If America is to adopt socialism, why not have socialism for the poor, rather than for the rich? Why should American households that earn $50,000 a year subsidize Goldman Sachs partners who earn $5 million a year?
Believe it or not, there is a rational explanation, and quite in keeping with America’s national motto, E pluribus hokum.
…the ill-fated markets for structured credit and mortgages of the past 10 years had the undivided attention of some of the world’s best applied mathematicians.
Never before were risks so parsed, measured, cut, dried and marketed to different investor groups with different risk preferences. Professional gamblers, or “hedge funds”, were enlisted to manage the riskiest part of the capital structure, while legions of mathematicians arranged other securities to be as safe as possible – for example, AAA-rated securities backed by subprime mortgages that are now trading at 50 cents on the dollar.
E pluribus hokum.
Americans who saved money during the 1990s put a great deal of it into the stock market and were bitterly disappointed. An American saver who invested in 1996, just as the boom was getting underway, would have given up all his gains by October 2002, at the stock market’s following the technology stock collapse. If the same investor held on to a broad market portfolio all the way to the present, he would only break even after inflation.
American asset markets did not offer returns high enough for the baby boomers to earn enough to retire.