maverick4

You're the first one I've ever heard this from, and it certainly is a very astute and possible reality. I first started suspecting the Fed was hiding how much it was inflating/printing, when it stopped publishing its M3 data publicly around 2004.

PatsFanInVa

McGraw, I'm way closer to PReign on this one. It looks much simpler, really. You're pumping a lot of money into equities on the part of the retirement savers via 401(k) defined contribution plans. If I'm a shareholder I like that. A ready source of investment dollars. But bear in mind that even if the presence of the 401(k) accounts were due to a desire to deflate consumer spending in favor of investment -- which is in fact what this scheme of things does -- it hardly dented the profligate consumer spending for which Americans are legendary.

So my understanding of your theory here is that the whole goal of low interest and 401 (k) investment was always linked to keeping consumer spending low. The problem with the theory is that over the course of time these things pertained, American consumer spending has been very high.

The second part of the theory, if I get this, is everybody would bank their money for a retirement that's overvalued by, say, 50% at present. In other words, measuring from the DOW's peak at 14,X00, we can look at today's roughly 10,000 DOW and say "aha! They just took it!"

But this is only true if you had all your money in equities and moved all your money into bonds or cash right when the valuations collapsed.

I don't think it was anybody's goal to "artificially deflate" American consumer spending, and if it was, they're not very good at it.

I do think that plowing money into the equity side of the retirement landscape makes less and less sense the closer you are to retirement, and the less "work" your money must do to remain valuable for the remainder of your life (however long that may be.)

I do think the corporate machinery of America is very happy that individual investors believe they should be swimming in investment capital.

But at heart I think PR's right. Our problem is essentially that we've been bleating mantras about the wisdom and benignity of markets, about the inherent undesireability of regulation, and about the tyrrany of paying our taxes for far too long.

A lot of the time on here (for example,) we talk about Europeans and describe "European style socialism" because the Europeans pay enough taxes to afford the services and lifestyle an advanced nation can truly afford. In the U.S. we don't. We just hide our heads in the sand for generations on any given issue. Then when it all comes home to roost and our jetski is now broken and our dot-com job as "minister of fun" has vanished, and our savings take a nose-dive, and our "plan" we announced to our family to retire at 40 is gone... and in fact, the dream of retirement at 65 seems unlikely... THAT'S when we SORT of catch on.

But our thoughts aren't society-wide. We're cantonized. "Oh no they'll kill the old!" "Oh no, my tax money will go to brown and black people!" "Oh no what if pregnant sluts have abortions with my taxes!!!!"

We'll focus on anything but the issue. And meanwhile, it's usually not even the tax money of anybody on this board we're talking about. It's the actual rich of society we're usually talking about being taxed.

See me, personally, I believe the "upper middles" should be taxed as well to broaden that taxation base on key society-wide initiatives. But again, people here think I'm Pol Pot because I don't burst out laughing like a pimply pre-teen hearing "boobies" when I hear "tax increase," nor do I go running into a corner to hide surrounded by assault weapons. Rather I note that we have the lowest tax rates in the industrial world, the biggest disparity in wealth, and some of the sorriest social services, and I say "Good. This is what we need to do."

But the national mythos is still muddled firmly in fairy-tale territory.

You'll still never win an election saying we need to pay the amount of taxes that achieves national goals; but still, in terms of the generational cadre we're talking about, we have an issue in terms of medicare and social security. To wit, the generational tsunami that is the baby boomers, combined with the level of support we promise for them in their old age, all imply that we should shore up those systems now and should have shored them up in the last couple decades. This did not happen and will not happen. What will happen is that they will march like a blue-haired army for the preservation of "every penny" of what they were promised.

They will phrase this as "every penny they paid in," which in fact will be an enormous distortion, since "what they paid in" will be gone in short order. Those still working -- generations X and Y, and then Z, will pay higher payroll taxes to Soc. Security, and likely will not see even close to the same benefits as their elders.

We all know this. We are seeing the front end of this Boomer siphoning in the attitudes of medicare-drawing older people, as regards health care. I got mine, go get yours.

So yeah, interesting times.

PFnV