Category Archives: Social Security

>About That Privatizing Social Security Thing …


Ooops. Stay out of the bond market, too. Jars buried in the back yard are looking better already.


Yesterday’s New York Times had a front page story about “small investors” fleeing the stock market to the tune of $33.12 billion through July. The article quotes analysts as saying the average American investor has “lost their appetite for risk” and also suggests this:

And the flight from stocks may also be driven by households that are no longer able to tap into home equity for cash and may simply need the money to pay for ordinary expenses.

I’m sure that’s a big factor, as are the wild up and down swings we’ve seen in the past few years which have in fact soured people on the whole risk thing.

Apparently Joe and Jane Investor is rethinking how their IRA and 401(k) contributions are invested. Equities are too risky, too unstable, too prone to losing their value in a matter of seconds due to some stock traders’ “fat fingers” or a fart in Greece that reverberates around the global exchanges. These facts alone should give anyone advocating privatizing Social Security (AHEM, Republicans) pause. Similarly, insofar as the risk and instability of the market have been caused by things beyond anyone’s control let alone ability to predict, it should give anyone advocating repealing Wall Street reform (AHEM, Republicans) pause as well.

Democrats: don’t listen to the spin, listen to the facts. Small investors have pulled $33.12 billion out of the stock market this year alone (and in fact the “average investor” began fleeing the market way back in 2007). There is a reason.

Personally I’m more and more convinced that all of this automated electronic trading has turned the stock market into a rigged game with loaded dice and the casino always wins.

Remember the May 6 ”flash crash”, originally blamed on a trader’s “fat fingers”? Yeah, right:

Recently we posted a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, around the time of the May 6 flash crash. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific “shapes” as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, simply by masking a big block order which other algos interpret as bid interest and pull all offers progressively or step function higher (or vice versa, although we have rarely if ever seen the walking down of a stock over the past 18 months).


Today, courtesy of Nanex we demonstrate that this type of illegal stock manipulation continues rampant to this very day, and the SEC still fails to acknowledge that it is precisely the HFT market participants that persist in destabilizing stock prices, which have given up responding to fundamentals and merely move up or down based on quote stuffing interventions by those who plead innocence and claim to only be providing liquidity. Well take a look at the millions in fake, and thus illegal, bids demonstrated below and tell us just how any of this manipulation is “providing liquidity” – the second the patterns break, the algos responsible for the churn pattern disappear, thus eliminating numerous levels of so called bid liquidity below the NBBO: break enough patterns and you have another flash crash as the market once again goes bidless.

Whew. And if that sounds like a bunch of gobbledy-gook to you, here’s the concept repated in plain English:

They say high-speed traders could have been trying to outwit one another’s computers with blizzards of buy and sell orders that were never meant to be filled. These superfast traders might even have been trying to clog exchanges to outflank other investors.

It’s the same casino mentality that allowed oil futures broker Steven Noel Perkins to single-handedly spike the global price of oil in a weekend binge of booze and bets on Brent crude futures. It’s the short sales and algo trading and all of the rest of the unregulated hedge fund BS over which Joe and Jane Investor has no understanding let alone control.

So when yesterday’s New York Times mildly posits this:

The notion that stocks tend to be safe and profitable investments over time seems to have been dented…

I’m thinking, Um, yeah. Understatement, much? Maybe what’s killed the notion of stocks as “safe and profitable investments” is the way the markets are now completely manipulated by computerized trading and other mumbo jumbo I can’t even wrap my head around.

A favorite bromide of the investment world is that “over time, the stock market outperforms other investments.” Maybe that was once true but this isn’t your father’s stock market. Back in the good ol’ days we didn’t have high-frequency traders and flash trades and computer algorithms running the show. Volatile is the new normal and it looks like a bunch of Wall Street assholes have turned the marketplace into a freewheeling ride on the roulette wheel.

