A few weeks ago, the Pennsylvania Treasury enforced a new law making it possible to take hold and liquidate Pennsylvania residents’ retirement accounts after three years of inactivity – regardless of account owner’s age.
Prior to this law, the state would not attempt to seize a dormant account until the owner reached 70.5 years of age.
Philly.com reports Pennsylvania-based Vanguard calls this a budget-inspired change and is planning to repeal the law.
“Budget-inspired” because the state of Pennsylvania is broke and lawmakers hope taking over and liquidating inactive retirement accounts can pay down some of their debt. Everyone has to be forced into paying their fair share.
Even if you don’t live in the Keystone State you could be at risk, too.
According to the State Data Lab website, Pennsylvania is one of 40 “sink hole” states, which are states without enough assets to cover liabilities. In other words, 80 percent of U.S. states are sinkholes. Do you live in one of them?
Cities and municipalities are another danger zone. Since 2010 over 60 municipalities and local governments have filed for bankruptcy.
The Dallas, Texas pension is in danger of going bankrupt. Retirees, and those close to retirement, withdrew $300 million from the fund over a few months to protect their accounts.
Due to the huge flight of capital, the pension board voted to stop pensioners from withdrawing their retirement funds; forcing retirees to keep their money in the near bankrupt fund instead.
State and city debt can put you in as much danger as the Federal debt, if not more. States and municipalities can’t print paper money like the Fed. This is all a house of cards, so don’t be surprised to see more states and cities enact similar laws and regulations.
At the federal level, as you probably know, talk of taking over retirement and savings accounts has been going on for years and much of the groundwork has already be laid.
As early as 2007, House Democrats have been creating plans to nationalize retirement accounts and coming up with new schemes to push account owners to invest only in government debt such as U.S. Treasury Bills or Savings Bonds.
This at a time when most central banks, such as China’s and even Saudi Arabia’s, have been dumping U.S. Treasuries.
That’s right, let hard working Americans save for retirement by investing in insolvent government paper run by politicians addicted to debt.
A few years ago, in the country of Cyrpus, the government faced a default. Their solution? Freeze everyone’s savings accounts and confiscate nearly 60% of consumer savings deposits.
Can you say highway robbery?
In layman’s terms, this thuggery is called a “bail in.”
Instead of using tax dollars to “bailout” failing banks, the powers that be dip their hands into retirement and savings accounts and give the loot to incompetent cronies at banks and financial institutions.
If this sounds like something that could never happen in the U.S., you’d be mistaken.
The mechanisms are already in place through the Dodd-Frank law, passed in 2010.
According to Columbia Law and Economics Working Paper No. 374, Confronting Financial Crisis: Dodd-Frank’s Dangers and the Case for a Systemic Emergency Insurance Fund authored by Christopher Muller and Columbia Law School professor and European Corporate Governance Institute Fellow Jeffrey N. Gordon, Dodd-Frank is dangerous and enables the FDIC to wield similar bail in powers like we saw in Cyprus.
“The only potential government intervention, a receivership, would wipe out equity and is likely to impose significant losses on unsecured creditors,” write the paper’s authors. In this case the ‘unsecured creditor’ is you, the bank depositor.
When the next “too big to fail” bank is ready to fail, the FDIC steps in, fires the bank management, installs government management to run the bank, and waves a wand, snaps their fingers, and turns your savings into the bank’s assets, which is then used to pay off their debts.
And voila, your savings are gone and the bank’s debts are paid. That’s pretty much how it played out in Cyprus. Bank customers’ savings disappeared, while the bank’s debts got paid.
What can you do to protect yourself?
Reduce your ‘counterparty risk’ (risk that the other party of a contract won’t live up to its contractual obligations. Or in financial contracts, the default risk). Turn some of your paper assets into hard money and keep it outside of the traditional banking and finance web.
Diversification with physical gold and silver may be a safe heaven against major financial shocks by keeping your savings outside the reach of financially irresponsible politicians.
- A hedge against governments, big business, and economic/currency collapse.
Precious metal values historically move independently of stocks, bonds, and Treasury bills, making them a hedge against unstable markets and keeping your portfolio balanced. Central banks do this. China, India, Russia and many other nations use gold as a monetary reserve protection against the falling dollar.Forbes reports U.S. academic institutions do the same. The University of Texas Investment Management Co., which handles Texas A&M’s $19.9 billion endowment keeps 5% of its portfolio in actual gold bars secured in a New York vault.You need to have a position in gold and silver metals to protect yourself and your family, too.
- Wealth protection
When inflation devalues paper currency, the relative purchasing power of gold and silver generally remains steady. Another way to measure the incremental purchasing power of gold is to use Standard & Poor’s index of the 500 leading publicly traded companies in the United States.According to analysis published by SeekingAlpha, since 1971, the gold-to-stock ratio has remained relatively stable over the last 40 years. Other than the anomalous drop in 2001, 1.5 ounces of gold has been equivalent to one unit of stock.