Monday, October 19, 2009

Making Money the Old Fashioned Way

The Fed is testing a system for handling transactions designed to suck up surplus cash by issuing special bond instruments called Reverse Repurchase Agreements to securities dealers in exchange for cash. The Fed would guarantee to buy these back for cash after a fixed term at a loss for the Fed. In the meantime Securities dealers could use them as collateral to borrow money from banks. They claim that this would keep inflation down by reducing the amount of liquidity in the money market mutual fund industry and keep down the interest rate that they pay. I’m not sure it really takes money out of circulation but Wall Street will make a lot money in the process.

The Fed has officially pumped 800 billion into bank reserves in the past year and the fear is this could trigger inflation if the banks decide they are willing to part with any of it. The truth is that the Fed has created tens of trillions of new dollars by any number of convoluted schemes and we only get the occasional hint of what they’ve been up to. The goal of all this paper pushing is to make it look like the financial services industry isn’t just a large parasite on the back of the economy sucking us all dry.

This brings us to the situation of a California man who lost his savings to the convicted Ponzi schemer Bernie Madoff. Unlike millions of other Americans he has managed to find work, all be it as door greeter. His boss says he is an inspiration to us all.... But since he has been forced to go back to work at age 95, he should not be an inspiration but a wake up call. There will be many millions of people who won’t be able to retire since their 401k(s) and pensions have been looted by the financial services "industry". Don’t kid yourself that the market is going to stay up. Predatory capitalism needs prey and the hunting is getting thin.

By next year the majority of US workers will be women, this is up from 40% when Ronald Reagan campaigned for a return to 1950 when women were 28% of the work force. He actually ran for President on the idea that too many women were working. Of course, his policies were really aimed at every women having a job so that overall wages could be driven down and the middle class destroyed. In 1980 it was not difficult for a family to live on a single income, now two or three are required to have the same standard of living.
Today, women are increasingly becoming the main breadwinner in families. Not because they are making more money but because the jobs their husbands trained for have either been out sourced or have disappeared entirely with the collapse of the economy. Door greeting simply does not pay that well. Many men (and women too) have retrained several times as career after career disappears and all they have to show for it is student loans they have to repay with ever smaller incomes.

The official advice being passed out to men at state job counseling offices is "Forget about ever getting a job like you had and go after a women's job". Why don’t they tell them to buy Reverse Repo’s with money that came free from the Fed and make a guaranteed return? Oh, that’s right, that’s only for the 1/10 of one percent at the top that made their money the old fashioned way. By stealing it.