Column from January, 2008 - Monday will be a bad day!!

Column of mine published in January 2008.

RUN FOR YOUR MONEY ---- WHERE?

The other day an old friend called. We had been in the Navy together and continue to share a jaundiced view of the powers that be. He asked me how safe he should feel with all his money, hopefully enough to get him out of this life - dead, resting in a variety of accounts at Merrill Lynch, the humongous investment and brokerage house. I snorted, not in derision but because I was in the same boat, along with all the rest of us, unless you are sleeping on a mattress of gold bars.

All of us, rich, comfortable, stretched or poor are caught in a pickle. Our financial underpinnings are less than what we assumed they were, less than what we have taken for granted, at least going back to 1933. Since 1933 there has not been a vision of a financial abyss such is now hovering on the horizon.

In March of 1933, a different time in every way, except for greed and other unpleasant hard wired human traits, President Roosevelt shut the nations banks for a four day "holiday," in order to calm the population and slow the drainage of cash and gold that people wanted back under their mattresses. The government was able to shore up the financial system, ease the panic and put in place the Federal Deposit Insurance Corporation (FDIC), that insures, by the government, bank deposits, in member banks, for up to a total of $2,500 in 1934 and $100,000 today with an additional $250,000 coverage on Individual Retirement accounts (IRA). A lot of money in those days and still a big deal today.

Over the past several months Merrill Lynch, Citigroup, Bank of America and innumerable investment houses, mutual funds and even the sacrosanct treasury of the great state of Maine have literally had the hubristic stuffing plucked out of their over inflated mattresses. Racing for fat returns they all drank their own bath water either packaging for resale, buying, or both, rafts of mortgage obligations, from "sub prime" borrowers. Many who had little hope of ever paying them off.

Insurance funds that were supposed to cover the failures are proving insufficient to cover the mess and as these rock solid piggy banks have had to show their losses they have been scrambling all over the world to raise capital by selling steeply discounted stock to deep pockets. The majority of the new investors are sovereign funds of various countries who are floating on trillions of petro and lead toy generated dollars. In short the dollars that we profligate citizens have shipped overseas are now coming back to buy our banking assets that rest on collapsing pillars of probity.

Needless to say the dollar also has tumbled in value. To the extent if your retirement money is in Treasury Bills, the assumed safest of the safe, though you will get your money back with interest it will be worth substantially less than when you put it in safekeeping. Maybe way less.

So what to do?

Run to the bank and yell give me my money? Forget it, they cannot print the stuff fast enough. Look to a stimulus package? How funny, in other words send more depreciated dollars to the citizens and urge them to blow it at the mall all in the hope of holding off an inevitable shattering correction.

Am I an alarmist? To a degree, probably, but face it we have been living way beyond our means. Stories in the Wall Street Journal, the New York Times and the Economist point out that the country has taken bigger hits in the past and that we are a $ 13 trillion economy. So what does it matter if we take a mere $700 billion hit on the mortgage trash.

But, but, but — if this mess spreads to all other parts of the debt economy, credit cards, home equity, retail sales, etc., as I am convinced it will, we could end up realizing that we are all living on the San Andreas fault of a shaky global economy.

What did this? The nasty greedy corporations? Please, we all did it. We want, and our politicians, of all stripes, want us to be happy so they feed our wants. Meanwhile we cannot even fill the infrastructure jobs that the 12 million illegal immigrants fill. Not because we can’t, but because we view such employment with disdain. Who wants to work as a busboy when they can sit at the table? Who wants to have their kids educated until they are stuffed with knowledge on physics and engineering and math when it is a free ride and easier to take a bogus course in "lifeology."

The piper will be paid.