So no wonder the average investor says no thanks to a rigged game. And when it comes to putting our safety net in that volatile casino? Not just no but HELL no. Those of you who want to put your economic future in the hands of a few untrustworthy, unregulated market manipulators whose best interest is not yours can still do so. But to gamble away the security we all share that way? Irresponsible.


Filed under economy, Social Security, stock market

>The Return Of The Lock Box

>You have got to be fucking kidding me. I remember Al Gore being roundly mocked for his “lock box” mantra — to the point where he parodied himself on Saturday Night Live. And now we have Sharon Angle bringing it back:

“The real Social Security solutions are to stop Harry Reid from raiding the Social Security trust fund,” Angle said in the ad.

“I’d like to save Social Security by locking the lock box, putting the money back into the trust fund so the government can no longer raid our retirement,” she says, echoing former Vice President Al Gore’s “lock box” comments that earned him ridicule in 2000.

Let me guess: in 10 years you guys will be in favor of carbon offsets to battle the crisis that is global climate change, right?



Filed under Al Gore, Social Security

>Happy Birthday, Social Security!

On August 14, 1935 President Roosevelt signed the Social Security Act into law. You can check out the vote tally here.

It’s worth remembering that when the debate over Social Security raged, groups like the National Assn. of Manufacturers, AMA, and U.S. Chamber of Commerce denounced the Social Security concept as “totalitarian.”

Now there’d be a revolution if anyone tried to touch it.


I just saw one of those TV ads from the U.S. Chamber of Commerce asking us to tell Congress to “slow down” on healthcare reform, which is hilarious since we’ve been trying to get some kind of healthcare reform in this country for decades. National healthcare was included in the original Social Security Act, but President Roosevelt removed it in a concession to the American Medical Assn. Figures. We’ve been suffering without it ever since.

In 1985 on the 50th anniversary of Social Security, Wilbur Cohen, one of the architects of the Social Security Act, reflected:

In 5 short months in 1934 the basic framework of the Social Security Act was formulated. And in another 7 months in 1935 it was enacted into law! A monumental change in the relationships between individuals, the States, and the Federal Government had been instituted. Today, 50 years later, we can see the significance and magnitude of that historic legislation in protecting families, communities, and the Nation.

Yet it’s been eight months and we still don’t have a healthcare bill. But we do have members of Congress bragging about how they’ve slowed the process down. Interesting.

Meanwhile, over at the Social Security Administration’s archives, one can read Congressional testimony and other documents from the program’s founding.

Here is Elon H. Hooker, president of the Manufacturing Chemists Assn.:

My opposition to this bill rests, in the first place, on the ground that, to my knowledge, it has been prepared without an factual study and without the necessary consultation with persons who will be most directly affected by its provisions.

I am sorry Senator Harrison is not here, because he takes exception to that, as I listened to the previous speaker. This bill was prepared with 6 months of study by a committee. That may seem to you gentlemen a long time, but the provisions contained in this bill are to cover a period of time running on to our children’s children, and our grandchildren, and months of experience in this kind of a complicated thing, 6 months study is not nearly enough.

In other words: slow down! This is too important! Not much has changed, has it?

Here is John Corson, another Social Security architect, recalling political opposition to the program:

Despite widespread approval of this new law, the times were rough. The Republican candidate for president in 1936 promised, if elected, to repeal the law. At his suggestion many employers inserted materials in their employees’ pay envelopes warning them that the payroll taxes to be deducted from their wages would be lost. And when it was proposed that Social Security numbers would be issued, this candidate branded them as “dog tags to be hung around the neck of every American worker.”

Fearmongering and lies, can you imagine? No indeed, not much has changed at all!

