The Bender Trends
Red and White D and I have had some long discussions about long-term trends that we see evolving. Some are disturbing, most are worthy of consideration.
1.Financial Companies have been making their primary profits by feeding upon their customers, thus devouring the gooses that layed the golden eggs.
This has been happening in many segments from banks that charge $25 per bad check; to health insurance companies that have been raising rates even when costs have NOT been going up, raising their fees to the point where many who need their products can no longer afford them; to really big outfits like Goldman that sold investment vehicles to their clients (like retirement funds) and then went to the markets and bet against those very vehicles.
You've got health insurance. You've got a claim. Are you 100 percent sure your insurance company will pay the claim...really? And if it won't...what exactly is your recourse? Compared to that company, how many attorneys can you hire, and at what cost? Like you, I have read that most Health Insurance Companies spend up to 40 percent of their incomes denying claims. Are you really 100 percent sure? You are paying dearly for that insurance. Don't you think you should be able to be more confident for something that is costing you so much?
Red and White D explained to me that the inflation we saw during the Carter Administration (worst President in my lifetime...even worse than LBJ or W) fundamentally changed the way that insurance companies viewed their business. Before, they made their money by carefully gauging risk. But the ability to take the reserves to markets and make a conservative 16 percent on them changed the way the executives looked at profit. Now they were no longer gaugers of risk but gamers in the market place. This idea spread throughout all the financial industries. Whole industries abandoned the way they used to make money in order to get into the markets and game them (GM had GMAC, GE had GE Capital).
2.Costs for overall medical care (including insurance) have trippled over a period of time when the average worker's wages only rose 20 percent in terms of real purchasing power. In fact, this cost has also trippled as a percentage of the GDP over the same period.
This has to stop. One prominent politician recently got into trouble when she mentioned 'death panels'. Well the real news is that we - all of us - are already subject to them.
A) They are called insurance companies.
B) They are called various names in various hospitals...but they already decide the level of care that indigents get.
C) Various government bodies already make judgements about what diagnotic screenings are 'appropriate' for what age/gender group (often to the detriment of women).
3. The Feds have been scrutinizing your local bank, inspecting it every three years, every dollar accounted for. But the financial firms that really threaten the whole system when they fail, or threaten to fail, seemingly get a free pass. And whatever they want from Congress...they get.
Lehman Brothers, Bear Stearns, AIG - remember them!
So, I guess the idea is that if you headquarter in New York, or give millions or hundreds of millions in campaign contributions, you get a lot of free passes. But if you are an honest smaller hometown bank, not so much.
4. Laws, created in sections, are written as much as ten years in advance by people with their own axes to grind. Then Congress throws the pieces together in one big lumpy mush. The results (predictable) are often contradictory and nonsensical.
It is mighty difficult to write a law that is a thousand pages long and not violate the constitution a dozen times. The new health care law is a thousand pages long.
5. The Constitution is nearly a dead article. The President can declare war without ever consulting Congress. Congress ignores its duties to advise and give consent. It rubber-stamps whatever the President wants.
And it isn't just wars either, though wars are far and away the most expensive example of Congress abdicating its responsibility.
6. The press is weaker now than it has ever been. It covers only what the current administration wants covered. Ah, the glories of the press being owned by mega-corporations.
Yes Virginia, the same company that makes jet engines for fighters and bombers also owns NBC and CNBC. If a lot more civilians were killed in Iraq during the war than was reported, particularly in the bombing campaign, do you think there is ever going to be any follow-up reporting?
There is a virtual black out of news coverage from two of the continents on this planet: Africa, South America, and little news from Asia and Australia. Investigative Financial Reporting is non-existant.
7. When was it ever a good idea to fight two wars at the same time? Can we ever afford to do that?
Wars cost money, folks. Why is it so difficult for my fellow conservatives to take a rational look at the dollars-and-cents costs of the things and vote against two at a time based on...here it comes...rationality? Many people who are opposed to the health bill now being considered, on the grounds of cost alone, still want to wage wars. Huh? Which is more expensive?
And, on a human basis: what do six tours to war zones in eight years do to an American fighting man? How can we expect to get functional humans back out of a process that does that?
8. When will the generations younger than me (I am 59) take a cold hard look at Social Security and declare they can't afford it?
I never expected to be able to retire and pull out much from Social Security. Even when I first understood the system, at about age 12, I knew it could not stand over time. Even then, the numbers did not add up. Only those with no math skills (that includes Congress, most teachers, most newpaper reporters, and folks who still believe in sugar plum fairies) could believe that younger generations will be able to support the Boomers (I am one) for what could well be 30 years of unproductive retirement.
