Tuesday, April 24, 2012

Government Creep

While the government struggles to save one crumbling enterprise at the expense of the crumbling of another, it accelerates the process of juggling debt, switching losses, piling loans on loans, mortgaging the future and the future's future. As things grow worse, the government protects itself not by contracting this process, but by expanding it.  - Ayn Rand, 1973
As an example of the mis-direction and "spin" put on economic news, I want to illustrate how today's release of the Case Shiller 20 metro city home price index for February.  The index showed a slight gain (.15% adjusted) across the metro areas used in the index, but it missed the degree of gain that Wall Street was expecting.  However, prices declined in 15 of the 20 cities.  Moreover, if you use the unadjusted numbers in the report - but not reported in the media headlines, home prices actually declined again by .8%, for the 6th month in a row.  Furthermore, the C/S price index hit its lowest level in 10 years. 

When the news report hit the tape, CNBC immediately posted this headline "home prices post surprise monthly gain." Clearly CNBC was not at all interested in presenting the facts or the truth. Here's the news link from the Washing Post - keep in mind that this is what a lot of the politicians, lobbyists etc will see:  LINK  You can draw your own conclusions on what motivates CNBC or the WashPo, but in my view the Government machine is teeing up the next round of money printing, Government stimulus deficit spending - both also known as "dollar devaluation."

I was going to write about this yesterday, but thought that the Spellman piece was a lot more interesting, since I've been warning anyone who would listen for about 10 years that eventually the Government was going to go after retirement fund assets eventually as means of financing Government deficits.

Many of you have already seen this, but there was a report in the NY Post over the weekend that Congress is starting to look at ways to shoehorn money out of your IRA/401 account.  You can read the specifics here:  LINK 

This comes as no surprise to me and this is going to be just the start.  I said back in late 2002 that "the elitists who control the system would hold things together until they had swept every last crumb of middle class wealth off the table and into their pockets.  This includes eventually de facto confiscating retirement funds in order to fund Government deficit spending."

This is a concept that is so anathema to the thinking and expectations of the general population, that 99% of the people in this country would never believe that Government will pillage their retirement account...that is, until it actually happens. 

Most are not aware of this, but during the election/transition period back in late 2008, there was a symposium held in Congress in which academics presented alternative methods of structuring the retirement system in this country.  The most plausible scenario, and one which has well-received by the audience of Congressmen, was a plan in which the Government would "annuitize" all retirement assets by exchanging your current retirement plan for one in which, in exchange, you would receive a guaranteed annuity benefit that would be collateralized by Treasury bonds.  And of course, Wall Street would be put in charge of managing the whole process.

Think about what this plan does.  It scoots around any eminent domain issues - not that Obama gives a rat's ass about Rule of Law and the Constitution, but it will enable the Government to issue trillions more in Treasury paper that will be exchanged for the assets in your retirement fund.

Please make no mistake about it, whatever legislation is born from proceedings described in the NY Post report, it is merely embryonic.  As we've seen with everything else that is Big Government, it starts small and the slow creep turns into an avalanche of Government administration and control.  If you think that you have some kind of divine right to keep and maintain your own retirement account, you are going to find out in time that you do not.

8 comments:

  1. michael schumacherTuesday, 24 April, 2012

    although I don't have the specifics...I recall that the swap of retirement $ for treasury notes was formalized in the re-issue of the patriot act?

    I may be having a "moment" with my remembrance of this but I do recall something to this was being discussed quite heavily on Calculated Risk around the same 2008 time-frame.

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    1. Calculated Risk probably thinks IRA swap/confiscation will never happen. They missed the housing crash and they've been optimitice about the data at every turn down. I haven't patronized that website in at least 2 years now.

      I got into comment war with one of the editors - before I had this blog - because their interprestation of economic data was not only overly optimistic/naive - it was just wrong lol.

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    2. michael schumacherWednesday, 25 April, 2012

      same thing with me at CR and Ritholz.... Got banned from his site for supposedly calling him a name. When I asked for proof of the offending post I was banned. He (Ritholz) is just another hack, never taking a side and always playing it safe. I meant to say that the discussion was in the comment section and not a post. One other thing...the woman who was there (who sadly passed away of cancer) was my source of ire as she felt it fine to use racial stereotypes with mexicans and blacks but can't say anything bad about anyone of jewish decent...ya know cause that's racist.... ;-)

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    3. LOL. I agree on Ritholz. His commentary and analysis is elementary school. I started checking his site everyday though because sometimes he links news or data that I might otherwise miss.

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  2. Dale, Good post mate. There was indeed some kind of forum during the transition about retirement accounts. The person testifying in fact was Alicia Munnell, a prof at Boston College. Also, don't forget, Argentina nationalized private pensions in 2008. Yes, it was Argentina, but many western countries seem to be heading in the Argentine direction.

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    1. Dale? Typo? LOL. Thanks for the feedback and thanks for looking up the name of the bird who made that presentation. Argentina nationalized their pensions and one of the northern european countries has started to move in on theirs - I can remember if it's Holland or Denmark.

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  3. When I first heard about that ~2009 meeting where they talked about annuitizing IRAs is when I started cashing them out, taking the hit, and buying as much PMs as I could. So far, I'm way early, but I have a really bad feeling that something like this will be sneaked into some random bill. The next day everyone will be wondering why their HR depts or brokerage companies are asking you to choose the rollover option you'd prefer - TSYs or TSYs, you're choice.

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    1. Even if the Govt doesn't ultimately "hypothecate" retirement assets - and there's no doubt they will - anyone who keeps their IRA with a brokerage firm custodian risks being MF Global'd. The MF GLobal maneuver isn't even a first. JP Morgan did this on a larger scale with Lehman. They're going to do the same damn thing with retirement accounts. I'd bet my dog on it. My dog is my the equivalent of a first born and only son for me....

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