Sunday Election Issues - 21 September 2008
The Elder Vote and Senator McCain

Elders and the Financial Crisis

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“In The Communist Manifesto, Karl Marx marveled that, such is capitalism's dynamism, ‘all that is solid melts into air.’ Bear Stearns, Lehman Brothers and Merrill Lynch should not be the last to learn the truth of that.”
- Washington Post, 20 September 2008

That was written in the context of disapproval of $25 billion in government subsidies to the auto industry, but the reference to the broader financial crisis by conservative columnist and author, George Will, hits where it hurts.

“All that is solid melts into air.”

Like many of elders – retired and near retirement - I have been nervous for several years about the economy in general and, personally, about the safety of my retirement savings. Now that the latter has been reduced (most of it in just one week) by a total of 30 percent, anxiety is a better description of my mood, and I have found it difficult over the past seven days to think about anything else.

My usual reaction to fear is to calm myself through study: search out the facts, read the experts, get the big picture and the small, consider the opinions of people who are supposed to know, try to understand the moves of the people who are in charge.

Such has consumed most of my waking hours for the past week. None of what I have read nor the intervention by the federal government on Friday in the form of $700 billion in taxpayer money to buy up failed properties reassures me, and I’m not the only one:

“In other words, for all the toxic securities that Wall Street has acknowledged holding, there will be yet more mortgage-backed paper that will go bad as the housing market continues to fall. As much as we all hope the worst is over, it's probably not.

“And as much as we might hope that the government finally has the answer, it probably doesn't.” [emphasis added]

- International Herald Tribune, 20 September 2008

That’s my conclusion too.

Amid everything else, I am concerned that the public is not following the crisis, that too few people read newspapers. Yes, I malign the press for their piss-poor reporting on the campaign, failure to point out candidate lies and near total lack of background on issues, but the better papers, if you filter carefully, are still the best source of day-to-day analysis and thinking.

However, it is necessary to read those better newspapers and not just your small-town rag which, if it is as bad as mine, tells you nothing or gets it wrong.

The only locally-produced story on the financial crisis in my town’s Sunday paper gave a breathtakingly light-hearted review of the Black Monday crash in October 1987, and concluded with this piece of idiocy:

“The good news is that, so far, this is mostly Wall Street's problem, not Main Street's. Hopefully, the people in charge are smart enough to keep it that way.”
- Maine Sunday Telegram, 20 September 2008

Not Main Street’s problem? Tell that to Mike Nichols of Anxiety, Panic & Health who left a comment on Friday’s post that his retirement savings are now down by half.

And Jan Adams of Happening Here who also left a comment saying she had “lost a lot this week.”

And NancyB of Ericksonsblogs who said, “Now with this loss, I will have to work longer than age 70.”

And Tropigal of Fashion After 50 who wrote, “I am trying to pull my money out, but I was told that tens of thousands of people are trying to do so, and it will ‘take time.’ I don't know if I will ever see a penny of my savings.”

Even Cop Car, who often butts heads with me over my political posts, left this mordant note on Friday’s post: “Good luck to us all - all of us owners of AIG, Freddie, and Fannie. Never thought I'd live long enough to be turned into a socialist.”

That's six out of the 12 different people, counting me, who commented on that post - fifty percent who are unlikely to ever recoup their massive losses.

Only a few of the major papers reported Sunday on the effect of the crisis on the retired and near retirees – all similar to that of TGB readers. One noted:

“After last week, psychologists took to the airwaves to tell people not to become sick over losing money, advising that pausing was better than panicking. But by then, enough people had sufficiently panicked to make a run on the $3.5 trillion in money market funds, similar to the bank runs that led to the Great Depression.

"’It's just amazing in the last four or five days how many times I've heard the words 'The Depression' brought up,’ said Kevin Flannery, general manager of the Leisure World retirement community. ‘It's all people are talking about here.’" [emphasis added]

- Washington Post, 20 September 2008

Yes. Old people know how bad it might become. If we didn’t live through the Depression ourselves, our parents did. We heard the stories all through our childhood.

As much as I owe to the major papers (along with some good online writing) for helping me understand how this crisis happened and what the federal government is proposing to do, the fatuousness of other writers at the same newspapers in the face of what may be calamity for everyone is astounding.

One New York Times writer is concerned about the effect of the crisis on pending sales of multi-million-dollar, Manhattan penthouses. Another of the paper’s writers, who purports to offer advice for ordinary investors and old people, asked this jaw-droppingly unhelpful question:

“Before you do anything with your portfolio, ask yourself this: Do you still believe in capitalism?