The American Medical Assn. fought both including a healthcare provision in the Social Security Act and fought private insurance, calling both “socialist.” From

By the 1930s the AMA was a very powerful political organization that controlled medical schools and medical education and defined the nature of medical practice in the United States. It fought third-party-payment insurance schemes for decades because it saw most insurance schemes and other potential external controls as forms of governmental paternalism, or “creeping socialism.” Dr. Morris Fishbein, the editor of the AMA’s publications and its primary spokesman in the 1930s, warned that any form of group health insurance or governmental aid in medical care “breaks down that initiative and ambition which are the marks of a young country going ahead,” and the young doctor who steps into such a job, “begins a mechanized routine type of service that is harmful not only to his patients but to his own character and advancement.”

That’s fascinating to me. The AMA didn’t want public OR private insurance? I wonder what would have happened if we had neither: no BlueCross/BlueShield or Medicare?

Finally, here’s John Harrington, general counsel for the Illinois Manufacturing Assn., making the argument that Social Security would sink already Depression-stressed small businesses, causing even greater unemployment:

We believe that this measure, if adopted, means at best an annuity of doubtful value for the aged of the future and unemployment benefit of doubtful value for the normally temporarily unemployed of the future–at the terrific cost of retarding the reemployment of those who are unemployed today.

It was interesting plowing through the archives because the arguments against creating Social Security are the very same points being voiced today by those who oppose healthcare reform–and from the same interests. I didn’t see anyone mention “death panels” but I did see lots of fearmongering about “socialism,” “totalitarianism,” higher costs, oppressing business, etc. etc. And yet here we are 74 years later, and Social Security is deemed the “third rail” of politics: mess with it and you’re toast.

We’ve been here before, people. Nothing has changed in America’s political discourse, save people have gotten sillier and more hysterical. But 74 years ago we were able to pass sweeping Social Security legislation in the face of opposition from Republicans, the U.S. Chamber of Commerce, industry groups, and fearmongers worried about “socialism.” There is no reason to not reform our broken healthcare system now.

I leave you with a piece of pop culture, my favorite quote from “The West Wing,” as a reminder of who the players are in this fight:

“Liberals got women the right to vote. Liberals got African-Americans the right to vote. Liberals created Social Security and lifted millions of elderly people out of poverty. Liberals ended segregation. Liberals passed the Civil Rights Act, the Voting Rights Act. Liberals created Medicare. Liberals passed the Clean Air Act, the Clean Water Act. What did conservatives do? They opposed them on every one of those things. Every one. So when you try to hurl that label at my feet, liberal, as if it were something to be ashamed of, something dirty, something to run away from, it won’t work, Senator. Because I will pick up that label and I will wear it as a badge of honor.”

Amen to that.

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Filed under American History, healthcare, Social Security

>I Guess It Seemed Like A Good Idea At The Time

>Remember President Bush’s grand plan to “fix” Social Security with “private accounts”?

Remember when John McCain supported the idea?

Here’s a sobering thought:

Investors begin 2009 licking their wounds from the worst year on Wall Street since the Great Depression, one that left many portfolios devastated and their owners scrambling for safety.

• The Russell 3000, which covers 98 percent of investable equities, shed $6.7 trillion or 39.7 percent of its value during 2008.

• The S&P 500 was down 38.5 percent, its worst performance since 1937.

• The Dow Jones industrial average was off 33.8 percent — the worst return since 1931.

• The five worst-performing stocks in Silicon Valley all lost more than 90 percent of their value.

• Every single technology index fell this year. Biotech did the “best,” with a 17.7 percent drop; Internet, computer, networking and semiconductor stocks all were down more than 40 percent, and disk-drive stocks were off nearly 61 percent.

Pension funds took a massive hit this year:

With the stock market shedding more than a third of its value this year, pension funds at big companies have been battered beyond recognition. What looked like safe stowaway spots where corporations securely tucked away assets for their employees’ retirements now look like roller-coaster funds. In addition to sending shivers up the spines of employees who count on that income, the problem also threatens to haunt the bottom line at many major firms.

Can you imagine the effect on American society if not only pension funds but also the Social Security safety net were invested in the stock market right now?

Thank God we dodged that bullet.

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Filed under Social Security, stock market