Sunday, January 31, 2016

Absurd Central Bank Policy

According to today's Wall Street Journal:

"The Bank of Japan on Friday joined a host of European peers in setting its key short-term rate below zero.  The move, long denied as a possible course by the bank's governor, came a week after the European Central Bank president indicated he was ready to launch additional monetary stimulus in March -- and days after the Federal reserve expressed new worries over market turbulence and sluggish growth overseas."

This is reminiscent of Dorothy and Toto trying to track down the Wizard of Oz in their effort to overcome the wicked witch of the East.

As devoted fans of the Wizard of Oz know well, the Wizard was largely irrelevant to the problem of dealing with the infamous wicked witch.  But that didn't mean that a lot of folks were none the wiser, as the Wizard commanded quite a following, as do central banks.

How absurd is it for central banks to punish commercial banks for holding reserves by forcing the banks to pay a negative interest rate on their cash holdings?  This is completely ridiculous policy, only possible in a world of make believe.

Europe and the US have passed regulations that have laid their economies to ruin and stagnation.  They have enacted financial penalties on firms that hire employees.  They have forced their commercial banks to lend to customers for purely political reasons. 

The regulators making the decisions in Europe and the US don't like free market economics and they abhor economic success in the free market.  They are constantly opining about inequality as they snuff out any opportunity for the non-wealthy to prosper.  Most regulators have never been involved in the private sector.  Like academics cloistered in their protected tenured environment, regulators have nothing but contempt for those who strive to improve their lives through participation in the private sector.

But much like the Wizard of OZ, central bankers and their regulatory brethren form a religious cult, unconcerned about the realities of their policies.  As long as they can command the attention of the crowd, they can pretend to be doing something significant.

The problem will all of this is that it doesn't work.  Economies will not produce growth if regulators stifle it.  This means that folks in the bottom half of the income and wealth stratum will continue to lose ground, as their standard of living recedes back to an earlier epoch.  This is a circular process.  Activists push laws and regulations that make the life of the less fortunate much worse and then these same activists point to the declining living standards of the less fortunate -- declining standards that could easily be reversed if activists could find something else to occupy their attention -- like work, for example. 

Central bank policy is not particularly harmful.  It is just mainly irrelevant, much like the Wizard of Oz.   That some people believe that central bank policy actually does something, other than employ otherwise unemployable bureaucrats, is the real harm of central bank policy discussions in the media. Such discussions ignore the real problem of an over-zealous bureaucracy that has driven the western economies to the curb and blighted the hopes and dreams of their citizenry.

Friday, January 29, 2016

Why Not Try Free Markets for a Change?

The financial press seems to be obsessed with central bank policies.  There is little or no real evidence that central bank activity has ever mattered much in impacting real economic growth.  No doubt, as Paul Volcker showed in the early 1980s, central banks do matter in the determination of the rate of inflation.  But, the real economy?  No way.

The highest rate of growth ever achieved in any 50 year period in American history occurred when there was no central bank.  In the 1950's and 1960's when real economic growth exceeded 4.5 percent, the central bank was quiet and inactive.

Only in the 1970's did the Federal Reserve begin to make the front pages of the paper and then, only to show how inept they could be.  The Fed engineered the largest peacetime explosion in the money supply in American history.  The result, easily predictable by a freshman student of economics, was a massive burst of inflation.  Putting that fire out is what made Paul Volcker famous.

Now, the Fed is a constant center of attention.  Why, is not clear.  Nothing the Fed can do or say can matter for real output and real income.  The Fed is simply irrelevant.

Thank goodness.

Because the Fed has an atrocious forecasting record.  As the economy began sliding over the economic cliff in December, the Fed was concerned about an overheating economy and inflation.  Hard to believe that any organization could be that inept.  But, that's the Fed.

Fortunately, the Fed doesn't matter for good or evil.

What the economy needs is free markets not an over-zealous Fed.

