Attention, All Boomers: Do You Have a Plan B?

City, state and nation, we have slipped our moorings and are rising up into the sky. We’re not on a course for new dreams and new adventures, however, but are merely high enough to be on a level with the square miles of inflated nonsense floating around in our smoggy cerulean. At these altitudes, you can see and hear Mayor Giuliani and his opponents dispute the proper place of repose for elephant poo-poo, for we are in the region where all kinds of crap hangs in the heavy, feces-burdened air sitting low over the nation.

The point on the altimeter where sky travelers enter the sludge belt is where the e-world begins. The e-world is, natürlich , populated by e-people engaged in every known form of dot-comism. It is the land of hype, hypertext and I.P.O. where jive and java commingle and C++ is better than an A and where the e-con men and e-con women hanging out on the Ethernet tell ya not to be a cyberschnook and pay e-tail prices because, with the right software and your own password, you can buy your ticket into the next millennium for a third less and double your money faster than you can say Y2K. Hoc iter ad astra , kids.

According to the economist-salespersons being interviewed around the clock on television, a line has been crossed on the far side of which previous human experience is worthless. In the domains we’ve entered, there will never be unemployment again, our personal net worth will expand for as long as the eye can see and a cancer cure only awaits the drug companies being incentivized by the Government with a promise to allow them to charge whatever the market will bear plus 10 percent. Hence, this is the worst possible hour to attempt to discuss a Plan B. Plan B will never be necessary, so what’s the use of making contingency arrangements for events that cannot transpire in post-Adamite creation, in the new epoch where babies are born without belly buttons? Don’t you realize in another 10 years the national debt will be paid off? Don’t you read the papers? Or are you one of those people whose bodies and souls can’t tolerate the new era? One of those people who don’t understand that from now on it’s blue skies forever, and if everybody is the greater fool, then no one can be played for one. It’s an infinity sum game we’re playing here.

Just in case humanity has not been absolved of original sin, shall we meditate on the unthinkable and ask what indeed if the stock market does go down? Let’s not speculate about crashes. Let’s postulate a slow descent over six or seven months or a year or even more. What, if anything, should the Government do? Seventy years ago, when the market did crash disastrously, only a small fraction of the population had its savings in securities. Most people kept their retirement money in bank savings accounts, which, by the end of 1932, melted away as the banks themselves crumbled. It was this disaster which moved the New Deal administration to insure bank accounts. The Government was seeing to it that the savings of the nation’s working people would never again be vaporized by the criminal shenanigans and excesses of high finance.

Well, now the life savings of the middle classes is again uninsured, but this time in the stock market. Does the nation take the position that putting your money in the market isn’t akin to putting your life’s accumulation in a bank savings account and thus those who do so know that they are taking a risk and if it doesn’t pay off, it’s tough shit, as the guys used to say over at the gasworks.

That position accords with generally held ideas about risk, prudence and free choice. If people see their retirement funds shrink to perhaps half their present value, you can maintain they have no one to blame but themselves in a free country and a free market and free everything else. On the other hand, there is something of a smirky rich guy’s point of view in that position. Every authority figure in the country has been telling people for years not to expect much from Social Security and to go into the market if they want their last days on earth to be golden or a least gold-plated. Furthermore, people have been, if not misled, then something close to it, by having it dinned into their heads for years that those who stay in the market long enough will positively come out winners. People have been more or less assured that they can’t lose. If they do lose anyway, might we not argue that they are entitled to some degree of protection?

If the air goes out of the market, not now, but in five years, for example, and it stays deflated for 10 years as it did in the 1970’s, an enormous number of people who will reach retirement age in that period are not going to have retirement money. What do we do about them? Give ’em their inadequate Social Security checks and send them out on the streets with tin cups? Realistically, we may have to decide between taking steps to protect their stock market investments or, after they go bust, sending them an additional check in the mail.

Unhappily, any plan for protecting the savings of the middle class invested in the stock market is shot full of dangers and difficulties. Assuming a way can be found, does the Government step in and protect everybody from loss or just some people, and who might those some people be? They might be deemed the deserving, nonspeculating investors, the definition of which will be worked out by a board of infallibly wise men and women.

No, the more you look at it, the more impossible is any insurance scheme analogous to Federal Deposit Insurance for protecting investment accounts. The only practical approach is to prop the price of securities across the board, which can be done by having the Federal Reserve tell the major brokerage houses that they will be lent or given money sufficient to buy the stocks until the averages are pushed back up into some predetermined range.

Such a plan is doable but not only will it be difficult, it will also have enormous consequences, only some of which will be jolly.

One of the difficulties is deciding when the Government should intervene and start buying stocks up. When the market has fallen 25 percent from its all-time highs? Thirty-five percent? Fifty percent? How do you answer that question and, once you’ve answered it, how high should the market be pushed up?

This Board of Infallibles, proposed above, ought to be able to come up with the answers to those questions, although, after they do, our troubles are by no means over. Once the Government contrives to maintain the price of securities at some administered level, the stock market ceases to be a real free market. It becomes a hybrid of some kind, half free and half sociobureaucratic. To the extent it isn’t free, it will become a defective instrument for the allocation of capital. In other words, money will not be invested in the most efficient and profitable enterprises, which is the major raison d’être of a free market in capital. Experience here and elsewhere in subsidizing inefficiency over the last 50 years is still so recent the woes which that entails need no dilation.

And where do we get the money to subsidize the market? The Fed will simply have to print it, thus opening the way to an inflationary spasm that will be made worse by foreigners selling the hundreds of billions of dollars previously bought and taken overseas. Yet more troubles will arise from that and on and on and on.

Suffice it to say that the Plan B suggested here is riddled with defects, but it may be the only Plan B available to us when all that happy-time crude drifting around in the American azure comes hurtling earthward with a horrendous plop. Be warned. When it happens, we’re going to need more than umbrellas and raincoats.

Attention, All Boomers: Do You Have a Plan B?