Part one is available here.
Discussed in Part One:
- Richard Russell on “The Big Lie.”
“Central banks create fiat money, denigrate gold, and try to convince the people that the money they print is wealth. That’s the great lie behind fiat money.”
- Social Security and the pension plans of many cities, counties, states, and countries are increasingly insolvent as zero and negative interest rates destroy fixed income investment returns.
- Worse, pension benefits are paid in continually devaluing fiat currencies. If the currency becomes worthless, so are your pension benefits. Zimbabwe, Venezuela, Argentina, and many more come to mind. The dollar, euro, pound, and yen are better by comparison, but that only means their devaluation, so far, has been less drastic. A pack of cigarettes cost $0.25 in the US fifty years ago. Today that same pack is $5.00 to $12.00 depending on taxes. But price increases are fueled by devaluing currencies.
- Central bank inspired zero interest rates and negative interest rates destroy the returns on fixed income debt – notes and bonds – and thereby destroy the investment returns that pension plans require to pay out promised benefits.
SO WHAT?
- There is no free lunch. If bankers create currency via fractional reserve banking and central bankers create currency via QE and other nonsense, the currencies are devalued and we all pay via higher prices, decreased earnings, and devalued savings.
- If creating currency via fractional reserve banking actually created wealth, then Zimbabwe, Argentina, and Venezuela would be wealthy. Created currency and QE are supposedly good for governments, politicians, and the financial cartel, but ultimately they make the rest of us poorer – someone has to pay for deficit spending, the interest “drag” from debt, and banker salaries. Who pays? Savers, pension funds, your retirement funds, your retirement income, and insurance companies – because central banks have devalued their currencies and pushed the return on fixed income investments to near zero.
- When governments need more revenue they look for easily available pools of “wealth” to tax, confiscate, or absorb. There are many $ trillions in public pension assets, IRAs, private pension plans, 401(k) and similar plans that could become targets for insolvent governments. What if pension plans were required to invest in official sovereign debt that yielded nearly nothing or required guaranteed losses?
CONSIDER THE FOLLOWING:
“In effect, gambling on additional future asset inflation is the only game in town. Institutional money managers are buying bonds that yield less than zero not because they’re pleased to lose money, but because they anticipate rates dropping further.” [Think bubble and coming crash…]
From John Mauldin in “Promises, Promises, Pension Promises”
“Public pension plans are rarely fully funded. They assume that future investment returns will make up the difference. What if they don’t?”
“The largest part of the money that a pension manager assumes they will pay out in 20 years comes from the investment returns on current assets.”
“Bottom line … US public service pensions are toast.”
“Another year, another mess with California’s public employee pensions. The California Public Employees’ Retirement System (CalPERS) announced this week that the rate of return for its investments for the fiscal year ending on June 30 was less than one percent. It was 0.61 percent.”
“That’s a far cry from the 7.5% CalPERS assume it will get.”
“If you’re a retired teacher, firefighter, etc., you naturally want what you were promised. You probably won’t get it. That’s just simple reality. The taxpayers don’t have the money. Now is an excellent time to accept that fact and make alternate plans.”
Repeat: “You probably won’t get it [promised pension benefits].” … “Now is an excellent time to accept that fact and make alternate plans.”
From Zerohedge:
“MetLife just announced a massive earnings miss and job cuts which the CEO attributed to lower investment income due to, you guessed it, low interest rates.”
Low interest rates destroy the returns on fixed income “investments.” MetLife and CalPERS are two of MANY examples.
CONCLUSIONS:
- Your retirement income and assets are at risk. Subsequent to “The Big Lie” we have been force fed with fractional reserve banking, central banks, QE, NIRP, continually devaluing currencies, dramatically reduced fixed income returns, declining returns on pension assets, and the insolvency of an increasing number of pension plans.
- “US public service pensions are toast.” Social Security and other public pension plans are increasingly insolvent. Many private pension funds are in equally bad shape. The choices are default, reduced benefits, or more contributions from … employees, governments, taxpayers … all of us.
- “You probably won’t get it.” The retirement income and medical benefits that we have been promised are at risk. The longer central banks keep interest rates at near-zero levels, the more insolvent our public and private pension plans become. If CalPERS assumes 7.5% annual returns and actually earns 0.61% (year after year), do you think they will catch up by earning over 14% in following years, while interest rates stay near zero? The stock market is currently at all-time highs. What will a recession and/or stock market crash do to stock market returns and CalPERS assets? From Zerohedge: Sell Everything.
- You might have little control over your Social Security benefits and many other public and private pension plans. You do have control over your personal investments in gold and silver. Stack, Stack, Stack!
- Protect your retirement assets, understand the strain that zero interest rates place upon public and private pension systems, and realize that your retirement income from both public and private pensions is at risk. Also, consider the morality and fairness of “printing currencies” while governments continually borrow, but with no intention of repaying those debts … instead of responsibly managing expenses, assets, and financial systems.
- Internationalizing your personal pension funds and hard assets makes sense for some individuals who need to protect assets while living in an increasingly predatory environment due to governmental and central bank policies. You may need to diversify your wealth offshore – possibly in gold and silver – to preserve and protect your retirement income. One option is here.
- Hard asset insurance with no counter-party risk is ESSENTIAL to protect your retirement income and retirement assets. Stack silver and gold – with no debt based counter-party risk – to supplement other public and private pension plans.
- Jim Sinclair warns that we should “Get out of the system” or GOTS. Too soon is better than too late – after the door slams shut. Assets held outside the debt based fiat banking and brokerage systems sound increasingly safer than levitated stock and bond markets, false confidence, and promises from politicians and central bankers.
Gold and silver will be increasingly essential for preservation of our future retirement assets and income ….
Gary Christenson
The Deviant Investor