Good Timing

The Fed, according to its press releases, is "data driven." Hence the recent "Fed liftoff," which appeared to lift nothing off but a curtain surrounding inept Fed policy, was timed to coincide perfectly with an economy sinking into a quagmire.

Today, the government released 4th quarter 2015 GDP growth of 0.7 percent.  Remember that you have to divide that number to get to the actual anemic rate of 0.17 percent.  That's within the margin of error of a negative growth rate.  Meanwhile the Fed, according to it's mid-December policy statements is concerned about a strong economy and growing inflation.

So this is "data-driven" Fed policy -- attempting to raise rates as the economy falls off the cliff.  Thank goodness Fed policy is completely ineffective or we would really have something to worry about. 

What a sideshow!

The Paradox of Oil

Wall Street analysts seem genuinely puzzled about the macro-economic effects of the collapse in oil prices.  Welcome to the super-regulated economy.

In olden days, a dramatic collapse in oil prices was a good thing.  The economy could adjust, painfully, to the damage to the oil industry as workers and capital moved from oil to other areas of the free market.  That can't happen today.

We now live in an economy where it is incredibly difficult to get through the red tape at all levels of government in order to: (i) start a new business or to (ii) expand an old business.  To those problems add in the enormous piling on of labor costs from government-mandated employee benefits -- Obamacare, the right to sue for whatever, over regulation from OSHA, and on and on.

No one could seriously think of opening a lemonade stand in East Baltimore unless they have the 16 to 24 months required to jump through bureaucratic hoops at the local, state and federal level.  Going to work for your local drug dealer makes much more sense.

So, when oil prices drop, consumers do benefit, but not by near enough to offset the damage to the domestic oil industry.  With such a pitiful level of economic growth and job creation, workers displaced from the oil industry have nowhere to go.  

A few decades ago, before regulations at every level of government reached such titanic levels, resources were free to move from declining industries to burgeoning new companies.  No longer.  Government now virtually outlaws the free movement of capital and labor through excessive regulations.

Even if some eccentric soul decided to venture into a new business, he would find Dodd-Frank and Elizabeth Warren standing firmly in the way blocking their path.  You can only borrow what regulators say you can borrow. Local bankers don't make lending decisions any more.  Those decisions are made in Washington today and are dominated by political considerations.

Elizabeth Warren's contributions to consumer protection have effectively frozen opportunities for business expansion and the play out of the free market.

We are in the no-growth Dodd-Frank, Obama, Elizabeth Warren economy.  Things like economic growth and growing living standards are things of the past.  So, when an industry declines the US economy just sinks along with it into the quagmire.  The free market is no longer permitted to do its thing.  Very bad news for the average American.

Tuesday, January 19, 2016

New York Times and What Constitutes "Proof"

An editorial in today's NYTimes reads "Proof that a Tax on Carbon Works."  Wow!  I have been waiting for something like that.  According to the editorial, the NYTimes has "proof" that a tax on carbon has no effect on economic growth.  Wouldn't that be nice. 

So, I read the editorial and found the "proof."  Referring to British Columbia, the editorial reads:

 "Researchers have found that the tax helped cut emissions but has had no negative impact on the province’s growth rate, which has been about the same or slightly faster than the country as a whole in recent years."

Wow!  That's impressive.  Unnamed researchers constitute "proof" in the minds of the NYTimes.  This is similar to the climate change discussions in the NY Times.  Things are "proved" to the NY Times, whenever the NYTimes believes that they are true.  That's all it takes.  Too bad, they couldn't (or wouldn't, for obvious reasons) name the "researchers" who came up with this absurd conclusion.

Even the NYTimes editorials are a pack of lies, consistent with the rest of their so-called newspaper.


Monday, January 18, 2016

Hollande Faces Reality

Francois Hollande declared an "economic emergency" in France yesterday.  He has finally figured out that zero economic growth doesn't grow the economic pie.  Since taking office as France's president, Hollande  has sought to divide an ever dwindling GDP.

