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Financial-literacy programs are getting popular again. Warning: They don't work. Maybe for 7% of us. But for the rest of Americans, they are a big waste of time and money.

Even best-of-intentions financial-literacy programs like Jump$tart, RichFitUSA, APCPA accountancy programs and the President's Advisory Council on Financial Capability will never work. Never.

Financial-literacy programs reveal a subtle lesson in behavioral-economics brainwashing. Your brain is irrational; you can't rewire or reprogram it. But Wall Street can. Wall Street has seven clever ways to turn your irrational behavior against you, to manipulate you, to siphon off your money.

Want proof? Just think about the past decade. Factor in the 2000 dot-com crash, the 30-month recession and the 2008 meltdown, and guess what? On an inflation-adjusted basis, Wall Street lost 20% of America's retirement money from 2000 to 2010. And they'll do it again.

Opinion

Get it? Financial literacy is a cruel joke that Wall Street insiders keep playing on investors, local governments, school systems, Congress and the president.

Here's why even best-of-intention programs will never work: They assume, erroneously, the human brain can retrain itself to make rational decisions about investing, finance and budgeting. But when it comes to investing, no matter how intellectually gifted you are, your emotions will trump reason.

Daniel Kahneman, a Princeton psychology professor and Nobel laureate, says we "would be better investors if we just made fewer decisions." But we don't. Even professionals, the "people who are specifically trained to bring" rational decision-making skills "to problems, don't do so even when they know they should."

You simply cannot rewire and reprogram an irrational brain and make an investor "less irrational." And yet, as well-intentioned as they are, the financial-literacy idealists keep fighting a losing battle. They're like Don Quixote tilting at windmills.

I was involved in a federally funded program following the Enron-era stock-scandal settlements. While advising a congressional committee on fund reforms, I looked at the many problems with promoting financial literacy. I reviewed the long history of failed attempts, including the Mutual Fund Educational Alliance, which has been around since 1971. Guess what? The fund industry was exploiting those educational initiatives as a clever marketing opportunity to manipulate investors.

7 ways we're getting taken

In spite of the hype about financial literacy, the programs all have a fatal flaw: Wall Street doesn't want smart investors. Wall Street makes its billions off investors who are clueless.

Here's how a leading neuroeconomist, Richard Thaler of the University of Chicago, put it: Wall Street "needs investors who are irrational, woefully uninformed, endowed with strange preferences or, for some other reason, willing to hold overpriced assets."

Bottom line: The last thing Wall Street wants is 95 million investors wise to Wall Street's con games. Wall Street revenues would drop substantially if financial literacy really did work.

Like a chess master, Wall Street will always be several steps ahead of the Main Street investor. Here are tools that stack the deck:

  • Commission brokerage plans that work to Wall Street's advantage.
  • Cleverly crafted marketing and sales systems that mislead naive investors.
  • Favorable Securities and Exchange Commission regulations won by Wall Street lobbyists.
  • Deceptive portfolio alternatives, practices and advice that skim fees.
  • Systemic data manipulation with stocks, bonds, mutual funds and derivatives.
  • Psychological profiles of investors that are used against them.
  • High-frequency trading algorithms that run circles around individual investors by making thousands of trades in hundreds of milliseconds.