Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
U.S. Escalation in Ukraine Is Illegitimate and Will Make Matters Worse - 1st Feb 15
The German 10 Year Bund Effectively a Call Option at 30 Basis Points - 1st Feb 15
Australian Stock Market Index ASX200 Technical Analysis  - 1st Feb 15
Stock Market Major 4 or Primary IV Wave - 31st Jan 15
Gold And Silver Price Probability for A Lower Low Has Increased - 31st Jan 15
U.S. Bond Market Has Reached Tulip Bubble Proportions - 31st Jan 15
The 3 Big Reasons My Apple Stock Price Prediction Is Still Coming True - 31st Jan 15
199 Days of Hell - Unintended consequences: Oil and the Worst Battle in History - 31st Jan 15
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

Obama Turns America’s Retirement Dreams into Nightmares

Politics / Pensions & Retirement Apr 29, 2013 - 12:53 PM GMT

By: Money_Morning

Politics

Keith Fitz-Gerald writes: If you think the U.S. government will not - or cannot - seize your money the way the government in Cyprus is doing, check out page 18 of the President's Proposed Fiscal Year 2014 Budget of the U.S. Government.

That's exactly what he intends to do.

Not years from now. Not decades from now.


Today.

This is organized crime on an incomprehensible scale and, if it passes, it will be legal, too.

Robbing Your Nest Egg
Anxious to raise more than $9 billion dollars over the next 10 years, President Obama has proposed a $3.4 million limit on individual retirement accounts (IRAs), 401ks and other tax-advantaged accounts as part of his 2014 budget.

In theory, this is going to generate a lot of cash by capping the amount of money that could be contributed tax free to tax-advantaged accounts like 401ks and IRAs.

In reality, it's going to backfire spectacularly by creating a huge disincentive to save, while also penalizing those who desperately need to build wealth as a defense against their spendthrift government.

Proponents of this plan say the proposal only affects an estimated 100,000 households - give or take - and a mere 0.3% of the 20 million IRAs in this country, and an infinitesimal 0.0041% of 401k plans according to Employee Benefit Research Institute data.

I think they're dead wrong. When it backfires, it will steamroll the entrepreneurial backbone of this country - small businesses and their employees - much the same way the Patient Protection and Affordable Care Act (PPACA), better known as "Obamacare," has.

Here's why:

■The Government is the poster child for the Law of Unintended Consequences. Since when has any government plan ever functioned as intended? This initiative is going to creep backwards into Middle America faster than you can spell barbecue. It's almost axiomatic that once a tax or fee is targeted on a small population of individuals, it slowly and inexorably expands. It never shrinks or disappears. Ever.
■Money is mobile. It will leave the country just as it leaves any punitive jurisdiction and go where it's treated best. Ask Germany why its millionaires are shifting money to Singapore. Why has there been capital flight out of France in the face of higher taxes? Why is Italian money headed for Luxembourg? Closer to home, why is California hemorrhaging? Why do newly minted IPO millionaires become Nevada citizens? You get the point...history is filled with examples of how money moves when it is targeted.
■Mission Creep. When it leaves, the government will face a revenue shortfall so the plan will be expanded and the cap balance will be lowered to sweep in still more Americans at far lower balances.

This is a joke...$9 billion over 10 years?! The government is going to stick it to people to raise $900 million a year - an amount of money that's completely inconsequential in the scheme of things.

It doesn't matter which side of the aisle you sit on, nor does it matter how much money you have or haven't saved. This is a direct attack on our financial liberties and our assets.

It's immoral and it's no different than what happened in Cyprus recently when that nation levied taxes on depositors in an effort to shore up decades of bad government decision making and profligate spending.

Another Financial Shell Game with Political Payoffs
I've often joked that the reason we have such terrible economic problems at the moment is because nobody in Washington actually understands how real money works, let alone what it's actually worth.

Now I'm not joking.