France is a basket case.  It has had no economic growth for the past ten years and the future looks worse than the past.  This is a country with a mandated 35 hour work week, but we all know that the actual work week is less than that.

What does he propose?  Not much.  Whenever you hear someone proposing "retraining" of displaced workers, you know they don't have a clue.  The problem is not that workers need retraining.  The problem is that workers need jobs to be retrained for.  It's exactly the same problem in the US and much of the western world.

The modern politician seems to believe that jobs grow on trees.  The modern politician continues to press for punitive regulations and taxes on businesses and business owners, to demand more employee mandates (which are nothing more than taxes on employees), and verbally demonize successful entrepreneurs.  Then, the modern politician seems surprised when there are no jobs.

Free markets, not expensive retraining programs, are what is needed to pull the western economies out of their slumps.  Anti-capitalistic rhetoric turns into anti-capitalist regulations, taxes, and legislation.  Result -- no more capitalism, which means no more jobs.

Hollande is just facing the reality of a France that is morally, politically, and economically bankrupt, like most of the western world.

Saturday, January 16, 2016

The Problem with the Big Short

Michael Lewis is a friend of mine and one of my favorite writers.  That said, the message of the Big Short and some of Lewis's other writings on the 2008 financial collapse are way, way off base.

The financial collapse of 2008 had absolutely nothing to do with an untoward amount of greed on Wall Street.  Wall Street is no different than any other street in America regarding the level of greed. There is just more money there, but not more greed. Greed is ubiquitous.

Teaching in a modern university provides a first hand exposure to greed.  Having worked both on Wall Street and in academia, there is no question who the greediest folks are -- the folks in academia, without a doubt.  Wall Streeters as a group are more generous and more caring than academics.  Wall Streeters are, as a rule, honest and straight forward in their business dealings.  Academics are mainly interested, institutionally, in their compensation and benefits, as they will be happy to tell you, if you give them a chance.

People aren't greedy because they have wealth.  People are greedy when they are willing to sacrifice principle and ethics for money, advancement and job security -- something that is much more prevalent in the halls of academe than in Wall Street.  Wall Street is a place that rewards merit, while academe functions more like a religious order, where tenure holds sway over merit and petty politics is a routine part of the everyday experience.

So, back to the Big Short.

Financial collapses are not the result of bad people doing bad things.  Bad people are always doing bad things -- during the booms, during the collapses -- bad people are always around doing their thing. 

Fortunately, there are not many bad people in Wall Street, which is why the average investor over the past 110 years and has been able to capture better than 10 percent returns annually by the simple tactic of buying a diversified portfolio and letting it ride. Companies like Vanguard have made this simple to do, so that ordinary folks have been able to gain great wealth, by taking advantage of index funds, which require zero investment expertise.  Thank you, Wall Street.  Even with bad people, floating around, Joe SixPack can double his money every eight years.  Not bad.

So, what is the message of the Big Short.  The message is that bad people in Wall Street caused the 2008 financial collapse.  That is complete nonsense. 

The collapse of the housing bubble is what caused the financial collapse, not Wall Street.  The housing bubble was caused by politicians, who decided to favor home ownership over renting.  So, they inserted tax breaks (mortgage interest deductability, tax free sales of homes, etc.) in the law and created government institutions that used the taxpayer (unwittingly) to finance unsound mortgages - FNMA, FMAC come to mind. 

This lead to an absurd boom in housing after the turn of the millenium -- a boom that could only end in disaster, regardless of the ethics of anyone in Wall Street.  Barney Frank was one of the cheerleaders for this stupidity and could easily be called the father of the Great Crash, because without his championing of poor lending behavior by FNMA and FMAC, the housing boom would likely never have gotten out of control.

