midtowng's blog

Trying to fix a broken 401(k) system

Representative George Miller is waging a lonely war against powerful enemies. He's trying to reform the 401(k) system, a system that most on Wall Street don't want reformed.
The key to Miller's plan is to force 401(k) providers to disclose their fees in plain English. If you don't think this is important, consider that those fees can eat up 75% of your potential retirement savings.

If you look at the system, basically what you have is working families making the conscious decision every month to try to save some money for retirement. Then along comes people managing those funds for them and they start dipping into those funds for fees that are really not in the best interest of those savers. So, you have elite financial managers getting rich off the back of middle-class working people. The last thing they really want is transparency.

"The 401(k) system today in the United States has been an acknowledged failure."
- Alicia Munnell, director of the Center for Retirement Research at Boston College's Carroll School of Management.

All these fees are a mystery to an overwhelming majority of Americans.

From a Whorehouse to a White House

On December 6, 1928, in the town of Cienaga, Colombia, thousands of families gathered in the town square for Sunday Mass. Most of the men in the area had been on strike against the banana plantations for nearly a month. They were demanding written contracts, six-day weeks, and to get paid in cash rather than company script.
The Columbian government responded by sending out the army, which set up machine guns on the roofs and at the corners of the square. After giving a five minute warning, the troops opened fire despite a lack of any provocation from the strikers.

Banana strike leaders

Joe Hill

"I die like a true blue rebel. Don't waste any time in mourning. Organize."
- Joe Hill's last written words

Every successful popular movement has its legendary, or near legendary, characters. People, or groups, who seemed bigger than life, and in the end must be sacrificed to the cause. The civil rights movement had Martin Luther King, Jr. and Malcolm X. The American Revolution had Nathan Hale.

For the labor movement the group that fit that role was the Industrial Workers of the World (IWW). While the roll-call of the IWW is filled with legendary characters, far more than can be written in anything less than a book, one character stands out above them all - Joe Hill.

Knights of Labor

The reason Labor Day exists is because of a long-defunct labor union known as the Noble and Holy Order of the Knights of Labor. This labor union didn't allow bankers to join. It also excluded doctors, lawyers, gamblers, stockholders, and liquor manufacturers because they were considered "unproductive members of society".
Considering the insane amounts of money that investment bankers get paid to move other people's money around, the Knights of Labor may have had a point.

Subprime meltdown over; now comes the bad news

So much has been made of the subprime mortgage meltdown that you would think it was almost totally responsible for the economic collapse, and that once the subprime problem was fixed then the worst would be over.

Unfortunately nothing could be further from the truth, despite hitting new highs in foreclosure listing. Instead it was the first round of a three part collapse, and we are on the edge of the second round.
I will demonstrate with a fantastic series of charts below, most of them were created by the T2 Partners.

When math meets political dogma

"The Church at the time of Galileo kept much more closely to reason than did Galileo himself, and she took into consideration the ethical and social consequences of Galileo's teaching too. Her verdict against Galileo was rational and just, and the revision of this verdict can be justified only on the grounds of what is politically opportune."
- Cardinal Ratzinger (now Pope Benedict XVI), 1990

You would think in today's world that people would accept that simple math isn't something you debate. You would think that people would accept that 2 + 2 = 4 and then move on.
But that's not how the world works. Galileo failed when he tried to argue physics with theologians. The problem today isn't physics - it is simple addition - and the theologians of today are political.

China cancels America's credit card

The public didn't pay much attention to this comment by Congressman Mark Kirk last week, but they should have.

"It would appear, quietly and with deference and politeness, that China has canceled America's credit card," Kirk told the Committee of 100, a Chinese-American group.

"I'm not sure too many people on Capitol Hill realize that this is now happening," he said.

It's hard to believe when you consider that China has bought over $1 Trillion of our debt, and the largest single-year purchase was 2008.

But now it appears that Mark Kirk knew what he was talking about.

"There will come a time where the lack of Chinese participation may have a significant impact," Kirk said.

The Great Strike

"Terrors Reign, The Streets of Chicago Given Over to Howling Mobs of Thieves and Cutthroats."
-Chicago Times headline, 1877

130 years ago America was a different place. Labor unions were small in number and relatively powerless, the federal government was immensely corrupt, and the presidential election had just been openly rigged.
Hmmm. OK. Maybe America wasn't different from today's world after all. But it was a great deal different from the America of most of that 130 years.

Saving the American economy by looting it

Paul Krugman recently pointed out that wages are falling across America. A week earlier the Treasury Department reported that tax revenue was collapsing at a 14% rate.

It's easy to see the correlation between these two trends. But what do they have to do with this statement? Everything.

Sen. Dick Durbin (D-Ill.) has been battling the banks the last few weeks in an effort to get 60 votes lined up for bankruptcy reform. He's losing.

U.K. faces a disastrous economic scenario

The source of the problem is crystal clear - the banking bailouts are costing too much.

(Bloomberg) -- U.K. government support for the banking system has risen to 1.4 trillion pounds ($2 trillion) and may climb higher as the financial crisis spreads to building societies and economists warn lenders may need more aid.
The amount invested in, loaned to or pledged to back bank assets now equals Britain’s gross domestic product, or 22,800 pounds for every person in the U.K.

The amount of money spent propping up the British banking system is unprecedented, and unaffordable. There comes a time when this sort of deficit spending hits the wall, when the number of interested buyers simply runs out.