But that's not even the worst part of it - guess who's got their fingers right in the middle of the proverbial pie? Yup... Wall Street and big business. If this cockamamie idea actually passes, the cap will "encourage" the wealthy to put more money into insurance products, including annuities and life insurance - both of which generate tens of billions in management fees a year... on your money.

This is like being "voluntold" to do something.

We're going to have another JPMorgan food stamp situation on our hands, only this one will be a lot bigger over time.

I bring this up not to dump on JPMorgan, but to make a point about the incestuous relationship between big business and government programs.

Most people are outraged to learn that the financial behemoth (which received a $94.7 billion taxpayer funded bailout in 2008) receives a fee of between $0.31 and $2.30 for each food stamp recipient in 23 states. They're positively gob-fobbed when they understand that since 2004 the company has collected more than $560 million in fees for processing government benefits.

It's not by coincidence that JPMorgan's political donations to members of the House and Senate Agricultural Committees have gone from only $82,000 in 2002 to more than $325,000 in 2010. Kinda takes corporate "welfare" to an entirely new level.

This time around the players aren't the big banks but their financial services "cousins" like MetLife Inc., Prudential Financial Inc., Allianz and Lincoln National Corp, all of whom are heavy hitters in the insurance and annuities markets.

Not surprisingly, many of those same companies are also involved in providing retirement plans which, of course, also require tremendous oversight and generate huge fees...soon to be ginormous fees, if Obama's scheme passes.

I realize that all of this is hard to imagine and even harder to get behind, particularly if you are not one of the 100,000 being targeted at the moment.

So let me tell you why you should care no matter how much wealth you have today or want to have in the future.

Here's the real game and what I believe is ultimately the end game.

Robbing Peter to Pay...Peter
Government spending is so bad and so out of control that "we" already owe ourselves more than $222 trillion dollars. That's the true "fiscal gap" between America's assets and its liabilities, according to Boston University Professor of Economics Lawrence Kotlikoff, who reviewed CBO numbers to arrive at such a stunning figure.

You'd think the government would simply stop spending; that's what any responsible individual or company does when the amount of money they owe exceeds what they make.

But Congress can't...they've socialized risk. The only way to keep the Ponzi scheme going is to keep handing out freebies. "They" just hope the bluff is called on the next guy's watch.

And that brings me back to President Obama's proposal.

The government has to sell debt to fund its operations. Right now it relies on an international network of buyers who are growing weary of the United States' fiscal policies and leery of its ability to pay back those obligations. What better way to ensure you have buyers than to create a captive monetary pool?

President Obama's plan, or at least some version of it, will pass in the next few years. Then, when it doesn't work, the government will step in to save the day by allowing exemptions and special tax-advantaged contributions under the guise of offering better financial security if - ta da- they are in the form of Treasury purchases. Chances are they'll play the "patriotic" card too while they're at it.

This would not only maintain the cap the president seeks but also ensure that even higher levels of debt are effectively monetized without resistance.

You'd think I'm describing something from George Orwell's "1984" but I'm not.

Japan has done this for years. Few people understand that one of the primary reasons that nation has not totally collapsed as a result of their financial crisis is that an estimated 95% of workers and retirees own Japanese government bonds. Therefore the combined public, private and corporate debt that's nearly 500% of GDP is almost irrelevant.

Bernanke and the president could only dream of having that kind of spending power.

Then again, perhaps they already do...

I'll be monitoring this situation closely in the weeks ahead - as you might imagine, everybody literally has something to lose.

But you know what?

Savvy investors have something to gain, too, which is why I'll be back in touch with information on where to stash your cash and what structures you can use to protect your assets. I'll also have more on specific investments that are going to benefit from this.

Somebody, as the old saying goes, is gonna make a pile of money.

It might as well be us.

Source :http://moneymorning.com/2013/04/29/obama-turns-americas-retirement-dreams-into-nightmares/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

Free Report - Financial Markets 2014