Canada did not do any of these things and were spared both the housing boom and collapse that followed.  There is no mortgage interest deductability in Canada; there are no tax free home sales in Canada; and, to their great credit, the citizens of Canada weren't bamboozled by their local versions of Barney Frank to create lending monsters like FNMA and FMAC to offer financing to folks who should never have received financing.  So, Canada escaped this nightmare not because their Wall Streeters are more ethical, but because their politicians, stupid though they are, cannot rival in stupidity the American politicians who created the 2008-2009 nightmare.  Thank you Barney Frank and Chris Dodd -- the champions behind FNMA and FMAC.

Of course after the crash, Dodd and Frank joined hands to shift the blame to Wall Street and managed to hammer through the most punishing anti-capitalism legislation in the history of the American republic -- the Dodd-Frank legislation.  You might say that Barney Frank and Chris Dodd are not only the fathers of the Great Crash, but also the fathers of the Great Stagnation that we have been enduring since 2009.  Thanks Barney and Chris.

Meanwhile, the very things that caused the housing boom in the first place are still enshrined in law.  Along the way, the notion that almost all financial institutions are too big to fail has been enshrined in law as well.  This means that someday there will be another housing bubble and another financial collapse.  But, what Dodd-Frank guarantees is that you the taxpayer are formally and legally on the hook for whatever happens -- whether Wall Streeters are greedy or not.  Thanks Barney and Chris.

Friday, January 15, 2016

The Joke is on The Fed

If you had no idea what the Fed had been up to and someone simply told you the facts, you might get to the wrong conclusion.  Try this set of facts:

Since mid-December, virtually all market interest rates including short term treasury yields, mortgage rates, etc. have fallen precipitously.  As of today, the excess reserves of the commercial banking system is 2 1/2 trillion dollars, making banks essentially desperate to increase their own lending activity, if only they could.

Now, if someone told you the Fed made a major policy decision in mid-December, would you suppose that the Fed had tightened or loosened monetary policy?  Right.

The only thing the Fed has accomplished since 2008 is to create massive distortions in member bank reserves and to provide a backstop, unneeded, to parts of the fixed income market.  Why this was useful is not clear.  The idea that low rates fueled the stock market rally seems not consistent with the effect of the recent decline in interest rates and recent stock market behavior.  If there really was a link why are lower rates preceding a major drop in the stock market?

The truth is that lower interest rates reflect the meager amount of commercial lending in the US economy and the pitiful economic performance since 2009.   Millions of Americans have given up hope of ever finding a job in the Obama economy so "unemployment rates," which don't factor in the millions who have given up looking  for work, have fallen to 5 percent.  The real unemployment rate, after including those who have given up hope, is well over 10 percent -- that's recession territory.

The Fed attracts a lot of media attention, but the Fed's impact on the economy is minor, at best.  The real bad actor is Dodd-Frank legislation and its accompanying regulatory regime, which has strangled the once mighty financial sector of the American economy,  Commercial lending is all but outlawed by the repressive Obama regime, unless loans are made to their political friends.  This is China banking, not free market banking. 

But, China is going the other way.  They are moving their banks toward free market banking, while America moves its banking system toward becoming simply another arm of an ever-increasing government sector. 

Hence, no economic growth and a growing malaise.  But don't blame it on the Fed. Admittedly, Fed policy is ridiculous, but it is mostly irrelevant.

Thursday, January 14, 2016

The High Price of Economic Stagnation

Middle class Americans have known that something is wrong for a very long time.  Declining real take home pay happens mainly because real wages are constantly being reduced by government mandated employee benefits. Things like anti-discrimination laws, OSHA regulations, family leave, mandated health insurance, and on and on are not, in the long run, paid by companies.  In the long run these benefits are paid by reduced wages to employees.  In effect, employees don't get to decide how to spend their income.   You pay for family leave whether you need it or want it.  The same can be said of all the other workrules and government mandates.

The mirage is that these are benefits paid by employers.  In the long run, employers only care about the total cost of an employee -- not how it is sliced up among various items like social security, unemployment comp, health care insurance, etc., etc.  One number, that's all that matters.  That number is not going to rise because of government mandates.  The mandates simply reduce the take home pay, out of that number, left for the employee.

