|
The Federal Government is running massive budget
deficits which is creating a massive supply of Treasuries. But there is
no demand and so the Federal Reserve is monetizing the debt. But these
colored coupons merely amount to certificates of confiscation.
Where will Congress find the capital to buy Treasuries? Most
likely, your retirement account and screwing up your retirement calculator.
MASSIVE BUDGET DEFICITS
The Obama administration is on track to need
approximately $2T of new debt sales or about 300% of 2008 debt to fund their
aggressive spending. But an disproptionately large amount of purchases
come from the ‘Household Sector’. Eric Sprott of Sprott
Asset Management enlightens us:
We must admit that we were surprised to discover
that “Households” had bought so many Treasuries in 2009.
They bought 35
times more government debt than they did in 2008. …
Amazingly, we discovered that the Household Sector is actually just a
catch-all category. It represents the buyers left over who can’t
be slotted into the other group headings. …
Our concern now is that this is all starting to
resemble one giant Ponzi scheme. We all know that the Fed has been
active in the market for T-bills. Under the auspices of Quantitative
Easing, they bought almost 50% of new Treasury issues in Q2 and almost 30% in
Q3. It serves to remember that the whole point of selling new US
Treasury bonds is to attract outside capital to finance deficits or to pay
off existing debts that are maturing. We are now in a situation, however, where the Fed is
printing dollars to buy Treasuries as a means of faking the Treasury’s
ability to attract outside capital. …
As we have seen so illustriously over the past year,
all Ponzie schemes eventually fail under their own weight. The US debt
scheme is no different.
Ponzi schemes fail when capital seeks safer and more
liquid assets by burrowing down the liquidity pyramid. This is similar
to the process that happens in a credit contraction. As I wrote
earlier, the Federal Reserve will fail with quantitative easing.
Buy "The Great Credit Contraction" eBook
CERTIFICATES OF CONFISCATION
Treasury instruments have been, are and most likely
always will be certificates of confiscation. The saving retirement
calculators are almost guaranteed to fail because of this uncertainty.
Here is a visual explanation so you can understand the math.
So likewise Treasury Inflation Protected Securities
(TIPS) are just an invitation to be stolen from. This makes your simple
retirement calculator even less useful.
RETIREMENT ACCOUNTS
Congress looted the Social Security Ponzi scam many
years ago. The social security retirement calculator is completely
broken and predictably riddled with fraud.
Where is the next largest pool of capital for these
vampire squids? Yes, your 401k (now a 104k), SEP-IRA, Roth IRA, etc.
How will these tax eating parasites slurp that value?
The Telegraph reported,
The Argentine state is taking control of the country’s
privately-managed pension funds in a drastic move to raise cash. … So,
over $29bn of Argentine civic savings are to be used as a funding kitty for
the populist antics of President Cristina Kirchner.
On 8 January 2010 Kirchner has attempted to fire the
chairman of the central bank because he has refused to use about $6.6B of the
funds to pay international debt that falls due in 2010 but a federal judge
has ruled Mr. Redrado
should be reinstated at the
independent central bank. What a mess! The President wants to
fire the banker because he will not hand over everyone’s pension money
to overseas bankers.
Businessweek has reported,
Seven in 10 U.S. households object to the idea of
the government requiring retirees to convert part of their savings into
annuities guaranteeing a steady payment for life, according to an
institute-funded report today. … The institute’s member companies
manage $11.6
trillion of assets in mutual funds, including
employer-sponsored 401(k) accounts.
While the state sponsored retirement accounts may
appear alluring, particularly when your employer matches your contribution,
you may get more than you bargained for. Like this English man if you contribute to your state sponsored
retirement accounts then you may find unwittingly find yourself in an
uncomfortable situation and have no one to blame but yourself. The tax
eating looters and moochers will attempt to force you to become infected with
their lecherous colored coupons.
CONCLUSION
The nation does not need Washington
DC and individuals do not need Washington DC usurping their retirement
accounts and forcing the purchase of Treasuries. Doing so is simply
attempting to sustain the unsustainable. But that is most likely what
will happen.
Now is the time to begin reducing
your exposure to this political risk and safely sheath your capital in safer
assets outside of these retirement accounts. For a reliable and free
retirement calculator use the Numeraire
Spreadsheet and realize that for hundreds of years a one ounce
silver coin will buy you approximately one steak dinner. For the ultimate no confidence vote just buy gold, silver or
platinum and learn some good hawala techniques like the Argentines.
DISCLOSURES: Long physical gold, silver and platinum with no position the
problematic SLV or GLD ETFs.
Trace Mayer
RuntoGold.com
Trace Mayer, J.D., holds a degree in Accounting from Brigham Young
University, a law degree from California Western School of Law and studies
the Austrian school of economics. He works as an entrepreneur, investor,
journalist and monetary scientist. He is a strong advocate of the freedom of
speech, a member of the Society of Professional Journalists and the San Diego
County Bar Association. He has appeared on ABC, NBC, BNN, many radio shows
and presented at many investment conferences throughout the world.
|