What the...? He goes on to offer this meaningless drivel:

“…spending just a bit less money in retirement may make a huge difference,” he writes as though elders haven’t already cut budgets to the bone due to the astronomical rise in gas and food prices. “‘Small changes in retirees’ burn rate will affect them far greater (sic) than what the market will do today,’ said Bill Schultheis, of Sagemark Wealth Management in Kirkland, Wash., and the author of The Coffeehouse Investor. That’s because overspending is a risk you can actually control, even if you can’t predict how the markets perform. ‘I’ve found that many clients really like that, because they like to be in charge.’

“He noted that spending on grandchildren was often a huge item for retirees. If you can’t bring yourself to cut back there, consider the cost of eating out. He says he is often surprised by the amount people spend on that.”

- The New York Times, 20 September 2008

Does that advice help you any? The last time I spent money in a restaurant was two months ago, and before that, four months.

Back at the Washington Post, former deputy assistant Treasury secretary for economic policy from 1988 to 1993, who was also a senior policy analyst in the White House, Bruce Bartlett, in offering advice to Senators McCain and Obama, says fixing the economy “will require belt-tightening from everyone.”

“If [a candidate] thinks we can get $1 trillion out of the income tax without burdening middle- and lower-income workers, let's hear how,” writes Bartlett. “If he thinks we can cut spending by that much, he should explain how. If he thinks it can be done without significantly cutting popular programs such as Medicare, I for one would like to know how.” [emphasis added]

Now there’s an idea: let’s solve this financial crisis on the backs of poor people and the old without even a nod to the rich with their tax-free money shelters overseas.

There is so little wiggle room in my austere budget that I’m worried about how much the premiums for Medicare Parts B and D and my supplemental coverage will increase next year, and I’m already paying double last year’s price for heating fuel. I know it is no different for most of you and for tens of millions of others.

Again, Main Street is being forced to bail out millionaires and their companies while our few dollars shrink further every week at the grocery store and gas station. Personally, I don't believe in the Paulson plan, the people who devised it or the $700 billion price. They told us the Iraq War would cost $50 billion and it's currently at more than $580 billion. Why should I believe them about even bigger numbers?

Economics writer, William Greider calls this latest bailout a "swindle" and says,

"Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout...

"We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage."

- The Nation, 19 September 2008

I feel that I’m not expressing my own outrage forcefully enough today, so I’ll let one John Cole (whom I don’t know from Adam) of Balloon Juice say it for me. I discovered him via Wood s Lot and he is as furiously angry as I am:

“I do not ever want to hear another damned word about the free market. I don’t want to hear another thing about letting the market regulate itself. I don’t want to hear about the free flow of capital. I don’t want to hear about government getting out of our lives.

“None of it. From superfunds to super-bailouts, I am tired of other people getting rich being irresponsible and then being told I have to pay to clean it up. I didn’t read one punitive aspect of this new plan. Not one punishment for the people who did this.”

[At The Elder Storytelling Placed today, Pat Temiz recounts a hair-raising journey in Afghanistan 1977.]

Comments

Well said!

And those small town newspapers? They survive because they give the readers what they want. Fluff!

I couldn't survive without my internet connection and access to the real world.

Good news, the Part B premium, except for those with the high incomes, will stay the same in 2009, as will the Part B deductible.

Part D will cost more - that's built into the basic plan and, of course, it's actually private coverage. Remember to search all plans for the best deal - they change each year.

I wonder how often these "experts" who tell us to spend less on the grandchildren as a solution to all our problems actually step outside their walled-in gardens? Have they ever tried to make a budget just with a Social Security check? Do they look forward to a retirement that is no retirement, but just another phase of their work lives? Have they tried to compete in the job market with all the young people out there who have been laid off?

For anyone paying attention, there is reason aplenty for real fear for the future. We have kowtowed to the moneyed few, both individual and corporate, until our foreheads are bleeding.

How can people who find their buying ability cut by a third at the grocery store and gas pump possibly not realize that it is the current government's policies that are causing it? Yet the majority of the public goes on its blinkered way, willfully ignorant of what's happening to our economy and what it means to their future and their children's future. They accept without question the babble that it's Wall Street's problem, or that "the economy is fundamentally sound."

I am terrified that this benumbed majority will blind themselves to reality by watching too many smear ads on tv and vote in 4 more years of the same destructive trickle-down economics that has run this country into the ditch.

I'm trying to figure out why anybody thinks 300 million or so Americans can guarantee the financial well-being of the more than 6,000 million people on the planet.

