Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

American Retirement Funds at Serious Risk of Being Seized

Personal_Finance / Pensions & Retirement Dec 07, 2010 - 09:44 AM GMT

By: Jeb_Handwerger

Personal_Finance

Best Financial Markets Analysis ArticleThe news of Hungary effectively seizing private pension fund assets to pay for the debt obligations of the state last week should come as yet another reminder of the urgent need to get tax-sheltered retirement savings away from the clutches of the state before it's too late. Hungary is just the latest country to decide that it's citizens retirement savings are the property of the state.


The last major country to use similar tactics was Argentina who confiscated about $3.2 billion of pension savings in 2001 before the country stopped servicing its debt and then nationalized the $24 billion industry two years ago to compensate for falling tax revenue after a 2005 debt restructuring.

On November 24th the Hungarian government gave its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension. Economy Minister Gyorgy Matolcsy announced the policy, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

Americans who think "this can't happen here" may want to think again.

In September of this year the US Treasury investigated the possibility of requiring retirement funds to hold a percentage of government securities in their investment portfolio. That, in effect, would be a nationalization of 401ks and IRAs.

And don't think for a second that the US is in better financial shape than Hungary.

The moves in Hungary were prompted by large annual budget deficits and a large debt to GDP ratio. So, let's compare Hungary's deficit and debt to that of the US.

First, a warning: Accept the US governments own financial statistics at your own risk. Federal debt, unemployment and CPI, just to name a few, bear no resemblance to reality.

The federal debt, as proclaimed by the US government is stated to be $13.8 trillion but just subjecting federal government numbers to Generally Accepted Accounting Principles (GAAP) shows a true debt, if accounted for properly, of $71 trillion as of 2009.

In 2009 the US GDP was $14.26 trillion. Therefore, the debt to GDP ratio of the US is 497.89%.

Hungary's 2009 GDP was $128.96 billion and their national debt was $93.36 billion for a debt to GDP ratio of 72.4%.

That doesn't look so good for the US. How about the budget deficit as a percentage of GDP?

Hungary posted a budget deficit of 4% in 2009. Meanwhile, when accounted by GAAP standards, as calculated by Shadowstats.com, the total deficit in 2009 was $4.3 trillion. Compared to a GDP of $14.26 trillion the 2009 budget deficit as a percentage of GDP was 30.15%.

Considering that Hungary was downgraded today by Moody's to Baa1, close to a "junk" rating, and the US' debt to GDP ratio is five times worse than Hungary's and the US budget deficit as a percentage of GDP is more than 7 times worse, those with retirement savings in the US should quite easily see the writing on the wall.

Gold made an all-time high of $1423.40 today, also clearly showing the writing is on the wall for the entire US dollar based financial system.

Keeping retirement funds inside of tax-sheltered accounts, which the US government will soon look to as the next source of funds to try to pay off its mountain of debt and keeping retirement funds in US dollar based "assets" is putting your retirement and future at great risk.

Grab your free 30-day trial of my Members-Only Premium Stock Analysis Service NOW at:
http://goldstocktrades.com/premium-service-trial

By Jeb Handwerger

http://goldstocktrades.com

© 2010 Copyright Jeb Handwerger- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Alex Kovacs
09 Dec 10, 15:35
RE: American retirement

The Hungarian government is not "nationalizing" the private pension plans in the sense that term is usually understood.

The current administration is reversing a law implemented by a previous rival admistration. That old law allowed employers to make contributions into private plans rather than to the state pension system (US equivelant of Social Security payments.) The reversal to the old law would simply give workers the choice to opt out of the state pension system entirely by staying with their private plans, but they would not lose any benefits from past contributions. The monies collected from the private plans, thus far, would be used to plug the deficit in the states pension plan, not for other sxpenses.

Unlike in the US, 401ks and IRA's were plans intended to be in addition to Social Secirity, the old Hunagrian law diverted funds away from the state pension system, thus leaving it with a deficit. Had some of the state pension contributions not been diverted into private plans in the first place (via the old law) there would be no deficit in the state pension sysytem now. In Hungary the money in the state pension system cannot be used for anything other than pension payments! Further, no past contributions that effect future worker's benefits made to the state system will be lost if one chooses to stay with the private plan.

The choice belongs to the individual worker to either opt out of the state system entirely (and give up any benefits from FUTURE contributions only) by staying in the private plan or to have his private plan contributions revert back to the state system.

It is true that states like Argentina often raid private coffers. However, It is not likely that it will happen in the US. 401ks might be at risk for some kind of capital controls. IRAs most likely not. Roth IRAs, no chance, as they have already had the taxes paid on them.

Thanks for the article.

Alex Kovacs


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules