How Wall Street Parasites Have Devoured Their Hosts, Your Retirement Plan and the U.S. Economy

[Octafish]

by PAM MARTENS
CounterPunch, SEPTEMBER 1, 2015

The riveting writer, Michael Hudson, has read our collective minds and the simmering anger in our hearts. Millions of American have long suspected that their inability to get financially ahead is an intentional construct of Wall Street’s central planners. Now Hudson, in an elegant but lethal indictment of the system, confirms that your ongoing struggle to make ends meet is not a reflection of your lack of talent or drive but the only possible outcome of having a blood-sucking financial leech affixed to your body, your retirement plan, and your economic future.

In his new book, “Killing the Host,” Hudson hones an exquisitely gripping journey from Wall Street’s original role as capital allocator to its present-day parasitism that has replaced U.S. capitalism as an entrenched, politically-enforced economic model across America.

This book is a must-read for anyone hoping to escape the most corrupt era in American history with a shirt still on his parasite-riddled back.

Hudson writes from his most powerful perch in chapters describing how these financial parasites have tricked our society into accepting them as a normal, productive part of our economy. (Since we write about these thousands of diabolical tricks four days a week at Wall Street On Parade, poignant examples came springing to mind with every turn of the page in “Killing the Host.” From the well-placed articles in the Wall Street Journal to a front group’s pleas for more Wall Street handouts in a New York Times OpEd, to the dirty backroom manner in which corporate speech was placed on a par with human speech in the Supreme Court’s Citizens United decision, to Wall Street’s private justice system and the Koch brothers’ multi-million dollar machinations to instill Ayn Rand’s brand of “greed is good” in university economic departments across America — America has become a finely tuned kleptocracy with a sprawling, sophisticated public relations base.

How else to explain, other than kleptocracy, the fact that Wall Street’s richest mega banks collect the life insurance proceeds and tax benefits on the untimely deaths of their workers – all codified into law by the U.S. Congress – making death a profit center on Wall Street. Or, as Frontline revealed, that two-thirds of your 401(k) plan over a working lifetime is likely to be lost to financial fees.

CONTINUED...

http://www.counterpunch.org/2015/09/01/how-wall-street-parasites-have-devoured-their-hosts-your-retirement-plan-and-the-u-s-economy/

THIS is why the Banksters and Warmongers -- and their crooked enablers in Wall Street-on-the-Potomac need to be in prison.

[Hydra]

1. They used to be more subtle about it

Now they casually wave it in everyone's face, counting on the fact that most people are still too indoctrinated to even see it.

[Octafish]

3. Open Air Criminality

There must be a difference between an Oligarchy and a Kleptocracy, but I'm unable to see it.



Perhaps a change of climate? Zen monks would sometimes use a stick on the back of pupil's head.

[SharonAnn]

29. "Goldman Sachs is a giant vampire squid wrapped around the face of humanity, relentlessly

"Goldman Sachs is a giant vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

By Matt Taibbi in a Rolling Stone article.

Probably the west description of Wall Street "investment banks" that I've ever seen.

[Oilwellian]

42. I think people see it

The bankers just know they won't be prosecuted as long as they own the right people in oversight positions. And they do.

[daleanime]

2. K&R....

And bookmarked.

[Octafish]

5. We are living in the wealthiest times in human history...

...and the "authorities" have rigged the game in their favor. From a couple years back:

7/8 of ALL WEALTH in Human History created since 1981.

Pruneface's budget guru David Stockman must've added up all the GDP and estimated the stuff from the middle ages. Whatever. His real point is that most of THAT has ended up in the pockets of the greedhead plutocrats' pockets.



In 1985, the top five percent of the households – the wealthiest five percent – had net worth of $8 trillion – which is a lot. Today, after serial bubble after serial bubble, the top five per cent have net worth of $40 trillion. The top five per cent have gained more wealth than the whole human race had created prior to 1980.” -- David Stockman, Ronald Reagan's budget director

http://www.cbsnews.com/video/watch/?id=7009217n&tag=related;photovideo

"In 1985, the top five percent of the households, wealthiest five percent, had net worth of $8 trillion, which is a lot. Today, after serial bubble after serial bubble, the top five percent have net worth of $40 trillion," he explained. "The top five percent have gained more wealth than the whole human race had created prior to 1980." -- David Stockman

SOURCE: http://www.cbsnews.com/stories/2010/10/28/60minutes/main6999906_page4.shtml

And to think there are kids in America who would go to bed hungry every night if they had a bed.

