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Retirement: IRA or Social Security?
by David Farside
Mar 31, 2008 | 569 views | 0 0 comments | 12 12 recommendations | email to a friend | print
There’s no doubt the rest of this year’s presidential campaign will focus on rhetoric concerning our fallen economy.

John McCain tells the world he doesn’t know much about economics. Actually, what Republican does? It’s evident their Reagan trickle-down economy isn’t working. Reagan was a great president as far as foreign policy was concerned, but his economic strategy of tax exemptions and credits for big business has reduced a high percentage of the consumer-spending middle class to the ranks of poverty level income.

Currently, the Republican guidelines on deregulation, the minimum wage and taxing the middle class to subsidize oil companies and bailout banks is one of the reasons we are in this recession.

While George is trying to regulate Iraq, Iran and the Middle East, he forgot to regulate the banking and mortgage lending industry here at home. Consequently, we are in “another fine mess” he got us into.

But finally, after years of Bush’s hands-off policy concerning the regulation of financial institutions, the federal government is tightening up banking regulations and lending procedures of mortgage, companies. Last week Bush said he is proposing ways to overhaul the way government “regulates” financial services including: banks, securities, mortgage brokers and insurance companies.

According to the Associated Press, the plan would give more authority to the Federal Reserve to oversee the stability of the financial markets. The reserve would have the authority to examine the books of institutions that represent a threat to the “proper function” of our financial system. I wonder what took George so long to wake up?

One of the Republican economic mantras is to replace Social Security with private retirement investments accounts. However, I have to wonder how the Republicans and Bush can justify their plan for private retirement accounts now that we are in a recession, depression and inflationary period in our economy. They have suggested that we as individuals should invest in the stock market and other securities to provide for our economic security at retirement age. I hope no one who has a 401k is preparing to retire soon because your economic future just melted away like everything else in our lives.

A good example is the demise of the investment banker Bear Stearns. They have been in business for more than 85 years and was one of the most trusted and respected institutions in corporate America. Their stock was over $100 a share at one time. Now, they are being offered $2 per share by Morgan Stanley. I hope that stock wasn’t in your 401k.

The United States government has done something it hasn’t done since the Great Depression: they are underwriting bank takeovers. They have committed billions of dollars to Morgan Stanley to cover most of their losses incurred in the takeover of Bear Stearns, saving the banking industry and the integrity of our so-called free market economy.

Some statistics show that 401ks and other personal retirement accounts have suffered losses of 40 preview over the last year and are expected to fall even lower over the next nine months.

I’ve heard the difference between a stock investor and a stock trader is: an investor loses money playing the long term. The trader makes money on the short term and knows when to ride his profits and cut his losses.

If investors and traders at Bear Stearns couldn’t figure out how to be successful then how in the world does George think the ordinary worker can make the right decisions and successfully invest in a private retirement account? I guess the answer is, George doesn’t think.

A recession is a decline in the economy for three straight quarters or nine months. In 1958, our last recession, prices increased by almost 3 percent. And, wholesale prices continued to rise by almost another 2 percent through 1959. Unemployment increased, and the dollar wasn’t worth the paper on which it was printed. It seems history is repeating itself.

The Great Depression of 1937 had similar economic indicators. There was a two-year downturn in production and corporate profits causing the stock market crashed in 1939. Curiously, wages gradually increased for the workers who were employed.

The Stock Market Crash of 1939 ranked eighth as the worst in our history as the Dow Jones average lost 40 percent of its value. However, the worst stock market crash began late in 1929 when another Republican, Herbert Hoover, was president. Between 1930 and 1932, the Dow Jones average lost 86 percent of its value. The full recovery from that loss didn’t take place until 1954, 22 years later.

Today, we are experiencing the same signals of a long recession. Production is decreasing, corporate profits are falling and the stock market is in flux. Although unemployment is rising, individual wages are slowly increasing and, like the “crash” of 1939, our dollar still isn’t worth the paper on which it is printed.

So, think about that before investing in your individual retirement account for your future. Maybe just investing in your own home, getting a reverse mortgage at the age of 62 and collecting your Social Security isn’t such a bad idea after all. What do you think?

David Farside is a Sparks resident and political activist. The polemics of his articles can be discussed at farsidian2001@yahoo.com. His Web site is www.thefarsidechronicles.com.
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