04-30-2018

Confiscation – Could It Happen Here?


The government is going to break a promise to somebody.

It’s just a matter of time.

Consider:

The U.S. Government has been running up debt like sailors on their first shore leave.

federal-reserve-bank-chart-us-federal-debt-1970-2015

Chart: U.S. Federal Reserve Bank of St. Louis.

            Federal Debt now stands at 100% of GDP.

            Social Security is insolvent – underwater by $32.1 trillion between now and 2090.

Economic growth alone won’t make the problem go away. As growth increases, so do wages – and Social Security liabilities will grow with them, unless we dismantle the Social Security system as we know it. As it stands, in less than 20 years, the Social Security trust fund – funded entirely with magical fairy dust and unicorn droppings – will be completely depleted, and we will have to pay those obligations either with real money, default on the promise, or we’ll have to inflate the economy, slash COLA, and pay back today’s dollars with dollars worth just 80 cents.

Which is, of course, the same as defaulting.

Meanwhile, banks awash in Chinese money – thanks to the continued Asian savings glut – have over-extended themselves, blowing up bubbles in subprime auto loans, credit card debt and our $1.4 trillion student loan bubble. Which, ultimately, the taxpayer is on the hook for. You can’t foreclose on and repossess a college diploma.  So when that bubble bursts, Uncle Sam will have to find that money somewhere else. That “somewhere else” is in the retirement accounts and pensions of affluent Americans.

When the droppings hit the fan, that “somewhere else” is you.

That is, those of you who have been diligent savers your whole life. The government, having painted itself into a fiscal corner, will have little choice: It will have to take a bite out of retirement accounts for the same reason famed gangster Willie Sutton robbed banks: “That’s where the money is.”

The confiscation can take many forms:

  • Currency devaluation
  • Tax on wealth
  • Tax on transfers
  • Inflation (which is slow-motion confiscation)
  • Currency replacement
  • “Bail-ins”
  • Bank seizures
  • Out-and-out seizures of retirement accounts
  • Seizures of bank accounts
  • Failure to pay out Security Investor Protection Corporation (SIPC) claims
  • Failure to pay out FDIC claims

We’ve seen it before – and very recently.

Within the last decade years, Canada, Cypress, New Zealand, the UK and the U.S. have all made regulatory preparations for possible future confiscations. And we saw it happen during the euro crises: Over-extended Cypress got caught swimming naked when the tide went out, and in early 2013, wound up zapping savings accounts of ordinary Cypriots:

Accounts under €100,000 got charged 6.6% right off the top.

These aren’t millionaires. These were ordinary families seeing their ‘safe money’ slashed. Accounts worth €100,000 and more took it on the chin even harder – to the tune of 9.9%. And that was just the beginning. When officials smelled trouble, they closed the banks outright, calling it a “bank holiday.”

In March 2013, Cypriot officials imposed a maximum €100 limit on all cash withdrawals. If you were already caught in the spider’s web, it was too late to get out. By the end of the month, the decree went out: all depositors who had saved over €100,000 had their balances slashed by 40 percent or 60 percent, depending on the bank.

Will the government do it here?

Not if they don’t have to.

But they will if they think they have to.

While the U.S. has a long history of stability, there have been times when the rules fly out the window, and the federal government has been willing to take radical measures:

  • Suspending habeas corpus during the Civil War
  • Interning Japanese-Americans during World War II
  • Taking the U.S. off the gold standard in the 70s.
  • Passing TARP in 2008 – and forcing banks to take the money – and the strings – whether they wanted it or not.
  • Suspending long-established bankruptcy law to ruin Detroit bondholders to pay off favored labor interests.
  • Cash for Clunkers – an act of economic insanity on a level not seen in a major power since Mao Tse Tung sent millions of Chinese peasants on a disastrous sparrow hunt.

A government that’s willing to do take all these radical measures is not going to break a sweat about means-testing your tax-free growth in Roth IRAs, or muscling 401(k) sponsors to channel money into government bonds. With fiscal problems what they are, it’s just a matter of time. This is why we’re advising extreme caution with any kind of paper asset that has to be held by any bank or Wall Street firm.

Gold and other precious metals have always been a store of value and a bulwark against government bank seizures and other forms of confiscation. We believe that every portfolio should include gold and precious metals as a hedge against massive seizures of paper assets, inflation and other government abuses.

Monetary Gold makes it easy to do so – and to work with some of the most experienced and knowledgeable gold and silver experts and advisors in the business. To add gold or other precious metals to your portfolio, call us today at 888-411-GOLD (4653).

 

Author: Monetary Gold