Call me sensitive, but I was struck a couple of weeks ago by two contrasting views of the world of finances. I completed reading a book entitled The Big Short, by Michael Lewis, that chronicles the steps of Wall Street bankers and brokers that led to the meltdown of the world’s financial system in 2008, and I went grocery shopping with my 86-year-old mother.
I’m not going to go into any detail about the book other than to say that if you haven’t seen a horror film lately that scares you enough, pick up this book and read it.
You’ll soon learn enough about the systems and people that are entrusted with your savings and pension funds to keep you awake at nights.
And in case you’re interested, their average Wall Street salary is more than $300,000 a year and their average bonus (2010) was $128,000.
This is an average, of course; at the top levels the numbers are in the millions.
If you recall, when all heck broke loose, the American government bailed out these folks to the tune of almost a trillion dollars and the bonuses rolled out as usual despite what you might agree, if you read the book, were criminal actions on the part of those who benefited most.
My mother, on the other hand, clips coupons and determines the weekly menu based on what is on sale at the grocery store.
My parents live on a modest income, based on a private pension that began in 1988 when my Dad retired and has not changed since then, as well as the Canada Pension Plan, which is low enough to ensure that any elderly people who do not have pension income (and there are many) will live well below the poverty line in their “golden” years.
They also had small savings on which they hoped to earn some interest to supplement their pension income. Yet, despite record profits by banks last year, and CEO compensation packages for Canadian bankers that ranged from $10 million to $40 million in 2010, they are earning less than one per cent on their savings, barely enough to pay their service charges.
I am, by nature, a capitalist and believe in the incentive of financial compensation for success. However, as we are witnessing an ever-enlarging gap between the rich and the poor, and as the elderly begin to comprise the majority of the poor, we have to ask ourselves if there is something morally distorted in the overall financial leadership we see in our politicians, bankers and investment people.
In the latest affront of concern for the average person on the street, the American political stalemate over debt has brought the stock market down almost 15 per cent in the last month which has eaten away even more at the principal of those investing for their own retirement.
Seriously, there is something wrong with this picture. Politicians who control economic policy are protected by indexed pensions that they earn after only six years of public service.
Business and banking leaders make so much money that they, and several generations of their offspring, will never have to worry and they seem to get this compensation regardless of job performance.
If you understand anything about fiscal policy, you’ll recognize pretty quickly that governments everywhere have mismanaged their own funds to the point where their only option will be to create the kind of monetary policy that will encourage inflation, and thus pay old debts off more easily with money that is worth less. Where will that leave the elderly on fixed incomes as prices go through the roof?
As I said, perhaps I’m sensitized.
I felt terrible watching my Mom stew over the price of everything she looked at.
Like so many in their generation, my parents worked hard all their lives, never took anything from the government other than Canada Pension payments and planned to look after themselves in their retirement. Now they fear they will outlive their money.
Perhaps we need to shake our collective conscience and ensure those who manage national and global financial policies think a bit less about their own security and a bit more about the dignity of the elderly.
Graham Hookey is an educational and parenting writer and can be contacted at ghookey@yahoo.com.