9. We will keep outsourcing jobs until no one left here has a decent one.
If every American company lays off workers and ships those jobs overseas, relying on every other company to not do the same, general wages will stagnate and fall in terms of buying power. That is exactly what we have witnessed in the last decade. There is an even nastier side effect. When you do this, and then need to rely on consumers to start spending again to jumpstart the economy, you will find they just can't do that on $10 an hour. That is one reason we are in a Depression, folks, not a Recession. We have exported jobs and imported a Depression.
10. Buy and hold is dead.
Mutual Funds are no answer...and they are predicated on buy and hold. All you will get is stagnant results at best with buy and hold. You could get worse.
The implication is that not only big financial firms are and will be gaming the system. Everyone with a retirement account will have to be doing the same.
11. 401k's are a disgrace and probably the biggest rip-off of all times.
If Congress was forced to use typical 401k's, the laws surrounding them would change in something less than 3 days. There are 6,000 funds out there. The typical 401k plan gives a choice of between 6 and 12. And who chooses which 6 to 12 funds? Why the guy at J.P. Morgan or at Principal (who is a good buddy of your company's president) does. Hmmmm. You should be able to smell the kick backs and corruption from any spot on Main Street U.S.A. Investigative Financial Reporting anyone? Naw, forget about it. No one would publish the thing even if it got written, with the possible exception of Rolling Stone.
12. The political parties are not serving the interests of their natural constituencies.
Democrats are not protecting the jobs of the union members, are not educating the public about the economic hazards of 'job flight'...and vote against the working man every chance they get.
Republicans vote against the small businessman and for really big corporations every chance they get. The mega-corporation-owned press has been all agog about the conservative take over of the GOP of late. That is a red herring to cover the real story: the GOP is in the pockets of the mega-corporations. Was it the conservatives that organized the August town-hall resistance to the health bill...or was it Mega-Health Insurance Corporation? Follow the money (as Deep Throat once advised) and you will quickly find who has a dog in the fight.
13. No one is looking out for Joe Average.
If Mega-Bank makes shameless home loans - many of them predatory - is anyone there to say no, don't do that? If Mega-Bank then bundles those loans and issues AAA rated bonds against them is there anyone there to say no? If that whole process is detrimental to Joe Average who took out the loans and also to Joe Average who bought the bonds, is there anyone there who can see how detrimental to the whole U.S. economy that process is? Will anyone make a fuss?...the Free Press... Congress? Investigative Financial Reporting anyone? Naw, forget about it. No one would publish the thing even if it got written, with the possible exception of Rolling Stone.
14. Greenspan and Bernanke have singlehandedly killed savings accounts and changed the fundamental banker/customer relationship.
Keeping interest rates extremely low for long periods makes banks dependent on the FED for money to loan, and independent of the small saver. Banks don't want your savings...go away! They will get their money from the FED thank you very much. That unhinges banks' relationships with their local customers. They no longer have to listen to them.
Keeping interest rates low for a long time also has another effect. Doing that tells the world that dollars are no longer worth anything. If they had value you'd have to charge higher rates to loan them out, and you'd be willing to pay higher rates to get your hands on some. It is a powerful psychological effect that the FED completely ignores.
15. Breaking up: Easy and existing relationships, between retailer and consumer, banker and customer, lender and borrower, debtor nation and creditor nation, etc. will be under greater and greater strain as those relationships strain and break.
16. Both the Financial and Medical Industries have grown from about 8 percent of GDP to over twice that. These two growth trends put the two respective industries in conflict with each other in the future.
If you look around your community, chances are that the biggest and best new buildings built in the last 10 years will be either banks or medical buildings. There is the physical manifestation of growth. It would seem logical that they both can not keep up their growth rates for much longer. The pie is only so big. As each industry struggles to grow they will bump into each other with more and more force. Expect struggles.
17. Buy and Hold is Dead (See #10 above). Its coralary is also dead: Investing to Create New Wealth and Jobs. We have witnessed the pouring of $Trillions from the public coffers (the FED) into private coffers (Big Banks) since 2008. That huge money flow did raise the Markets and ease conditions. But new things were not produced from that tidal flow, and new jobs were not created. Financial firms feel better, but industry and workers have not benefitted. What happened with the $Trillions was not investment to create new wealth and jobs. What happened was more gaming of the system.
18. Giving money to, lowering taxes for, or eliminating regulations for Big Business will not create more jobs. Big Businesses do not create jobs (See #17 above). Small Businesses do. The numbers I have do not support the idea that lowering taxes for any people or corporations will actually spur investment. Please Click Here to see this evidence on my Data Page. In fact, while the Bush Tax Cuts have been in place, Big Business has been actively shrinking its workforce here in the U.S.
19. The Central Banks of the U.S. and Europe are on two very diffent courses. The U.S. Central Bank (the FED) is on an inflationary course. The European Central Bank is on a deflationary course. These are two Techtonic Plates that will come into conflict. There will be dangers and opportunities as a result of this conflict.