Sorry To Burst Your Bubble

The Onion, a weekly “newspaper” for which every day is April Fool's, had me in stitches with its recent page one story: “Recession-Plagued Nation Demands New Bubble To Invest In!” The only problem was, as with all good humor, this joke rang too true, especially after seeing what the lousy economy is doing to my retirement accounts and the insurance industry.

The Onion's article was an absolute riot, and was right on target. It “reported” that a panel of top business leaders, testifying before Congress about the worsening recession, had demanded that the government “provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.”

(To read the Onion's full story, click here.)

“What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future,” said the CFO of one “bubble-based” investment firm. “We are in a crisis, and that crisis demands an unviable short-term solution.”

The Onion added that “according to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.”

One “expert” quoted in the story declared that “the U.S. economy cannot survive on sound investments alone.”

All kidding aside, this country is in serious trouble, short- and long-term. We're bailing out banks, investment houses and mortgage companies with tens of billions in taxpayer money. People are losing their homes. With Main Street more heavily dependent than ever on Wall Street via 401Ks, stocks in variable products and the like, retirement feels a lot more precarious and much further off.

Meanwhile, tens of millions have no health insurance, while even those lucky enough to have coverage face bankruptcy from out-of-pocket medical care expenses.

Our federal budget deficit is out of control, while states, counties and cities–which don't have the luxury of floating Treasury bills at will, like Uncle Sam enjoys–are scrambling to close huge budget gaps. The Social Security “Trust” Fund is pretty much spent, thanks to decades of surpluses misappropriated for general government purposes, while Medicare faces a much more immediate financial crisis.

The insurance industry is not immune to the macro-economic issues plaguing the economy. Some are directly impacted by the housing crisis, having foolishly invested in subprime mortgage-backed securities. All are feeling the triple-whammy–premiums falling in a soft market, exposure growth flat in an economic slowdown, and investment income undermined by low interest rates and a volatile equities market.

Each day brings grim earnings reports from the insurance sector, with no letup in sight.

Any idea how we are going to get out of this economic mess? Will a change in the White House make any difference, or is the President's impact on the economy more illusion than reality? How will the insurance industry manage through this difficult period?

The Onion suggested a number of new “bubbles” Americans could invest in, including “Some Sort of Fund,” “Atmospherics,” and–my personal favorite–”Illegal Immigrant Futures.”

“Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to begin encouraging massive private investment in some fantastical financial scheme in order to get the nation's false economy back on track,” the Onion reported.

“Every American family deserves a false sense of security,” said one risk analyst in the story. “Once we have a bubble to provide a fragile foundation, we can begin building pyramid scheme on top of pyramid scheme, and before we know it, the financial situation will return to normal.”

How about insurance futures? Oops! Already tried that!