None of this was obvious when economic growth exceeded four percent, but at two percent real wages cannot keep pace with the government mandates.  Hence, the standard of living of the average American is falling.  Slow growth does not permit enough demand for labor to overcome the rising tax on employees (that's another way of describing the cost of government mandates).  Four percent growth creates a very different environment than two percent economic growth.  Recall the 1970s.

In the 1970s, an overzealous government managed to sledgehammer the American economy in ways similar to what the Obama administration has accomplished.  The Jimmy Carter malaise is not much different than the current malaise.  It took Ronald Reagan and a series of pro-free market policies to usher in the roaring economic growth of the 1980s and 1990s.

Economic growth is not low because we have the wrong monetary and/or fiscal policies -- although these policies are abysmal.  Economic growth is non-existent mainly because of micro-economic considerations -- mainly the over-regulation of everything.

In time, the victims of economic stagnation are all of us -- not just the middle class.  The Dow Jones topped 1,000 in 1964 and seventeen years later in August of 1981, the Dow Jones was 780.  Even the stock market suffers during prolonged economic stagnation.

Until the unchecked and arbitrary regulations of government -- at every level- are reversed, the American economy cannot really grow and every segment of our society will suffer economically because of this no-growth.

Wednesday, January 13, 2016

Higher Rates? Fed Policy is a Joke

So, where are the higher interest rates from the Fed December "liftoff."  Other than the funds rate and the repo rate, no other market rate is higher today than it was before the "liftoff."  That's right!  No market rate has gone up (the prime rate is not a market rate).

Indeed, rates are not only lower today, they are substantially lower than they were prior to the Fed liftoff.  Excess reserves are sloshing around in the commercial banking system to the tune of nearly $ 2.5 trillion, according to the recently released data on the Fed's balance sheet.  The only tightness in the lending market is due to regulatory zeal, certainly not a lack available funding in the commercial banking system, which is still loaded with excess reserves in a way never seen before 2009.

All that has happened is that the Fed is wasting a ton of taxpayer money by paying 50 basis points on commercial bank deposits at the Fed and doing reverse repos at 25 basis points with the great unwashed.

There is no tightening; there will be no higher rates.  This is all some ridiculous joke.  Thank goodness, because it looks like the global economy is rolling over and the US is going with it -- not a good time for rates to go up or for banks to be financially constrained from expanding commercial lending.  Fortunately, the Fed liftoff neither raised market rates nor financially constrained the banking system.

However, overzealous regulators are at their posts, substituting their (inexperienced) opinion as to who to loan to, for the experienced bank veterans of commercial lending  This is how they used to do things in China, but even the Chinese learn.  American regulators, unfortunately, do not learn.

Saturday, January 9, 2016

Obama Economic Policy Bears Fruit

The continual sledge hammering of the US economy by the Obama Administration is beginning to bear fruit.  Job growth, by any measure mediocre at best, is concentrated in the lowest paying jobs in the economy.  High paying jobs have been disappearing.  Now, it appears, the economy may be contemplating heading over the nearest cliff.

The only virtue about a sluggish economy is that if you don't climb too high, you can't fall too far.  That is about the only consolation for this mess.

Meanwhile, Obamacare has created a frightening crisis for those who lost their low-deductible insurance policies that they owned before Obama decided to "fix" America's health care system. It used to be that only the uninsured were bankrupted by their medical bills, but no longer.  Due to the extraordinarily high deductibles, not well understood at the time, middle class Americans are gravitating down the income scales, many taking personal bankruptcy.  Obamacare is accelerating the process of moving millions of Americans out of the middle class and into the ranks of the poor.

About the only thing that seemed to shine during the Obama years was the stock market, which soared from low 6,000 to over 19,000 in seven years.  This pleased Bill Clinton, Warren Buffett, Al Gore, John Kerry and other limousine billionaires (maybe Clinton is only worth a paltry few hundred million).  But, now stocks don't look so hot.

