Now that it's time to collect, retiring boomers better watch their assets.

For a long time I have been writing that I think allowing someone else to have physical control of your financial assets is just a very bad idea.  My view has been that the US and the world have been building an unsustainable, scam ridden economy based on fiat currency and fractional reserve banking which has resulted in unpayable piles of debt in America and abroad.  Dishonest money leads to dishonest dealings at all levels and every country in the world is now in a race to debase their currencies.  I have conjectured many times that when it all comes tumbling down as it eventually must, possession will again become 9/10ths of the law.  Well, maybe not 9/10ths of the law but certainly 9/10ths of reality. 

If you loan your assets to a bank, for example (something that most people euphemistically call "deposits" or "savings" when in fact it is a loan to the bank so that they can invest it on your behalf), and the bank goes under then you could lose everything.  Of course there is the FDIC to bail you out but the FDIC was insolvent as of August 2009 (did you know that?).  Oh, but the government will just bail the FDIC out, right?  Well, it has been considering that and probably even doing it in some sort of sneaky, off balance sheet way given that banks continue to fail each Friday like clockwork, and this is happening in a recovering economy.  But this whole concept that government is some sort of bottomless pit of money that can never be exhausted is just crazy.  If people stop loaning money to government cheaply and if government cannot tax people more without creating riots and if further money printing is likely to result in hyperinflation, then how is the government going to bail the FDIC out so that the FDIC can bail you out?  What cannot happen will not happen.  Government is not big enough to bail everyone out and so that will not happen.  The first to receive bailouts will get bailed out but after some point the bailouts will stop (just like Nixon had to stop paying gold at the gold window at some point) and everyone after that point will get stiffed.

As long as the shocks remain fairly small, the Ponzi system will continue to appear to work but if the problems continue to grow then past promises might not be worth anything.  When a sitting US Governor is quoted in the national media as saying that past pension promises for public union employees are actually "fairy tale promises" then you simply cannot write that off as rhetoric and a healthy mistrust of government at all levels is highly advised.  Such moves prove that government will say anything it wants in the short term in order to buy votes but if the promises cannot be met then all you can expect is a slap on the back and a government employee telling you "too bad so sad".  If you don't like it then there is a nice warm cot in a FEMA detention camp ready and waiting for you.  We will be told "we all have to chip in to the recovery of America" and "everyone has to take some pain" but the con men at the top won't have to give anything.  Only the sheeplized masses will be doing the giving.

It is because of this line of reasoning that I have been telling people for a long time that any government controlled retirement accounts are nothing but honey traps.  You get sucked in with what appears to be a sweet deal but you find out too late that you were the patsy in the deal.  This latest article from the LA Times is more evidence that I am right.  When government is going to steal from you the first thing it needs to do is to demonize you publicly.  It doesn't matter that all you were doing was following government's own agreed upon rules.  Government is not about doing what comes honestly but rather about what it can get away with.  Government has to show the people who aren't getting the fat deals just how good the people who did take advantage of the programs are making out on their dime.  It has to divide the people and to set them bickering amongst themselves lest the people wake up and figure out that Dem=GOP=scumbag con men.  It has to turn the rule of law on its ear so government hacks can just make up the rules as they go along.  None of this is possible without some degree of social disorder.  Government believes that crises of all types are nothing but opportunities to grab further undue control over the people.

As the LA Times article states, government created the Roth IRA in 1997.  The Roth basically trades off a lot of future tax revenue for a little more tax revenue today.  From the perspective of the individual, it is a mistake by government, a permanent tax shelter, something to take advantage of so you can make out like a bandit.  It was all good and fine to contribute to the Roth since 1997 but now that people are actually on the verge of collecting the advertised benefits, here comes the demonization.  If government can sufficiently demonize Roth participants then it can rewrite the whole deal retroactively in favor of the government just as Chris Christie is doing with public service union contracts and obligations.  Someone has to pay for the massive money scam we allowed ourselves to be drawn into and the only money available to do this is the retirement savings, pensions, etc. of boomers.  We have to expect that this will be heavily targeted for theft by government con men over the next decade.  They have control of those tax deferred accounts, not the people.  Possession will be 9/10ths of the law again because how else can government steal its way out of this mess?

And so goes the honey trap.  For public servants who were promised ridiculously fat retirement benefits it was all well and good until they started trying to collect and, now that they are, the whole program is exposed as a "fairy tale promise".  For Roth investors, their program is a "fiscal Frankenstein" which is robbing the government of much needed tax revenue.  I sense a pattern forming.  The big, dripping fat programs are being demonized and then dismantled first but at the end of the day all the retirement savings programs will come under attack because government never had any intention of paying up.

That's right, I said it.  Anyone who can do math could see that not everyone could get paid what they are owed under these programs (IRAs and 401ks in the stock market, pensions, annuities, any form of deferred retirement compensation).  Government has plenty of bean counters.  They knew that they would end up defaulting on the American people's retirement programs just as the US government defaulted on gold convertibility of the dollar in 1971.  At this point government simply has too much debt and too little income and this is happening at a time of aging demographics as a credit bust plays out.  In other words, it's a perfect storm which will pave the way for legalized government theft of retirement funds through various mechanisms including default and massive inflation (which is actually just another form of default).

If you think about it for a second, government is struggling to remain in operation today and this is before the big wave of boomer retirement has even begun.  The nanny state system is stressed out without any real stress having been applied yet.  What can we expect it will be like in 5-10 years when the bulk of the boomers are in retirement and beginning to get sick more because of aging and are no longer productive to the economy?  In the words of the elite, they will have become "useless eaters".  Maybe we can all just think happy thoughts and immerse ourselves in an aura of bright, new wave mental energy to make it all go away.  Or maybe a big awakening is ahead of us where we finally figure out en masse that government has been conning us since at least the closing of the gold window, and probably all the way back to Ike's presidency.