krebscycle

(from 2011) 401k’s are the biggest rip-off of the public in US history. Basically, workers are provided with an opportunity to help the government fund the retirement of financial sector managers who use workers tax free savings both as sources of fees and to be the base of the “dumb money” in the stock market. Given usually minimum menu of mutual funds to choose from and lacking the expertise, time, and financial resources to play the game, ordinary 401K investors are like a middle school phys ed class “given the opportunity” to play  a game with a professional football team. Here’s a simple solution: under the same rules the Federal Reserve bank should offer zero-fee 4% plus inflation 401K savings accounts to all workers – the option to choose this should be automatically part of any 401K plan (and all the variants). The Fed funds should be limited to, say, a million dollars per US worker and should only be funded with money deducted from ordinary income.  The Government would then limit the influence of the bond market on its debt costs, the public would have a safe way to save for retirement, and a couple of trillion dollars would potentially be taken out of the financial markets and put into productive investment like railroads, bridges, and education. Basically, working people would have the opportunity to invest in the future of the country. And those who prefer would be welcome to bet on their mutual fund instead – this would be an option.  Since US 10 year bonds are about 4% too, the government has no serious additional cost – the Fed Reserve should be required to buy 30 year treasury bonds directly from the Treasury with the public investment.

The US “left” and establishment liberals are deeply invested in nostalgia for those imaginary days when FDR’s iron fist beat down the cringing malefactors of great wealth, LBJ led the civil rights movement, and Glass-Steagal protected unions from banksters. None of that really happened and the world and the economy have changed a great deal in the last 80 years, but nostalgia for an invented past and desperate clinging to outdated and even meaningless terminology and policy proposals is a hallmark of the Left and of its Liberal allies.  The right, on the other hand is still supposedly fighting for a vision of free-market unregulated capitalism that never has existed, never can exist, and makes sense only as a duplicitous marketing cover for making the rich richer and even more protected from law or competition than ever. 

The policy proposed above would be condemned by both Left and Right. The Right would pretend that the “free choice” of people to be ripped off by one of the financial managers selected for them by their employers, subsidized by a tax deduction, and governed by complex laws was being threatened by giving them an option to invest in their country. The Left wants to regulate the financial sector more – but this proposal just allows citizens to shrink the financial sector.

Simplified: March 20 2014