As the United States moves into a new decade of military overreach abroad and national bankruptcy at home, Washington is in a desperate search for more revenue and a solution to the future financing of the trillions in national debt obligations currently held by foreign central banks and investors. Economists, politicians and smart investors know the dollar's days as the world reserve currency are numbered as is our ability to finance the national debt.
Although the historical government solution to unsustainable government debt loads has always been the destruction of the debts by currency depreciation and eventual hyperinflation, there is always an intermediate step used to buy more time for the politicians in power. This action, usually sidestepped and downplayed by the establishment historians paid to hide the real facts of history is wealth confiscation. Napoleon had it right when he stated, "History is a state of lies agreed upon."
The largest source of liquid private wealth remaining in the United States are the $15 trillion in private retirement funds and the ultimate ownership, control and future of these funds have already been compromised and exchanged for the favorable tax treatment of private retirement plans. Congress writes the laws, so they can tax, penalize, hold your funds hostage and although they'd never use the word, "confiscate" your assets at their discretion.
The retirement trap I'm writing about is only a proposal at the present time and since it may well begin in the latter years of the Obama Administration assuming the Democrats can somehow maintain their majorities in Congress, I'm calling it the "Obama Retirement Trap". But make no mistake, the government need for current revenue and their frenzied search for a short-term fix to fund a backstop of liquidity to buy future government debt obligations when no credible investors will buy them is an unspoken quest of both political parties. The establishments of both political parties will do anything to stay in power and this will include raiding and pillaging your retirement funds.
Washington Proposals For A Mandatory Guaranteed Retirement Annuity
The government is getting ready to use that power and in a remarkably cunning way.
The prototype for their plan was devised in 1991 by Alicia H. Munnell, then Director of Research for the Federal Reserve Bank of Boston. She presented the idea in a paper entitled “Current Taxation of Qualified Pension Plans: Has the Time Come?” Later she was promoted to Assistant Treasury Secretary, and along with Robert Reich, Henry Cisneros and Hillary Clinton, she began to plot a raid on retirement funds. One element of the scheme was to create a Mandatory Pension System and fund it with a one-time 15% tax on retirement assets and a recurring 15% tax on retirement plan income.
I warned about this in my 1994 book, “Escape the Pension Trap”. Fortunately, the GOP election victory that same year derailed the Mandatory Pension System.
Guess what? It’s back... and nicely repackaged. It’s back because, due to slumping tax collection, Washington is on a desperate search for a new revenue stream. And this time they don’t want to just tax your retirement assets, they’re out to take them.
Teresa Ghilarducci: The New Architect of the Retirement Plan Wealth Attack
The latest leftist plan first appeared in 2007 at the Economic Policy Institute: Agenda for Shared Prosperity. In 2008, she became the new Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. In her book, “When I’m 64: The Plot Against Pensions and the Plan To Save Them” she hypes her retirement solution for millions who do not have adequate retirement savings and her solution is to confiscate most of the retirement assets of successful Americans.
Here’s Her Plan.
Each year, the government will put $600 into a Guaranteed Retirement Account for you and every other working person in America. If $600 amounts to more than 5% of your annual compensation (if you earn more than $12,000) you will be required to contribute 5% of your total annual compensation to the GRA. The Feds will promise to pay a 3% “inflation adjusted return” on each GRA, based on the government’s Consumer Price Index. When you retire, you receive a portion of the account each month. Then -- get this - when you die, your heirs receive only 50% of what’s in your GRA. The rest goes to Uncle Sam. Remember, this is the good news!
Following the introduction of Guaranteed Retirement Accounts, the next step will be to cap the tax deduction for annual contributions to existing private retirement plans at 5,000. (Many Americans will support this, given the hostility to the well-publicized Wall Street mega-bonuses and retirement plans.) Next will be a tax on every retirement plan’s income, to provide an immediate flow of revenue to the Feds. Finally, there would be a prohibition on buying any non-U.S. investment for any retirement plan.