[fasttense]

20. By buying back their own stock, corporate CEOs are stealing future revenues from those corporations

So, CEOs and major stockholders take out huge loans and use that loan money to buy back their own stocks. The corporation will pay back the loan, a little at a time for many, many years. This leaves the corporation with less money to hire, manufactur or market their products. If they do it often enough it could wipe out all future profits of the corporation, making it merely a slave to its loans and the banks that have those loans. Eventually such buy back schemes will bankrupt the corporation in the future.

But the current, not the future, CEOs and major stockholders gain because the price of those fewer circulating stocks goes up. But for CEOs and major shareholders to make any money off those higher priced stocks they have to sell them. In the meantime they can borrow against the newly created higher price and they can use them for backing in all sorts of money schemes. But when things get bad, they are going to have to sell them.

Oh my, this sounds like a set up for another economic collapse.

[JEB]

22. Not that great in Camden.

http://www.democraticunderground.com/10027129814

Thanks again for all your work and for sharing it here.

[KG]

4. aided by both the rep and dem parties.

[Octafish]

7. That, unfortunately, is the problem. Ask UBS.

There used to be opposition. That has been co-opted in the name of Buy Partisanship.

For example, UBS hired former Sen. Phil Gramm -- the guy who spearheaded the repeal of New Deal regulations like the Glass-Steagall Act that prevented the casino from grabbing the federally insured depositors' money -- and later brought onboard former President Bill Clinton, who signed said deregulation into law.

Today, as part of the new form of government-capitalism cooperation, they specialize in "Wealth Management."

http://financialservicesinc.ubs.com/revitalizingamerica/SenatorPhilGramm.html

"Revitalizing America." Ha!

[erronis]

18. "Buy Partisanship", indeed! Gramm and Clinton - two peas from the same pod.

[closeupready]

6. "the most corrupt era in American history" - about sums it all up, right there.

[Octafish]

8. Neil Barofsky, then-IG for TARP, explained How Things Work.

Neil Barofsky Gave Us The Best Explanation For Washington's Dysfunction We've Ever Heard

Linette Lopez
Business Insider, Aug. 1, 2012, 2:57 PM

Neil Barofsky was the Inspector General for TARP, and just wrote a book about his time in D.C. called "Bailout: An Insider Account of How Washington Abandoned Main Street While Rescuing Wall Street".

SNIP...

Bottom line: Barofsky said the incentive structure in our nation's capitol is all wrong. There's a revolving door between bureaucrats in Washington and Wall Street banks, and politicians just want to keep their jobs.

For regulators it's something like this:

[font size="6"][font color="green"]"You can play ball and good things can happen to you get a big pot of gold at the end of the Wall Street rainbow or you can do your job be aggressive and face personal ruin...We really need to rethink how we govern and how regulate," Barofsky said.[/font color][/font size]

CONTINUED... http://www.businessinsider.com/neil-barofsky-2012-8

"Integrity is for paupers." -- traditional saying, CIABCNNBCBSFoxNutNoiseworks

[marmar]

9. K/R

[Octafish]

10. Kurt Vonnegut made things clear as a mountain stream...

From "God Bless You, Mr. Rosewater" with thanks to DUer ORREX, from way back when:

"...I think it's a heartless government that will let one baby be born owning a big piece of the country, the way I was born, and let another baby be born without owning anything. The least a government could do, it seems to me, is to divide things up fairly among the babies. Life is hard enough, without people having to worry themselves sick about money, too. There's plenty for everybody in this country, if we'll only share more." said Eliot Rosewater.

"And just what do you think that would do to incentive?" asked his father, the Senator.

"You mean fright about not getting enough to eat, about not being able to pay the doctor, about not being able to give your family nice clothes, a safe, cheerful, comfortable place to live, a decent education, and a few good times? You mean shame about not knowing where the Money River is?"

"The what?"

"The Money River, where the wealth of the nation flows. We were born on the banks of it--and so were most of the mediocre people we grew up with, went to private schools with, sailed and played tennis with. We can slurp from that mighty river to our hearts' content. And we even take slurping lessons, so we can slurp more efficiently."

"Slurping lessons?"

"From lawyers! From tax consultants! From customers' men! We're born close enough to the river to drown ourselves and the next ten generations in wealth, simply using dippers and buckets. But we still hire the experts to teach us the use of aqueducts, dams, reservoirs, siphons, bucket brigades, and the Archimedes' screw. And our teachers in turn become rich, and their children become buyers of lessons in slurping."

