Re: [PEN-L] Re: everything's groovy
At 12:09 PM 10/30/97 -0500, Louis Proyect wrote: [SNIP] >One of the things that is bound to take place sooner or later >is the privatization of social security, just as it did in Chile. The whole >point of the mutual funds industry is to get people to accept the idea that >this is the only "realistic" way to prepare for retirement. It is commonly argued that the only things that are inevitable are death and taxes. I acknowledge the first but don't accept the second, and for the same reasons believe you are too quick to predict the inevitable privatization of social security. Not too long ago a lot of folks would have believed that Fast Track was nearly unstoppable. If you accept the notion that there are still some things that can be accomplished through organization and struggle, then the privatization of social security need not be so certain as you claim. This is not to underestimate what it will take to defeat it; only to recall that people can also act consciously as agents of their own futures. >Another aspect of this is the need to get a broad section of the population >to accept the logic of the capitalist system. A small stock-holder who owns >20 shares of Citibank is likely to go along with the cutback of 5000 jobs >that is pending. Since this improves corporate profitability, the value of >the share is increased potentially. The concept of "people's capitalism" has been around for more than a few years. Yet even in the instance of worker-buyouts, ESOPs, etc., we have witnessed cases where worker-"owners" have been willing to strike against the management of enterprises they are purported to own. The system employs many ideological tools designed to side-track worker discontent and derail opposition to profit-maximizing schemes. Some work better than others; some work in some cases and not in others; none have been found to achieve fully what they were intended or designed to accomplish -- which is why they keep cranking out new ones (or guzzying up old techniques). In a period of growing inequality, declining real incomes, contingency, longer working hours, outsourcing, etc., it may take a lot more octane than the additive of a handful of stocks to convince workers their fates are more aligned with management than with one another. >This really gets ugly when you think about all the union retirement funds >that are invested in the exact same companies that are attacking them. >Frankly, there is no easy solution to this problem. It gets to the heart of >the way that the capitalist system functions. I suspect that when the time >comes for the ruling class to privatize social security, socialists will >really have to come up with some strong arguments. > >Louis Proyect If we wait that long, no argument will suffice. The work of defeating privatization has already begun. It is our job to extend and expand it. In solidarity, Michael E.
Re: [PEN-L] Re: everything's groovy
Fellows, Jeffrey wrote: >A ponzi scheme, as Tom wrote, might be an accurate conception of the >political drive to privatize social security. Assuming the money stays >in the US, wouldn't a large redirection of SS trust funds away from the >bond market and into the stock market likely reduce bond prices (by >eliminating the decifit-reducing bias of SSTF T-bill absorption) and >increase stock prices, thereby increasing short-term returns in both >financial markets? But the USG budget will be balances, so there won't be any more T-bonds to buy! Doug
Re: [PEN-L] Re: everything's groovy
A ponzi scheme, as Tom wrote, might be an accurate conception of the political drive to privatize social security. Assuming the money stays in the US, wouldn't a large redirection of SS trust funds away from the bond market and into the stock market likely reduce bond prices (by eliminating the decifit-reducing bias of SSTF T-bill absorption) and increase stock prices, thereby increasing short-term returns in both financial markets? Jeff Fellows -- From: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: Re: [PEN-L] Re: everything's groovy Date: Wednesday, October 29, 1997 6:46PM Jerry wrote, >Whether the losses are recovered or not by the mutual funds "investors", >before you consider whether these people are going to pull their $ out of >the market, you have to consider their alternatives. Given the rates of >interest on savings accounts, what choices do most of these small-timers >(including many retired working people) have? Some of those other >choices (like municipal bonds) might be undesirable for other reasons. I agree. But the issue isn't just whether "these people pull their money out of the market", it's whether these people and others borrow *more* money to put it *into* the market. There is considerable choice on that one. A Ponzi scheme that doesn't attract new investors is a sad thing to behold. Regards, Tom Walker ^^^ knoW Ware Communications Vancouver, B.C., CANADA [EMAIL PROTECTED] (604) 688-8296 ^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
Re: [PEN-L] Re: everything's groovy
> I guess there must be something in V. 3 of Capital that explains
> all this.
The particular issue that I raised ("investment" of savings by
working-class families in the stock market) wasn't considered by Marx.
However, Part 5 of V3, in particular the sections on credit and fictitious
capital, might be of interest re the crash.*
Jerry
* you might also want to take a look at Engels' comments on the stock
exchange in the "Supplement" to V3 (see pp. 1045-1047 in Penguin/Vintage
edition). **
** [NB: for those who have not read _Capital_ before, they should read
all of _Capital_ rather than jump to the "good stuff." Marx's advice
to the "French public" is of note here].
