housing prices are presumed to grow (not fall) and the government treats them as cash then the price level of the basket of goods in the CPI is an inadequate “proxy” for the money supply. The new proxy must factor in housing values (independent of the fleeting interest rates) and the stock prices.

Have your wages hyper-inflated in lock step with either stocks or housing values in the last ten to fifteen years? If the answer is no, then you have lost ground relative to folks who benefited from these asset bubbles. I really should not have to present empirical evidence here because the answer should be self-evident.

Second, we should create an Oregon Stock Exchange. It would be purely private, just like the New York Stock Exchange. It would have two defining features. One, only Oregon residents would be able to participate in the exchange, and only in their personal accounts rather than indirectly through trusts and other deceptive devices. Two, only companies incorporated and based in Oregon would be allowed to be traded on the exchange.

Would this look like a bank? I really don't know. Would this look like a security over which the Securities & Exchange Commission would want to assert full dominance? I really don't know. Would it provide at least a tiny chance that your private investments under Mr. Bush's Social Security reform proposal might stay slightly closer to home? Yes, of course . . . that is the whole point of this mental exercise. Would Mr. Bush and his clan of Savings & Loan Sharks and Junk-Bond Scoundrels object to the creation of the Oregon Stock Exchange? In a heart beat with every bone in their soul . . . which again is the point of this mental exercise.

Keep your money close to home. Do not agree to any investment agreement that does not allow you to withdraw your deposits upon demand, upon terms comparable to that of a deposit at your local bank.

Where have all the scoundrels gone? They did not just vanish did they? . . . they scattered like a virus to create a more systemic problem much like a cancer. If your locally owned banks were your immunity system from outside financial control then today you have no immunity system whatsoever. The Oregon Stock Exchange would only partially remedy the local system to provide local financial security. The new-CPI proposal would initially engender laughs, but those laughs highlight the absurdity of the loss of relative wealth of mere laborers.

If labor demanded a one-time catch-up adjustment in wages, to match the asset bubbles, then the increase in wages would far outstip any supposed value of getting tax breaks for participating in Bush's so-called Social Security deal. Then, if we pluncked all our savings exclusively into local investments then Oregonians would be better off . . . at least for a while.