"I wasn't aware that I slurped."

Eliot was fleetingly heartless, for he was thinking angrily in the abstract. "Born slurpers never are. And they can't imagine what the poor people are talking about when they say they hear somebody slurping. They don't even know what it means when somebody mentions the Money River. When one of us claims that there is no such thing as the Money River I think to myself, "My gosh, but that's a dishonest and tasteless thing to say."

"It's still possible for an American to make a fortune on his own." said his father.

"Sure--provided somebody tells him when he's young enough that there is a Money River, that there's nothing fair about it, that he had damn well forget about hard work and the merit system and honesty and all that crap, and get to where the river is. 'Go where the rich and the powerful are,' I'd tell him, 'and learn their ways. They can be flattered and they can be scared. Please them enormously or scare them enormously, and one moonless night they will put their fingers to their lips, warning you not to make a sound. And they will lead you through the dark ot the widest, deepest river of wealth ever known to man. You'll be shown your place on the riverbank, and handed a bucket all your own. Slurp as much as you want, but try to keep the racket of your slurping down. A poor man might hear.'"

These are the wealthiest times in human history, yet it means AUSTERITY for the 99%.

[angel823]

12. Powerful stuff

here.

Angel in Texasperated

[L0oniX]

13. Wow

[JackInGreen]

16. A missed voice of

sense and absurdity.
I can't imagine to wonder what he'd think of this horror show.

[erronis]

19. Thanks for this excerpt! Time to get back to (re)reading some more Vonnegut.

[PufPuf23]

25. God Bless You Mr. Rosewater is of my favorite novels.

Thank you for what you do.

[reformist2]

28. Too cryptic. It's time to blow the lid off, and show everyone how banks and Wall Street take

in trillions for themselves, by nickel-and-diming us to death.

[L0oniX]

11. "two-thirds of your 401(k) plan over a working lifetime is likely to be lost to financial fees"

...and yet 401k users don't want Bernie getting a little % for education. DUH!

[ctsnowman]

14. K & R

[SoLeftIAmRight]

15. Parasites

that word says it all

[Helen Borg]

17. My retirement plan is just fine, thank you.

I've got a solid $500 in my 403b!

[JEB]

21. K&R for the original post and subsequent informative posts and links.

[tblue37]

23. THIS!

America has become a finely tuned kleptocracy with a sprawling, sophisticated public relations base.

[colsohlibgal]

24. Yes, Soul Sucking Parasites.

Not just the Banksters...health care as well. There is no reason other than pure greed for a health care company to have CEOs making multi millions.....exactly what do they bring to health care delivery?

They all are greedy relentless leeches, robber barons pure and simple.

[reformist2]

26. They take 1-2% of your money each year, whether the market goes up or down....

Is it any wonder why your mutual funds don't really go anywhere? Just imagine what will happen to them once we go into a long-term bear market!

[taught_me_patience]

38. a 5 min google search

Reveals hundreds of mutual funds with almost no load. Who chooses high load funds anymore?

[reformist2]

46. There are no funds that are free. Somebody runs them, and you better believe they charge you for it.

[progree]

48. Yes, the Vanguard S&P 500 fund charges 0.17%/year (0.05%/year for $10,000 or more invested)

Meanwhile, the U.S. stock market has gone up more than 9%/year since 1926 (and 11%/year since August 76). Including reinvested dividends. That was explained in #41.

By the way, he said "almost no load". He didn't say free.

[progree]

41. Vanguard's S&P 500 Index Fund up 58 fold since inception (8/31/76)

Not all funds are 1 to 2% annual expenses. Vanguard, which is member-owned, has 0.17% annual expense on its domestic index funds (minimum investment $3,000). The annual expense (expense ratio) drops to 0.05% with a $10,000 minimum investment. And no purchase or selling cost.

Take VFINX, Vanguard's S&P 500 index fund -- a passive fund that seeks to emulate the S&P 500 index. It curently has a 0.17% expense ratio (minimum investment: $3,000). (With a $10,000 minimum investment you can get into VFIAX, Vanguard's Admiral Class S&P 500 index fund, with a 0.05% expense ratio).

Back to VFINX:

http://www.thestreet.com/quote/VFINX.html

Since inception 8/31/76: 11.00% average annualized total return, last update: 8/31/15 close.