Neither do public pension funds.  Most of these funds were 70 percent funded coming into early 2015.  Do a little arithmetic.  If a fund with $ 70 billion was 70 percent funded back then, it's liabilities must have been $ 100 billion. The 7 % actuarial assumption embedded in these plans means that the $ 100 billion liability is now $ 107 billion.  What's happened to the fund's investments.  They are down about 6 percent since early 2015.  That's $ 4.2 billion.  Add that to the $ 7 billion increase in liabilities.  This means a $70 billion (now worth $ 65.8 billion) pension fund has an increase in unfunded liabilities over the past twelve months of $ 11.2 billion.  That's a sobering number and it will likely get worse, much worse, over the next sixteen months. Guess where state and local budgets are headed?

I guess tightening gun control laws and releasing terrorists to restart their careers in terror is the new economic policy.  So far, it hasn't been explained to me how this will help the middle class American, but presumably Obama and his allies have an explanation at the ready.

Friday, January 8, 2016

So, the Rate Hike...How's That Going?

How many of you lend or borrow federal funds?  Not many, I suspect.

So, the Fed's recent raising of the target funds rate only affects you and me and the business community if other other market rates go up as well.

None did.

Treasury yields are lower today, substantially lower, than they were before the Fed Raise.  Mortgage rates are lower, cd rates are lower. 

So, what went up?

No Growth Hits the Limousine Crowd

The wealthy liberals are now seeing the fruits of their no-growth economic policies.  Even the stock market has finally begun to pay attention to the lack of growth in the western economies. 

While the pundits continue to drone on about China, the Fed and the oil market, the truth is we live in an over-regulated world.  That creates two related problems: 1) it is incredibly difficult to start a new business or to expand an existing business; 2) dislocations like the current fallout from the energy industry take forecver to effect transition of the unused resources to other purposes.  Both of these problems create enormous economic waste.

Lets do some simple arithmetic.  If an economy grows at a two percent rate for seven years, it will have 15 percent more GDP at the end of seven years than it had at the beginning.  If that same economy grew at four percent, the increase in GDP would be 31.5.  Subtracting one from the other, our economy would be 16.5 percent larger today, if we had the average growth rate since World War II.  16.5 percent of $ 18 trillion is almost $ 3 trillion.

So, the true cost of Obama economic policies is 16.5 percent of our GDP by this point, or almost $ 3 trillion.

So, all of these arbitrary regulations and Dodd-Frank type legislation have real-world costs.  Now the rich are beginning to help pay the cost with a weakened stock market.  The middle class has been paying the cost for the past seven years and will continue to suffer as long as this regulatory regime remains in place.

Tuesday, January 5, 2016

The Pundits are Shocked

That stocks have cratered globally in the first few hours of the new trading year seems to have come as quite a shock to stock market pundits.

The pundits are overwhelmingly bullish, expecting double digit returns for 2016.  This is simply dusting off last year's failed prediction of double digit returns.  They are all now being trotted out to explain why they were so wrong last year.  The answer they give:  the markets were wrong, they were right.

Remember the real world background.  There is no economy in the world growing at a decent pace.  It is likely that China's economic growth is no better than ours -- barely any growth at all.  Last year, earnings on S&P stocks fell.  That's likely to happen again this year.  So, with that as the set of facts and possible facts, why is anyone looking for strong stock markets in 2016.

Fourth quarter GDP results are not in yet, but most estimates have now been lowered to below one percent (that's an annual number, so we're really talking 0.25 percent -- within the margin of error for zero). This is the economic progress that Yellen and Obama are so proud of, but for the rest of us this is economic stagnation.

This is not to say that markets might not produce a spirited rally today or perhaps later this week.  But, for the year, how do stocks go up when earnings continue to go down and there is no economic growth ahead anywhere in the world for as far as the eye can see.