Re: [PEN-L] Re: everything's groovy
Doug Henwood wrote: > Never thought I'd see reasoning like that on PEN-L. It's true: we have seen some weird reasoning on PEN-L recently. For instance, just the other day someone wrote re Wall Street that "everything's groovy"! > People should keep > their money in stocks because they have nowhere else to go. I didn't suggest that people "should" keep their money in stocks. What I suggested, instead, is that the decision by small-time "investors" to buy stocks (especially mutual funds plans) has to be looked at in relation to the other alternatives open to these people. Consider the options for working people who have savings (especially older workers): they can put their savings into a savings account and earn what amount of interest? Even with inflation at relatively "low" levels, they will feel the bite and might even see a reduction in their real savings. Or, they could buy bonds ... and have their savings tied up with very high penalties if they cashed them in early (assuming that is even an option). Or they could invest in the futures market which is even more risky than the stock market. Or they could speculate in gold, art, real estate, etc. (and stand a good chance of being taken to the cleaners). Or they could "invest" their savings on the ponies, the bookies, and lotto. Or, they could go on vacation or fishing and just spend their savings (and hope that they die early and don't end their days eating cat food). Jerry
Re: [PEN-L] Re: everything's groovy
I was somewhat surprised myself to see Levy's embrace of mutual funds myself. I guess there must be something in V. 3 of Capital that explains all this. More to the point is the political questions involved with "small investor" psychology. One of the things that is bound to take place sooner or later is the privatization of social security, just as it did in Chile. The whole point of the mutual funds industry is to get people to accept the idea that this is the only "realistic" way to prepare for retirement. Another aspect of this is the need to get a broad section of the population to accept the logic of the capitalist system. A small stock-holder who owns 20 shares of Citibank is likely to go along with the cutback of 5000 jobs that is pending. Since this improves corporate profitability, the value of the share is increased potentially. This really gets ugly when you think about all the union retirement funds that are invested in the exact same companies that are attacking them. Frankly, there is no easy solution to this problem. It gets to the heart of the way that the capitalist system functions. I suspect that when the time comes for the ruling class to privatize social security, socialists will really have to come up with some strong arguments. Louis Proyect At 04:29 PM 10/29/97 -0500, you wrote: >Gerald Levy wrote: > >>Whether the losses are recovered or not by the mutual funds "investors", >>before you consider whether these people are going to pull their $ out of >>the market, you have to consider their alternatives. Given the rates of >>interest on savings accounts, what choices do most of these small-timers >>(including many retired working people) have? Some of those other >>choices (like municipal bonds) might be undesirable for other reasons. > >Never thought I'd see reasoning like that on PEN-L. People should keep >their money in stocks because they have nowhere else to go. This, even >though no one can explain why stocks should continue to yield 3 to 10 times >the rate of GDP growth. The whole thing is like a damn seance. If we just >put our heads together, we can conjure the returns! > >Doug > > > >
Re: [PEN-L] Re: everything's groovy
Gerald Levy wrote: >Whether the losses are recovered or not by the mutual funds "investors", >before you consider whether these people are going to pull their $ out of >the market, you have to consider their alternatives. Given the rates of >interest on savings accounts, what choices do most of these small-timers >(including many retired working people) have? Some of those other >choices (like municipal bonds) might be undesirable for other reasons. Never thought I'd see reasoning like that on PEN-L. People should keep their money in stocks because they have nowhere else to go. This, even though no one can explain why stocks should continue to yield 3 to 10 times the rate of GDP growth. The whole thing is like a damn seance. If we just put our heads together, we can conjure the returns! Doug
Re: [PEN-L] Re: everything's groovy
Jerry wrote, >Whether the losses are recovered or not by the mutual funds "investors", >before you consider whether these people are going to pull their $ out of >the market, you have to consider their alternatives. Given the rates of >interest on savings accounts, what choices do most of these small-timers >(including many retired working people) have? Some of those other >choices (like municipal bonds) might be undesirable for other reasons. I agree. But the issue isn't just whether "these people pull their money out of the market", it's whether these people and others borrow *more* money to put it *into* the market. There is considerable choice on that one. A Ponzi scheme that doesn't attract new investors is a sad thing to behold. Regards, Tom Walker ^^^ knoW Ware Communications Vancouver, B.C., CANADA [EMAIL PROTECTED] (604) 688-8296 ^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
Re: [PEN-L] Re: everything's groovy
Tom Walker wrote: > As Doug pointed out a while ago, many mutual fund > "investors" had come to expect annual increases of that magnitude as a > matter of course. To "recover most of the air pressure" would require not > only that recent losses be cancelled out but that something like the > previous rate of increase be resumed. That's more or less what happened > after the bump last spring. It could happen again. But it hasn't happened > yet and I wouldn't bet on it happening any time soon. This, however, doesn't > mean that everything's _not_ groovy. Whether the losses are recovered or not by the mutual funds "investors", before you consider whether these people are going to pull their $ out of the market, you have to consider their alternatives. Given the rates of interest on savings accounts, what choices do most of these small-timers (including many retired working people) have? Some of those other choices (like municipal bonds) might be undesirable for other reasons. Jerry
Re: [PEN-L] Re: everything's groovy
>Why assume that the balloon has burst? Most of the air pressure that was >lost yesterday seems to have been recovered today. This, however, doesn't >mean that "everything's groovy." Less than half of the three day loss was recovered on Tuesday. But that's beside the point. At its peak, the Dow index was more than 30 percent higher than a year earlier. As Doug pointed out a while ago, many mutual fund "investors" had come to expect annual increases of that magnitude as a matter of course. To "recover most of the air pressure" would require not only that recent losses be cancelled out but that something like the previous rate of increase be resumed. That's more or less what happened after the bump last spring. It could happen again. But it hasn't happened yet and I wouldn't bet on it happening any time soon. This, however, doesn't mean that everything's _not_ groovy. Regards, Tom Walker ^^^ knoW Ware Communications Vancouver, B.C., CANADA [EMAIL PROTECTED] (604) 688-8296 ^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