So in the 39.00 years between 8/31/76 and 8/31/15, the S&P 500 has had a 11.00% average annualized return

Which means it grew by 1.1100^39.00 = 58.56 fold ("^" is exponentiation)

Meaning $20,000 invested in the fund back then would be $1.171 MILLION now

Something that grows at the rate of 11.00%/year on average doubles on average every 6.64 years: 1.1100^6.64 = 2

Note, this isn't some "hot" cherry-picked mutual fund. It is a plain vanilla index fund that follows the S&P 500 Index as close as it feasibly can. I only pick it because it is the oldest such fund I know of. And it is a very broad index of U.S. stocks -- it is 75% of the U.S. stock market by market capitalization.

And because investing in an S&P 500 index is the "default" choice for one's core equity investment recommended by most financial advisers and financial pundits, at least from what I've seen and read. And Warren Buffett, generally considered the world's greatest investor.

A small cap index fund or a value index fund would have done even better during this period.

Nor is this the return only an insider would get. Nor is this some theoretical return before expenses. The fund's returns shown above are net after expenses. This is the return a Joe/Jane Sixpack would have achieved if he/she had put money in at inception and left it alone (with dividends and capital gains distributions reinvested).

As for bear markets: for long-term investors, bear markets are just statistical noise.

Please also see my #34 where I debunk the false statement that "as Frontline revealed, that two-thirds of your 401(k) plan over a working lifetime is likely to be lost to financial fees". Frontline said no such thing.

[reformist2]

45. You may as well tell people they too can win the lottery.

[progree]

47. I guess my parents and I have been serial lottery winners for decades.

Last edited Thu Sep 3, 2015, 08:56 AM - Edit history (2)

As long as one buys and holds for the long run widely diversified LOW COST stock funds.

That's the historic experience going back a century. And my parents and my experience -- almost all our innumerable funds have done better than CDs or bonds. So we're serial lottery winners I guess.

But oh well.

[font color = red]On Edit, 9/3 848a ET:[/font]As for the lottery analogy, the odds are stacked against lottery ticket buyers -- on average lottery ticket buyers only get back 75 cents or something like that per dollar put in. Whereas on average U.S. stock investors get a rate of return averaging a positive 9%/year -- doubling one's investment on average every 8 years. Because it is based on corporate earnings. I'm for any "lottery" that is based on corporate earnings and has the track record of the U.S. stock market.

There's another kind of gamble: outliving one's savings. A much bigger likelihood if one is investing in CDs and bonds than in stocks. Innumerable studies show that. That's the lottery I'm concerned about losing. I want the odds in my favor.

There was the famous Peter Lynch / Fidelity ad that I remember seeing. Well I googled this and found this from 2001:

http://www.rbcpa.com/peterlynchcommentary20010920.pdf

Since World War II, despite nine recessions and many other economic setbacks, corporate earnings are up 63 fold and the stock market is up 71 fold. Corporate profits per share have grown over 9% annually despite the down years. Nine percent may not sound like a lot but consider that it means that profits mathematically double every 8 years, quadruple every 16, are up 16 fold every 32 years, and are up 64 fold every 48 years."

I just can't understand how some DU types can complain about how corporate profits are an ever-bigger share of the economy (while wages/salaries are an ever-declining share). And how profitable the corporations are blah blah blah. And then in another post they will say I'm way too smart to invest in the stock market.

Well, the stock market is investments in corporations, and earnings (profits) drive share prices and provide dividends.

And as my last post explained, the S&P 500 is 75% of the U.S. stock market -- not some small lucky set of stocks or a hot sector or two. A Total U.S. Stock Market fund -- consisting of small and mid-caps as well as large caps -- would have done even better, but there isn't such a fund that goes back that far, so that's why I use the S&P 500 fund.

[Rex]

27. Banksters love the Greed is Good generation, so much so that they decided to keep America that way.

We've been in Totally Fucked mode since the 1980s.

[LongTomH]

30. K&R for truth

[Hotler]

31. Kicking...... Thanks, Good read as always. Take care my friend. N/t

[hifiguy]

32. Kickety rec.

More truth from DU's greatest truth-teller.

[Babel_17]

33. Not just parasites, extortionists (nt)

[progree]

34. Frontline didn't say that about 401k fees. The 2/3 figure is from a hypothetical example

as Frontline revealed, that two-thirds of your 401(k) plan over a working lifetime is likely to be lost to financial fees.

