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Read this Stephen King article closely, and you begin to detect a number of things. His take on the Markets stands as there being too much Cash floating around for too long, Investors become used to grabbing anything to get the Cash rolled into a paying Investment, and We are just now finding that a lot of that Investment is not making the Profits attributable in the manner where the Cash was first made. I did not actually use this Argument when I initially criticized the Bush Tax Cuts back in 2001, but I came fairly close.

Economists need realize that Taxation is a basic tool of economic policy, not simply a bane on the Economy; it being the overwhelmingly best Regulator of liquidity in any Economy. The Bush Tax Cuts granted greater liquidity to the Market, and allowed greater Saving of Profits from enterprise; so Investors went on a Buying spree, while Business managers went on a Cost-Costing binge, this all simultaneously. The End-Result was that a huge range of Investment was made, taking Immediate Profits over Long-Term expansion, and Business performance deteriorated with artificially-reduced Consumer Demand. I like to think this was prophetic on my part, though I must admit that my exact reasoning was ex-post-facto.

Mike Shedlock (Mish) delves into the realm of Retirement Benefit drag on the long-term economy. It is well-thought, and expresses the real need for revision of Pension plans in this Country, especially for Government Workers. The trouble here lies in his unspoken adoption of switch to 401(k) plans, the Conservative Economists’ curative for Pension reform. The problem with this formula lies basically in the content of the previous two paragraphs of this Post. Investment will never adequately fund Retirement for the greatest number of People; Markets are Conflict resolution in the realm of Pricing, only real Capital expansion will raise the amount of Cash exiting as Dividend profits. Reliance on Investment for Retirement basically forestalls Retirement, if the Individual desires an expanding portfolio rather than a rapidly decreasing one.

The probable only effective Curative for Pension woes lay in the proposition that all Pensions should be limited by Federal law–whether they are Federal, State, Local, or Private Sector. Notice I specifically did not say that any Pension plan must meet that limitation, I said there should be a limit placed on the Pension Benefit. Private Sector Workers would act as a brake on Public Sector demands for raising of such a limitation, until such time as their own Pension plans reached such a limitation level. Public Sector Savings in their traditional Pension plans would be fantastically great, though, as even high-ranking officialdom could be limited to a uniform Pension design. I would suggest something like twice the Average Social Security Benefit largesse, with a Health benefit set somewhere about $6000 per year to buy Health Insurance privately. lgl