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October 18, 2007

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Roger Milford

Ooh boy. There are so many wrong conclusions and invalid inferences drawn by this article that I don’t even know where to begin.

“Born in America, a series of late-life reversals left him without savings or a private pension.”

And, what, pray tell, are these reversals and how did they happen? Assuming he has a defined-contribution retirement savings plan (automatic enrollment into which is now mandatory, thanks, ironically, to an initiative pushed by Bush himself), then for a person to experience enough “late-life reversals” to wipe out both savings and pension is like an Australian person losing the entirety of his or her super. Which is borderline ridiculous, but all right, let’s assume away…

“Everyone knows (god knows they've been told often enough) not to depend on Social Security as an only source of retirement income, but sometimes stuff does indeed happen.”

This is too ridiculous to bother dismissing. Of course you don’t depend on SS as the only source of retirement income. Even FDR himself said that.

“Alan Greenspan thinks it will be okay. Alan didn't see the dotcom bubble or sub-prime mortgages as a problem either. He cheer-led the tax breaks and now writes that he regrets them. Nice timing, Alan.”

If you’re going to demonize Alan but praise the Clinton years, keep in mind that Clinton not only kept Alan in office, but renominated him to the Fed chairmanship twice.

“We don't talk about how this happened in America, because we mostly don't know that it happened. But we began this little trip down Ruination Lane by giving $2.5 trillion to the already unconscionably rich in tax breaks.”

By what point are you “unconscionably rich”? With 100K in the bank? 200K? A million? Ten million? And as for the tax breaks, well, there is a reason America’s economy rebounded within six months after losing almost four trillion in market value in the month after 9/11.

“The guys who make their hundreds of millions (and get tax breaks on them) were all selling the dollar short—that’s street-speak for betting it was on the way down—and down is where it went.”

Well, duh. Every time you buy British pounds, or Swiss francs, or Japanese yen, you are “selling” the US dollar to buy foreign currencies. The only way to prevent people from selling the dollar is to forbid American investors from buying foreign currencies or foreign currency assets. Is that what this guy is getting at?

“Personal debt in America is out of control, with too many carrying four or five maxed-out credit cards.”

I have four credit cards. Mainly to arbitrage rewards opportunities. Three are entirely unused, and on the fourth, I carry a balance of $2 to keep up my credit score.

“Show me how Ford and GM came to find themselves on the ropes?”

You want to know? Because of unionists. Ford and GM found themselves on the ropes because their cars are more expensive, and of slightly lower quality than overseas competitors’ cars, notably the Japanese. I’m sorry, but given two cars of similar quality, one costing $10,000, and one costing $12,000, it’s not just greedy Wall Streeters, but rather any smart, logical, consumer that would choose the $10K car.

But why are Ford/GM cars more expensive? Because the unionists refused to budge on things like $70/hr wages, and lifetime healthcare benefits. That’s why GM and Ford have to pass the increased costs onto consumers. The only way to “force” consumers to eat up the higher costs is to forbid them from buying foreign-made vehicles. And that’s just silly. Again, is that what this guy is getting at?

Buy this guy makes some very coherent points. I agree with his assessment of the problems facing the US. However, my response can be boiled down to two points:

1. The guy’s points on Social Security are very valid. I hate Social Security. Because the way it works is that the government takes your money to lend money to itself. It would be absolutely amazing if we could introduce something like Australia's superannuation, which is one of the most brilliant public policy moves ever made by any government anywhere – and it would solve most of our problems. But unfortunately, when Bush tried that in 2005, the Democrats killed it, claiming that it would allow retirees to “gamble away” their retirement savings. I wonder if anyone told them that it was shepherded through the Aussie Parliament by a Labor government, and that Aussie retirees haven’t managed to “gamble” themselves to destruction yet. I’m sorry, but if there’s anyone to blame the SS fiasco on, it’s the Democrats – both for coming up with such a hare-brained idea in the 40s, and for standing in the way of any attempts to reform it, even along the lines of something championed by an even-further-to-the-left party in Australia.

2. The guy’s bewailing of the fact that Americans don’t like the US dollar and US-made goods incorrectly places the blame on greedy Wall Streeters. However, it’s logical behavior to not want to hold a depreciating asset, or to not want to buy a more-expensive good when one of better quality for a cheaper price is available. The only way to reverse this trend is either to 1) ramp up quality and cut costs, essentially produce faster, better, and cheaper than the Japanese or Indians or Chinese can, or 2) legally forbid Americans from buying foreign currencies or foreign-made goods. This guy sounds like he would go for the latter.

Bill Kaye

Hey Roger, Check your facts on average credit card debt in America. (Using yourself as evidence for a lack of credit card debt in America is beyond laughable, although,I am laughing at you)

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