No they did not. It was a HYPOTHETICAL example of a 401k with very high 2%/year fees, and a worker putting his/her entire 50-year working life's 401k contributions all in his first year -- a legal and practical impossibility.

In my case, my 401(k) was mostly invested in Vanguard index funds where the expense ratio is about 0.10%. And where the employer paid the 401k management fees and provided a match.

========================================================
The "2/3 of your 401k plan eaten up by fees" is based on a theoretical calculation like so:

Assume that without expenses, a dollar invested 50 years ago would have gained 7%/year:

Ergo, that dollar would have grown without expenses to 1.07^50 = $29.457 in 50 years. (the "^" is exponentiation)

With 2%/year expenses, the after-expense growth rate would be 5%/year ,

so the dollar would have grown with expenses to 1.05^50 = $11.467 in 50 years.

So yes, in this scenario, 29.457 - 11.467 = 17.990 is lost to expenses, which is 17.990/29.457 = 61% or very roughly about 2/3.

===========================================================

But I very much doubt that most 401ks have anywhere near 2%/year expenses.

And, also, if you do a more realistic calculation, where the worker contributes a certain amount every year, the percentage lost due to expenses is much less than looking at a lump sum made at the beginning of the period. (What worker makes his/her entire lifetime contribution to a 401k all in one year -- his first year on the job?) And even that overstates the problem, in that, due to inflation, workers contribute more in their later years than in the earliest years.

Also the percentage lost to expenses is much less if you look at a shorter period like 20 or 30 years.

And it doesn't include an employer's match to an employee's contribution.

Xcel Energy's plan: 25 choices http://www.myplaniq.com/LTISystem/f401k_view.action?ID=1049

Click on the "Show All Funds and Details" gray button below the bottom right of the table.

Then when the new page appears, Click on the "Show More Fund Parameters & Ratings" blue button just above the table to see the Expense ratios. The index funds are around 0.10% expense ratio. The target date retirement funds are all 0.16% to 0.19%.

If your employer is only offering you choices that all involve 0.20% or higher expense ratio, you need to get your coworkers together, with pitchforks, and raise holy hell, because yes, you are getting screwed. Not by Wall Street but by your employer.

#################################
Much more on this at http://www.democraticunderground.com/12527227

[Scuba]

35. K&R

[Admiral Loinpresser]

36. This is one reason why Bernie is more electable than HRC. n/t

[raouldukelives]

37. K&R

A young, fresh faced generation of coddled and privileged MBA's who always knew how special and unique they were. How successful and wealthy they would one day be. Many of them gleefully appointed to positions of authority by their friends and families who have themselves always been owed the world and all its wealth.

But the landscape was already littered with profitable companies, factories, hospitals and small banks that had already determined the best way to build a good company with a good name was to provide a good service. Which they did admirably over the decades to become what they were.

The only way to profit by working for these firms was by making a better product or by providing a better service. These things require intelligence, dedication and time. Something Gods special little angels had never learned about nor learned to respect.

They were due the world, wealth and all the time to enjoy it. The only way to accomplish this was by dismantling all the good works of their forefathers, by raiding the profitable companies, in many ways lynch pins of entire communities, and using deceit, dismantling and destruction to profit madly themselves in the short term while turning our country into a third world wasteland of low taxes on robber barons and harsh fines and prison sentences on our most vulnerable to continue funding more and more draconian municipalities.

There are those who find these people and changes disgusting and there are those who work for and emulate them.

It is only through the efforts and donations of so many shareholders that so much destruction has been wrought to so many in such a short time.

If it wasn't literally turning our world into hell. If it wasn't a spit in the face to everyone who ever fought and died for democracy. It'd almost be impressive.

[Octafish]

44. You have told the story of our Age.

In a time when Integrity is for paupers, Piratization with Open Worship of Welfare for Warmongers and Traitors, the greatest wealth in all human history lines principally the pockets of the Have-Mosts while the planet burns and it's not mentioned at all on television.

Thank you for putting into words, Raoulie. A story well told is unforgettable.

[bobthedrummer]

39. K&R#71

Bankster USA
http://www.prwatch.org/topics/banksterusa

[CrawlingChaos]

40. K&R

[Oilwellian]

43. Jim Cramer openly admits to ripping off clients

Like he said, "it's a pretty good game."

[Quantess]

49. I'll read this when I get back.