No, this isn’t a post about banks. It isn’t a post about personal finance either. It’s a post about the founders of the United States’ concept of “Checks and Balances” within the US Constitution as it could be applied to the field of economics. Continue reading →
Entries Tagged 'Economics and Investing' ↓
Political Economy: An Old System for a New Day
December 26th, 2011 — Economics and Investing
Private Pension Plans: The Next “Bubble”
December 4th, 2011 — Government
The pain in the pension
Pension plans have been hit hard by the current crisis. The stock market is in a volatile up and down race to nowhere; commercial real estate is still in trouble, and there’s a huge crisis in Europe.
Not only that! World War II baby boomers are now retiring. People are living longer. And the Bush administration was quite successful in helping businesses switch from providing their employees with defined benefit plans (i.e, pensions) to defined contribution plans (i.e., 401Ks, 403Bs etc.).
Unfortunately, defined contribution plans haven’t worked out so well. AARPs newsletter is full of articles about older people unable to retire because they have not made enough money in their 401Ks to do so. Many seniors previously had to take money out of their 401(b)s because of an emergency or illness. And many simply lost money trying to learn how to invest, a skill most Americans aren’t taught in our public schools.
Private pension funds are managed by experts in investing and actuarial statistics. 401(k)s, on the other hand offer products created by investment companies and insurance companies to lure people who know nothing about investing into turning over their money to these companies, companies which define workers’ contributions but not what benefits, if any, those employees will ever receive for their contributions.
In “Insurance Company 401k Mutual Funds; The Poor Man’s Derivatives” I wrote about a major insurance company’s defined contribution plan that my employer at the time the offered years ago. The products offered had the same name as real mutual funds, but when I inquired about why I wasn’t earning the same amount that those mutual funds were paying, I was told the truth. My insurance company’s mutual funds in my 403(b) were “knock-offs”. The company person claimed they did not take out fees. Clearly their imitation mutual funds simply weren’t as good as the actual products sold on stock exchanges!
Where’s a government when you need it?
Given the problems of so many seniors, the defects of 401(k) plans, and the current intention in Washington to make cuts to Social Security, wouldn’t you think our national government would be concerned about maintaining private pension plans?
Well, apparently not! Continue reading →
Citizens Concerned About Sovereign Debt Crises
November 28th, 2011 — Government
Taijitu - diagram of ultimate power
In the last example of Fourfold Problem-Solving we looked at How Buyout Funds Work as an industry on the microeconomics level. Today we’re going to look at national and global examples on the the macroeconomic level.
A national example of fourfold thinking
Macroeconomics is simply the “big picture” economics. At this point in time that usually means on the national or international level. Microeconomics, on the other hand, is anything below the national level, e.g., industry, households, regional and local governments.
The national level is where Americans can clearly see the downside of binary either/or thinking. We think we have two national political parties in this country; Republican and Democratic. The reality is that we have four parties:
conservatives ultraconservatives
liberals progressives
Our ultraconservatives have pulled conservatism one way; now our progressives are pulling liberalism back towards its former place, and even beyond that into more progressive territory. Meanwhile, we have a liberal Democrat President who is trying to moderate the damage of that split, and traditionally conservative Republicans appear to be becoming more and more of a minority in Congress.