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Is Your IRA or 401K a Target of Government Appropriation?

Stock-Markets / Pensions & Retirement May 19, 2010 - 02:30 AM GMT

By: Lorimer_Wilson

Stock-Markets

Best Financial Markets Analysis ArticleBy: Chris Blasi - Will the laws and rules in place to protect individuals in their attempt to set something aside for retirement be safeguarded by the representatives elected to advocate for them in Washington? Will the principles and moral integrity of the political class keep them from appropriating the trillions of dollars held in 401k's and IRA's? I'm not so sure!


While the answer is most likely yes, when one realizes the magnitude of the financial predicament the U.S. might well find itself in shortly, it is indeed, conceivable that such an appropriation of private retirement accounts might prove to be too compelling for most politicians to resist.

With an economy and financial system on life support, trillions of dollars of new U.S. debt must be sold to keep up the daily operations of the welfare state. Unfortunately, the recent match-ups between desperate seller and willing buyer (transparent buyers) have been falling short. As a result, debt monetization appears to be expanding via the growing share of debt auction issuance being taken down by "Direct Bidders". Consequently, if this continues, a new source of massive funding must be found very soon.

Several years back theorizing on the possibility of a government takeover of private retirement monies was bandied about only by those labelled "conspiracy nuts" by the main stream financial media. Consequently, a pliant public has been successfully conditioned to scoff at such speculations. Indeed, to even suggest that the US Congress would lay claim to the retirement savings of the common man were the ravings of the "un-American", as per the attitude projected by the media shills to such musings.

Will We See an Introduction of Guaranteed Retirement Accounts?

In the annual report of The White House Task Force on the Middle Class, Joe Biden discussed the possible creation of so-called "Guaranteed Retirement Accounts" (GRAs) which would provide protection from "inflation and market risk" and potentially "guarantee a specified real return above the rate of inflation." Why such a magnanimous gesture?

Where would such a deeply indebted public find the extra funds to invest in such a sure fire offer?  Forgive the cynicism, but as an aside, should such a creation come to be, what are the odds the officially declared rate of inflation used to index such a vehicle would fall short of real CPI? And risk....is there not risk in being stuffed with IOU's that nobody seriously believes would ever be paid off in a currency retaining any semblance of purchasing power?

What is the Motive and Opportunity Behind GRAs?

Connecting the dots in the speculation of this pending scheme, and utilizing basic detective methodology, we find motive and opportunity jumping out at us. The motive would be to keep a bankrupt political and economic system going a little while longer. The opportunity would be that the trillions of other people's dollars would be 'protected' in the hands of Congress. Indeed, unless there is some other massive pool of untapped wealth yet to be discovered, and appropriated, the rumours as to the confiscation of individual retirement monies may have legs!

To successfully commit such a assault, it would serve the orchestrators best if a crisis ensued whereby the victims implored the perpetrators for their gracious protection. This point causes me to wonder if an event, or series of events, might transpire that drive disillusioned equity investors to the "safety" of government guaranteed paper.

A good foundation toward such a transition has been laid. Ample disdain for Wall Street exists, and it is easy to ramp up courtesy of this crew's whorish behaviour. One could surmise that with stocks still selling below their peak of a decade ago that it would not be particularly difficult, with the assistance of a clueless and complicit media, to cause the public to sour on the "stocks for the long haul" mantra. Maybe just one major sell off, coupled with some additional high profile exposure of the creepy doings of investment bankers, would set the stage for a major short-term shot in the arm for a beleaguered Treasury and Federal Reserve.

Is an Orchestrated Decline Coming in the Stock Market?

What if the funding shortfalls of the Treasury become so acute that the magnitude of monetization required threatens to collapse the financial system or send interest rates skyward? Could such a possibility lead certain elite powers to decide, under the cover of darkness naturally, that national security calls for an orchestrated take down of the stock market? Accepting this as a possibility depends on one's beliefs pertaining to several key criteria, namely:

1. The degree of financial duress one believes the U.S. is under

2. The impact continued monetization will have on financial system stability

3. The participation levels for future debt auctions

4. The machinations the powers that be are capable of.

Should one believe the deployment of GRAs are reasonably probable, then the remaining action item in this scenario would be to coax the public into personally assuming the debt the rest of the world was refusing to accept.  If the beliefs of many regarding activities conducted by The President's Working Group on Financial Markets (Plunge Protection Team) were sound, could not this same entity be utilized for such theoretical events as those described?  The possibility such an initiative might be needed to rescue the Treasury market does add an additional, and considerable, threat to the equity markets.

Lastly, for those who believe very unsavoury things transpire when it comes to power and money, then a substantial sell-off in the equity markets would present a convenient buying opportunity for well-funded international interests at the expense of millions of ordinary investors. Would this not be a natural extension to the play book used throughout the economic crisis, with a slight variant? Instead of socializing the mortgage and derivative losses of bankers upon taxpayers, in this scenario, mountains of unwanted debt would be dumped on a politically powerless citizenry in exchange for their ownership interests in viable revenue generating entities.

Where Should One Invest?

It is times like this that the "no counterparty risk" element of gold and silver really shines. As such, I strongly believe every investor should allocate a portion of their assets into physical gold and silver.  As to ETF's, I am not convinced they are a reasonable substitute for the time tested wealth protection provided by physical gold and silver.  And while mining stock or warrants have provided leveraged returns in past precious metals bull markets, they would most likely suffer a decline, at least temporarily, in any stock market plunge.

Chris Blasi is President of Neptune Global Holdings LLC (www.NeptuneGlobal.com) and a guest contributor to both www.FinancialArticleSummariesToday.com (F.A.S.T.) and www.MunKnee.com (Money, Monnee, Munknee!) and an economic analyst and financial writer. He is also a frequent contributor to this site and can be reached at editor@munknee.com."

© 2010 Copyright Lorimer Wilson- 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.

Lorimer Wilson Archive

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