Excellent Ronni and well said Mike - I agree totally. As a retired Federal employee, I'm wondering if the next step will be the Treasury stopping the payment of my measly monthly pension (so they can continue to bail out Wall Streeters). I read in Newsweek today that the CEO of Lehman Brothers walked away with $400 million - he knew when to bail out for sure! All of this fills me with anxiety too and a whole lot of anger, especially when I realize the dumb-downed lazy voters will most likely put a Bush clone and moose killer in the White House to continue the demise of this country down the financial drain. I am turning into a really crabby old boomer.

You said it well. I also have been researching it and it doesn't reassure one to learn more. I suggest anybody who hasn't read Naomi Klein's The Shock Doctrine, head to your library or used bookstores for a copy. This is how 'they' get what they want. It's how we ended up with the Iraq war and a blank check is again requested. Americans need to say hold on a minute. Why this moment? Why immediately? Why not look at it for a bit? They don't want anybody to do that and Paulson, who may not be very good at his job, is wanting it all coming under his control (or his successors) with no oversight. Does this smell bad to you? Something has to be done but what is more the question that resonates with me right now.

I did like what Obama said about it but he didn't go far enough given he has to get elected first. The truth is Americans have some responsibility for this problem too. Unfortunately those who had no part in the wrong doing, like retirees, who were trying to be responsible in their lives and investments, they are the ones that somebody else wants to have pay for it. It is scary as we have so little real information or control.

Aww, Ronni...me butt heads with you? I prefer to think that we present alternative viewpoints--two of the 360 million viewpoints that may be about in the USA.

Rain wrote it before I got around...that we need to not let ourselves be stampeded into supporting radical "remedies" to huge problems. We Americans are notoriously short-sighted. We need to elect people who take the long view into account--not just what happened last week. This is particularly important in electing our Senators and Representatives.

Today, even Goldman Sachs is giving up on investment banking as its sole line of business. If that isn't an indication of the terrible decline in our economy and in our country's growth, I don't know what is. I agree with everything said here and in Cop Car remarks about who we elect, for EVERY SINGLE OFFICE. We must do our research, talk among our peers, and try to make sense of an economy that is affecting everyone, but mostly those of us who are retired or hoped to retire. For me, I had thought my selling my home would be a bonus to retiring. But not now. And I fear, not ever again will we see home values rise at such a level as before. AARP just released a report on the affect of the housing industry on retirees. Here is url:http://assets.aarp.org/rgcenter/econ/i9_mortgage.pdf. They say that homeowners 50 and above were significantly affected by the mortgage crisis with over 684,000 homeowners age 50 and over being delinquent, or in foreclosure, or lost their homes during the six months ending December 2007.

And now, its even worse with banks, investment banks, wall street in such disarray. Maybe I will never get to retire now.

If this bailout plans goes through as proposed, we may as well put our Constitution through the paper shredder:

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

What power!! The Sec Treasury can select which institutions to bail out with the only limitation that it has to be $700 billion at any one time with NO RECOURSE TO JUDICIAL OR ADMINISTRATIVE REVIEW AT ALL.

This is just incredible.

I'm a psychologist but I have no panacea for the masses on this one.

Certainly, before cringing about CEO pay, think of those millionaires who let you down over the weekend on the football field. Or those millionaires you or your kids or grandkids listen to on the radio or on CD.

And remember it's not the CEOs who voted the big golden parachutes, it was the Boards. Why do they never want to shoot the board members who allow this stuff?

As for stocks, I'm dollar cost averaging and buying the same amount every month as the market sinks. Our retirement assets are only 30% in stocks anyway. Don't have more if you can't sleep with risk.

As for cutting back on spending, living within our means is a good idea for all of us.

My bet is that hard times are with us for at least another year or two, maybe longer. It is not the first time. We will survive. And capitalism, while imperfect and prone to excess every decade or so, is still better than the alternatives.

Regarding our Congressional candidates:

Earlier this morning I emailed mine who are running for re-election to let them know that if they vote for the Paulson proposal, there are alternative candidates to vote for and I will do so.

Definitely, write and CALL your congress creatures with your concerns! There has to be legal oversight for whatever is done. There have to be provisions for the taxpayer to be protected -- we should be taking over these companies, not just buying bad assets.

