With the Treasury needing another $1.5 trillion in debt to finance the anticipated federal budget deficit,
the Obama administration is obviously scrambling to find new ways to sell
government debt cheaply, without having to raise interest rates.
Two years ago, the U.S. Department of Labor and the Treasury
Department held joint hearings on whether government lifetime annuity options
funded by U.S. Treasury debt should be required for private retirement
accounts, including IRAs and 401(k) plans.
Now I ask you-can you point to the clause in the
Constitution that gives the federal government the right to tell you how to
invest your money?
I do not seem to remember that amendment.
But our Kenyan Emporer is starting to grease the skids.
Packaged as a new retirement-savers plan designed for
workers whose employers do not offer IRAs or 401(k), President Obama announced
in his State of the Union address earlier this year an initiative that allows
first-time savers to start building up their savings in Treasury bonds that
could eventually be converted into traditional IRAs or 401(k) plans.
While it is not as onerous as an Obama administration
directive demanding a certain percentage of individual retirement savings must
be invested in U.S. Treasury bonds, it may be a first step in that direction.
With the Obama administration having run federal budget
deficits in the range of $1 trillion every year in office since 2009, somebody
has to buy all the Treasury debt the Obama administration plans to issue.
In January 2013, the U.S. Consumer Financial Protection
Bureau suggested it should play a role in helping Americans manage the $19.4
trillion they have put into retirement savings. “That’s one of the things we’ve
been exploring and are interested in terms of whether and what authority we
have,” bureau director Richard Cordray told Bloomberg in an interview.
Under the direction of the Obama White House, the Treasury
and Labor departments have increasingly pushed the investment theory that
because government bonds carry a sovereign guarantee against default, any IRA
or 401(k) funds placed in a Treasury R-Bond would constitute, in effect, a
government annuity that would pay the retiree a lifetime income, regardless how
stock and bond markets might independently perform.
The government’s argument is that IRA and 401(k) investors
lost principal from their retirement savings accounts when the housing bubble
burst and the Dow Jones Industrial Average fell from a closing high of
14,164.53 on Oct. 9, 2007, to a closing low of 6,547.05 on March 9, 2009.
That is true.
My 401K plummeted.
And as soon as I was permitted (I was
governed by insider rules, even though I only saw a small fraction of my
company’s results), I put every dime into my company’s stock at $8 per share.
My logic was, if the stock kept going down, retirement was
the least of my worries, but there was no reason it should not go up to it’s
former value.
I moved it out at $40 a share within a year, and it has since
been as high as $90.
Fidelity Investments estimated the average 401(k) fund
balance dropped 31 percent between the end of 2007 and March 2009.
With the
stock-market rally that began in March 2009, Fidelity noted 401(k) account
balances increased 28 percent by the end of the third quarter 2009.
Since 2009, most IRA and 401(k) investors have registered
substantial gains.
So the people who were at retirement age who were in risky
investments may have suffered, but most people had the opportunity to recover.
Without the help of our government.
And without investing in bonds backed by a government whose
spending is out of control.
A government who would have to sell more bonds to pay us
back.
Which is the equivalent of paying Visa with a Mastercard.
Retirement savers in nations with high debt that have
demanded retirement savings be placed into government debt have fared badly,
taking huge losses as debt crises deepened and bond markets began selling the
debt at serious discounts.
The Argentine state took control of the country’s privately
managed pension funds in a dramatic move to raise cash.
In 2008, Argentine
sovereign debt was trading at 29 cents on the dollar, reflecting the devalued
state of the Argentine peso, with the result that private pensioners holding
government debt in their retirement accounts could not be assured those bonds
would have any meaningful value at maturity.
Think it can’t happen in the US?
Reuters reported last year that Polish Prime Minister Donald
Tusk announced a government decision to transfer to the government pension
system all bond investments in privately owned pension funds within the
state-guaranteed system in an effort to educe Polish national debt and allow
the Polish government to resume borrowing in international markets.
By confiscating, or otherwise “nationalizing” the bonds held
in Polish citizen private retirement accounts, the Polish government, with
public debt currently standing at approximately 52.7 percent of GDP,
circumvents restrictions that deter the government from allowing debt to rise
to over 50 percent of GDP.
By shifting bonds held in private retirement
accounts into government accounts, the assets are held on the state balance
sheet to offset public debt, giving the government more scope to borrow and
spend.
As is the case with other nations in the European Union,
Poland faced with slowing economic growth, a grim job situation, and declining
tax revenues, has been forced to borrow to maintain the nation’s large social
welfare system without imposing austerity measures.
The international reaction among private investment advisers
was one of shock and dismay.
Poland’s move follows a similar move taken by the
Mediterranean island of Cyprus earlier this year.
The Cyprus government
confiscated 10 percent of the amount in all bank accounts in a move calculated
to raise 6 billion euros to meet a condition set by international bankers,
including the International Monetary Fond, as a condition of finalizing a
proposed Eurozone bailout.
Still think it can’t happen here?
Americans live with an illusion that their retirement, guaranteed by Social Security, is safe.
As I showed readers in a previous post, the taxes that were withheld from you and your employer have been spent-there is no money set aside for you.
The government plan is to tax your children to pay for your Social Security.
I was speaking to a lady friend recently who is retiring this year, and she thinks she is secure because she had filed for her benefits.
Her actual statement was that I am at risk while she is not because her benefits have been approved.
She has no concept of the fact that she is dependent on future tax revenue streams to continue her benefits.
Nor does she understand that in fifteen years or so (give or take), when we are both retired, we will both be supported by those tax revenues from the younger Americans who are still working, a situation that will be strained by the demographic reality.
And she is pretty much the mainstream. Americans are oblivious to this.
For most Americans, Social Security is a primary part of their retirement plan (even though it was never intended to be so).
They are counting on Uncle Obama to care for them.
I would even argue that the below chart is unrealistic-I believe most people in the bottom income tier have nothing but Social Security, and that the same is true for the middle income tier.
In fact, because Social Security benefits are capped, I would further argue that the percentage of the top income tier's portfolio for Social Security is far less than the 37% illustrated below.
The government encourages that "Uncle Obama Will Provide" mindset because it makes you more dependent on them and gets them closer to their goal, which Stephen T. McCarthy explains in several posts like this one HERE.
Why else is Obama considering stealing private retirement funds?
He knows the federal government can't pay everyone who will be demanding benefits by the end of the decade, so he wants to steal your personal savings from you to repay the money he took from you during your working life.
In the Obama vision, your retirement will look like this:
An interesting statistic from a friend who works at a brokerage firm-85% of all boomers are woefully under-funded for retirement.
Yet according to the above graph, not even half of all Americans are worried about it.
Now I know that it's a fact that 67% of all statistics are bullshit 50% of the time, but don't you think Americans ought to WAKE UP AND SMELL THE COFFEE!
Especially since they won't be able to afford coffee in retirement.
No, I take that back-for a few hours a day they'll be able to get coffee for free...
My thanks to Robin at Your Daily Dose for the idea for this post....
.jpg)
