The definition of madness…assuming the world economy can deleverage from the global debt bubble and grow at 4%.
In today’s “Morning Must Read,” Bloomberg’s Tom Keene highlights comments on economic equilibrium models. He speaks with Kingston University Economics Professor Steve Keen. Here is a direct video link.
For the past 20 years, financial experts have counseled the public down a self-destructive path leading to massive capital shortfalls and deficits in savings and pensions worldwide. Spend more, save less was the motto; that taking more risk and paying more fees for financial products and services would magically make up for chronic under-saving. For short periods like 1996-2000, 2003-08 and 2010-15, it appeared to wishful eyes, that the magic might be working, as three successively larger credit pumping cycles boosted asset bubbles, and helped paper over balance sheet holes. But the mirage has always been fleeting. As each bubble bursts, capital tanks and years are wasted trying to recover prior values, as savings deficits compound and the population moves closer and closer to planned withdrawals.
If ever there was a verdict on bubblenomics, it is this: today, even with asset prices back near all time highs for the third time in 17 years, even before the next bear market knocks trillions off prices once more, savings deficits today are massive and mounting. Ignoring math and believing false prophets has wrought tremendous harm. Denial is not a strategy. We are now past the point of small tweaks and well in the territory of massive restructuring needed. See: Collapsing pensions will fuel America’s next financial crisis, and this issue goes far behind America, the retirement savings blight is global today. The truth is this:
Unfortunately, there are no easy answers. Pension reform — as with Social Security reform — is most equitably approached as a combination of benefit cuts, increased contributions and higher eligibility ages. But since those solutions tend to offend all stakeholders, it is difficult to get past the inertia.
The sooner individuals take steps to understand math and take active responsibility for managing their finances, rather than blindly riding asset bubbles to their inevitable collapse, the better off we will all be.
When news of the Wells Fargo fraud/sales pumping culture hit last October, we reminded our readers, that this was not just a Wells story, but financial sector wide. (See our archive of stories here). And last week, when news of similar practices at Canada’s TD bank broke, we wrote in “Wells Fargo North”, that it was not 
just TD, but rather, “an entire industry of sales-obsessed investment firms/banks posing as “financial advisors” which have increasingly gutted households from the inside out over the past 2 decades.”
The plot thickens, as today we have a CBC report which confirms Canadian banks are all driving their staff to push credit and so called ‘investment’ products on to customers against the customers’ best interests, and all under the guise of “financial advice”. See: “We are all doing it”: Employees at Canada’s big five banks, speak out about pressure to dupe customers:
“Employees from all five of Canada’s big banks have flooded Go Public with stories of how they feel pressured to upsell, trick and even lie to customers to meet unrealistic sales targets and keep their jobs.
The deluge is fuelling multiple calls for a parliamentary inquiry, even as the banks claim they’re acting in customers’ best interests.
In nearly 1,000 emails, employees from RBC, BMO, CIBC, TD and Scotiabank locations across Canada describe the pressures to hit targets that are monitored weekly, daily and in some cases hourly.
“Management is down your throat all the time,” said a Scotiabank financial adviser. “They want you to hit your numbers and it doesn’t matter how.”
Read the whole article. If you are taking financial advice from people who work for the bank/broker/dealers you are doing so at your peril. Yes the people seem nice. But they are working for a self-obsessed, greed machine, that cares about profits not people, or the harmful effects of their recommendations on real families. It’s time to wake up.
And yes, we do need to break up the banks and separate the ferocious product/investment sales side away from the traditional deposit taking-loan making side which is backed by CIDC insurance via taxpayers. We cannot afford to continue any other way.