Meanwhile, government policy in the large western economies is hell bent upon destroying what's left of the free enterprise system, not to mention the rule of law.

The pundits are living in their own glass cage.  They should get out into the real world and try to run a business.  They would learn quickly why stock markets are not headed up for the foreseeable future.

Monday, January 4, 2016

Global Meltdown -- Too Much Policy

"Policy makers" are forever patting themselves on the back for their policy successes.  But, what are these successes?

Economies grow because individuals are given the freedom to use their own "local" information to improve their economic well being.  In the aggregate, this unleashing of human activity is the only real source of economic growth.  That technology grows is simply a byproduct of this "local" unleashing of human activity.

Governments have put chains around individual freedom to act on "local" information by well-intentioned laws, regulations and rules.  These laws, regulations and rules were designed to promote fairness or other noble objectives, but their impact has been to stifle the freedom of action that individuals need to pursue their own interest.  This pursuit of their own interest is the only real engine of economic growth.  Hence, no growth.

Enter the policy makers.  Imagine, you wanted to slow the number of individuals killed in traffic accidents yearly.  How would you do that?  One sure way to do that is to outlaw the use of automobiles and trucks.  How can anyone be hurt in an automobile or truck accident, if there are no automobiles and trucks.  As President Obama said recently, "if only one life can be saved, then it is worth doing."  He was speaking in the context of gun control, but the logic of his argument applies equally to anything else.

Would economic growth be affected by the abolition of motor vehicles?  The answer, according to policy makers, is "no."  So long as monetary and/or fiscal policy is set appropriately, outlawing things doesn't make any difference.  Hence, regulations, rules, and laws are irrelevant according to policy makers.  So why not simply outlaw all economic activity (something the Obama folks may have considered but abandoned because of a recalcitrant Congress) and then run an accommodative monetary and fiscal policy.  That should do the trick, according to today's policy makers.

Globally, big government rules the roost.  The result: no economic growth.

Sunday, January 3, 2016

The NYTimes Lays Another Egg

The editorials of the NYTimes are mind boggling.  They seem to be little more than requotations of policy statements from the Obama Administration, Hillary Clinton's campaign or the Democratic National Committee.  There has not been a single NYTimes editorial to depart from this pattern in the past five years.  That the editorials are inconsistent with one another does not seem to bother the Times editorial staff as they blithely recite Democratic Party propoganda on their editorial page.

The latest jibberish is today's editorial on social security.  The editorial suggests, incredibly, that all social security needs is a simple fix to be the ideal retirement system for middle class Americans.  That is pathetic.

The main real-world impact of social security is to eliminate middle class savings in the mistaken hope that social security will take care of the middle class.  That nonsense is perpetuated in today's editorial.  If citizens simply invested the money that the government takes away from them in social security payroll taxes in an index fund of common stocks from age 21 to age 65, a simple calculation shows that they would end up (each individual) with $ 6.3 million by age 65, instead of the paltry $ 1,300 per month that social security provides.

Social security robs the poor and the middle class by taking more than 15 percent of their income annually and providing a pitifully small monthly stipend that provides zero for the next generation upon their death.  Worse, the taxes that people pay in are spent to fund the Clinton Foundation, subsidize friends of Obama in the alternative energy space, etc. and are not set aside to fund social security.  You can see why Clinton and Obama like social security, while the poor and the middle class are being looted to provide funding for rich Democrats.  Why is that a good system?

A better system is a broad based system along the lines of a Roth IRA expanded for all Americans and not touchable, by them or by Democrat politicians, until age 65.  A system like this would build wealth, not dependency and could not be looted by Democratic politicians seeking Al Gore - like wealth.

Instead of advocating more theft from the middle class, the NYTimes should address realistically the plight of middle class Americans, who are currently being looted by their government while the NYTimes sits on the sidelines applauding this debacle.  Wealth creation, not victimization, is what middle class America needs and it will not come about by pretending that social security is a fair or even viable system.