What Would Spark this Nationalization?
A plan this radical can’t just be slipped through Congress. It can only ride into law on a first-class national crisis. Have you noticed that somehow the politicians are always able to find one when they need one.
- Loss of Triple-A Status for U.S. Treasury Bonds
The loss of triple-A status for Treasury bonds is the most likely trigger. And according to Steven Hess, Moody’s lead analyst for the U.S., it’s not that far-fetched. He states, “The AAA rating of the U.S. is not guaranteed. So if they don’t get the deficit down in the next 3 to 4 years to a sustainable level, then the rating will be in jeopardy.”
- Terrorist Attack or Military Disaster
A terrorist attack or a military disaster like the collapse of Pakistan or an Israel/Iran conflict and disruption of oil shipments could close American markets just as we saw in 2001. That would create a financial crisis over night.
- Another Economic Meltdown
After years of deficits, the greatest hazard to our economy is a run on the dollar and on Treasury securities by foreign investors. Although America’s foreign creditors don’t want to start a run on Treasury debt – they prefer a slow, orderly retreat -- no one intends to be the last to head for the exit. Political or economic pressure in Asia could force Japan or China to take immediate action and dump our debt and knock the prices down to fire-sale levels.
What happens if China decides to cut its losses on U.S. Treasuries and issues a $100 billion sell order? That’s only 10% of their holdings, but it could set off panic selling of dollar-denominated bonds and crush the U.S. stock market like an egg shell. Mortgage rates would spike, which would suck the housing market into another air pocket. The President would probably sign an Executive Order closing the markets until order could be restored.
Any of those events would take place in an atmosphere of deep public worry and fear. That’s when Washington would come to your rescue and guarantee to restore your retirement funds back to a “pre-crash” level. How nice, right? However, in exchange you would need to “voluntarily” move your retirement assets into your new Guaranteed Retirement Account.
For those who don’t sign up for a GRA because they’re not fooled by the carrot, there would be sticks to consider.
1. Additional withdrawal penalties and taxes on their retirement plan.
2. Limitations on permissible investments -- nothing that isn’t “in the public interest.”
3. Mandatory minimum holdings for targeted investments, such as Treasury obligations.
Remember, these retirement proposals are just in the discussion stage but progressives are promoting this confiscation agenda to the Obama Administration as a new source of revenue for a bankrupt federal government desperate for additional sources of revenue.
When the next economic or stock market crisis hits, your retirement assets will be at risk from this type confiscation effort regardless of whether the Democrats or Republicans are in control.
The Confiscation Event
At some time during the next decade, a global run on treasury debt and the dollar will also likely take the American stock market down past lows not seen since the financial meltdown crisis in 2008 and 2009. The 50% to 75% stock market pullback during the actual bankruptcy of the Washington debt and paper dollar will send shock waves through retirees and current plan participants as their private retirement plan balances plummet.
At this time, Washington will come to the rescue and guarantee all private retirement plan market values back to pre-crisis levels. The gullible American public will overwhelmingly support this effort by switching their dwindling funds into the Guaranteed Retirement Annuity managed by the government. For the first few years, Washington will probably label those few of us who warn that that Americans have lost their retirement benefits as extremists, Ron Paul paranoids and Tea Party advocates.
Then it will become crystal clear to all Americans that their retirement benefits have been given away for a promise by an evil group of plunderers who have never in their history kept a promise, a guarantee or their word on anything. The greatest theft of wealth in the history of the world will have taken place and only those few who heeded an early warning will still have their retirement benefits and security.
Ron Holland has written three books, two on the Washington threat to the private retirement system, plus over 100 reports and articles and he speaks and serves as a moderator at conferences on a wide variety of financial, political and freedom-related topics. He is a strong proponent of defending American liberties at home and the importance for global investment diversification outside the dollar and U.S. financial markets. Ron Holland works in Zurich and is a co-editor of the Swiss Mountain Vision Newsletter.