Poof! There go Americans' dreams

By Jon Markman

As one major financial institution after another succumbs to crushing losses this year, it is mourning in America for the hopes of average working people who believed in the myth of stock ownership as a sure path to a better life now and a safe retirement later.

It may sound like a gross exaggeration to say that the dreams of Main Street are dying on Wall Street this week, but it is a fair interpretation of recent events. For the capital that is required to fund businesses, schools, streets, farms, vacations, homes and cars is quite literally evaporating like dew at the start of a summer day with the untimely death of every bank, brokerage and insurance company.

Where did the money come from, and where has it gone? It's an interesting saga, and it will take just a few minutes to tell. Let me warn you first that it starts out like a fairy tale but quickly becomes a horror story, so I'll be sure to tell you when to cover your eyes.

The times that Wall Street forgot

For years, banks, brokers and insurance companies have besieged us with marketing claims that the regular purchase of shares in public companies would effortlessly grow in value forever.

Never mind that there have been long periods in the past century -- such as, roughly, 1929 to 1932, 1937 to 1949 and 1965 to 1982 -- when this simply wasn't true. It has been valid enough in the recent consciousness, from 1982 to 2000, and with that hopeful seed planted, the same ad whizzes who depend on our natural human optimism to buy all manner of fluff took it from there.

This hasn't always been the case -- far from it. During the first 90% of the industrial age, companies that wanted to grow their businesses were required to convince committees of stingy men at banks that their projects were worth investing in. Those committees were loath to put their firms' capital at risk, so they demanded both collateral and personal-liability agreements from supplicants. Except for brief and disastrous interludes of public participation in Europe -- each of which ended with 100 years of citizens' abstinence from capital markets -- only people of great means financed industry.

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But in the middle of the 20th century, an unchecked ambition to build big projects across the United States and Asia was married to the development of mass-market advertising techniques, and the practice of persuading average moms and dads to put hard-earned money to work in big business with little fear as to its safety was born.