According to widespread media reports, both the U.S. Treasury Department and the Department of Labor plan are planning to stage a public-comment period before implementing regulations that would require U.S. savers to invest portions of their 401(k) savings plans and Individual Retirement Accounts (IRAs) into annuities or other “steady” payment streams backed by U.S. government bonds. (Source)
Even Newt Gingrich, former speaker of the House, has published a warning here. He says, “they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises.” (Source)
Why? Somebody has to cover the US Federal Government’s huge “bailouts” and $6.3 trillion in rapidly defaulting real estate mortgage liabilities: $2.8 Trillion and $1.9 Trillion of MBS (“mortgage backed securities“) guaranteed portfolios at Fannie and Freddie, and an additional $782 billion and $809 billion in company debt outstanding for the two GSEs, respectively. (Source) [Plus all mortgage backed securities now held by related Federal loan programs such as Ginnie Mae and FHA.]
Join me and say, “I do not condone this, I do not consent.”
Europe, Japan, China and the rest of world have their own problems and have drastically reduced lending money to the US Government. So, guess what? The “somebody” is going to be you and me–and $6.3 trillion works out to about $60,000 from every one of America’s 105 million households.
According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months. (Source)
Unless the US Government moves quickly to grab pensions or slow down withdrawals, the tidal wave of retiring baby boomers are going to take more and more funds out of their pensions. Money spent on living expenses is not available to politicians. This further limits the pool of easily plundered assets and US Government’s ability to “borrow” baby boomers’ money–as explained here:
Starting next year and increasing every year after that for more than a decade, the number of people who were buying stocks and bonds are increasingly going to be selling those stocks and bonds (the WSJ estimate $300 Billion a year, every year).
What kind of return on investment (ROI) can I really expect when the number of people only selling stocks and bonds increases by several million every single year? Some say that foreign investors will snatch up those stocks and bonds. But with almost all of the industrialized world (and China) aging at the same time, the context isn’t rational.
The simple fact of the matter is that the bull market in stocks and bonds of the 1982-2000 period isn’t going to be repeated in our lifetimes. Instead, a long-term bear market is much more likely. (Source)
Curious? Follow the links:
- Argentina seizes pension funds to pay debts. Who’s next? – Ambrose Evans-Pritchard
- 401k/IRA Screw Job Coming? – The Market Ticker
- U. S. wants workers to invest in annuities – BLOOMBERG
- The Government is (Still) Devising Schemes To Steal Your 401k – DeCoster
Once wise politicians are controlling your money you can relax–your money will be perfectly safe, backed by the full faith and trust of the US Government. No need to concern yourself with silly little details and complicated arithmetic. After all it’s just money, so why worry?