If there is not a provision for taking care of those at the bottom as well as bailing out those at the top, we head into another depression -- Hoover bailed out the rich and left the poor to suffer, too. That's what started the bank runs. We can't let this happen again.

http://www.thebulletin.us/site/index.cfm?newsid=20116690&BRD=2737&PAG=461&dept_id=576361&rfi=8&ref=patrick.net

Ronni said "I am concerned that the public is not following the crisis"

That's what Palin was supposed to be for, to keep the public's attention diverted from the real issues but even the smart-ass neo-cons didn't see this one coming. McCain has been caught with his baggy pants down around his knees and even "Cindyrella" can't save him this time.
The myth of free market economics was never based on anything more tangible than the wishful thinking of our resident fat cats and their politician sycophants.
Maybe, if after all, there is a tiny blip of light at the end of the tunnel. Maybe this time, the Freedmanites and their supporters have gone too far. Maybe this is the straw that will cause the house to fall down and maybe Barrack Obama can lead this country out of the neo con wilderness where the wealth can be shared equitably.

I too have been really angry this last week. Not only at the deep losses I've taken (40% in 15 months), but at the audacity of Sec. Paulson and the Bush Administration. It sounded exactly like what got us the Patriot Act and into the Iraq War.

I emailed my senators and representatives over the weekend as well as Pelosi and Reid. I can't find any economist anywhere who thinks this is the best way to solve the problem.

Sounds to me like the Bush administration wants to bankrupt the country so there will be nothing left to implement programs for the rest of us.

I just wanted to add 2 things. Senator Sanders put his strategy for helping the economy on the Huffington Post blog and it protects the middle class. He has a lot to say at
http://www.huffingtonpost.com/rep-bernie-sanders/the-middle-class-must-not_b_128046.html

Also, Balto Gas and Electric is owned by Constellation, a publicly traded energy company that was threatening it was going under. It was bought out my Warren Buffet's group. Do you know what the CEO of Constellation is getting out of this? 48 million dollars is his parachute retirement buyout.
Justice?

All those greedy "let the market regulate itself" people loved to quote Saint Ronald Reagan, who declared government isn't the solution to problems, government is the problem. Suddenly they seem to have forgotten this pronouncement. It's far different when they want welfare for themselves.
Love that money manager claiming "many clients really like that (cutting corners even more), because they like to be in charge." Well, I don't "really like" it. Our expensive eating out consists of a trip to a fast-food place once in a while. We stay home more instead of driving, and as is true for most people across the country, there is no public transportation here. In what way are we in charge?
We retired folks can only cut expenses so much,and we've already done that.
Rain, I agree that Naomi Klein's book, "Shock Doctrine," is a real eye-opener. It explains a lot of nutty neo-con philosophy.

I recall being repelled many years ago by an ideology that adamantly professed capitalism would fail because our system would be taken from within -- not foreign or domestic spies, but betrayal from some of our own ideologists. Mix in some greed and avarice under the guise of acceptable business practices engaged in by those who truly don't care for their fellow humans, or follow the professed belief of their claimed spiritual foundation, and we have the makings for the undoing of our country.

Well, I do have to wonder just what sort of internal system is now subsuming the freedoms, opportunities and financial solvency our constitution and bill of rights were created to guarantee every American -- not just the few.

The past year I found myself thinking about finally allowing my professional license to expire which would result in my giving up working. I am beyond the legal retirement age, but I would welcome no longer having to fulfill time and financial obligations required to keep my state license and national certification current. I've had this nagging concern for many years, however, that I might regret relinquishing my ability to work given what I saw happening in the U.S. financial world and with our government.

Now I see how unwise my taking such an action would be since I am one of the middle Americans who are going to be saddled with paying off the excesses of Wall St. This will be so even if legal but immoral and unethical decisions are made by officials clearly not acting in my best interests require me to take on this financial burden.

My financial security is further threatened because I'm an elder recipient of Social Security and Medicare to which my deceased husband and I contributed throughout our working lives. I consider these plans at risk, too, because of persistent current administrative efforts to destructively alter or dismantle these successful programs. They were designed to provide some basic income and health care for our qualifying citizens.

I do not trust this administration, or any words from candidates of that party that they will ensure these programs will not be sacrificed in some way. I only have to look at the words, actions and honesty of those candidates political party -- a historical track record and current stated intent demonstrating elders and others of modest means interests will likely be betrayed. Even the other major party has been negligent acting in the past, but they clearly have a more positive record, actions and commitment to providing some protection for all the citizens, not just the few.

NYT caught up with you today, Ronni...

Blogs are just like getting the paper early....

http://www.nytimes.com/2008/09/23/business/23retirees.html?_r=1&hp&oref=slogin

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