There’s only one ending to Uncle Sam’s borrowing extravaganza
America’s national debt has soared more than $4 trillion this year alone…
It now totals $26.7 trillion. That’s $81,000 for every man, woman, and child. It’s around the value of every residential dwelling in the country. It’s about 130 of Jeff Bezos’ fortunes. It’s an astronomically large figure…
And it could be paid off tomorrow if the U.S. government raided one of the biggest pools of capital on earth… one that partly belongs to you.
Right now, Uncle Sam can get all the money he requires with a few keystrokes at the Federal Reserve. That’s thanks to the virtually insatiable and (for now) guaranteed demand from governments and investors around the world for the U.S. dollar, the world’s reserve currency, for its usefulness as a medium of exchange, store of value, and unit of account.
The U.S. dollar enjoys “exorbitant privilege” – a term coined by French politician Valéry Giscard d’Estaing – as the world’s reserve currency. Without dollars, nations are essentially frozen out of international trade and the global economy. So the Fed can sell unlimited volumes of U.S. Treasury securities to fund the government – and there are plenty of buyers.
Until those buyers disappear, that is. Over the past six centuries, there have been six different reserve currencies – each lasted for around a century, give or take a decade or two. Depending on how you measure it, the U.S. dollar is in the last inning or two of its dominance of the global financial system.
There may come a time – sooner than you think – that the dollar falters. And then, even the heroic efforts of Fed Chairman Jerome Powell won’t be able to deliver the U.S. government the cash that it requires.
There may come a time – sooner than you think – that the dollar falters. And then, even the heroic efforts of Fed Chairman Jerome Powell won’t be able to deliver the U.S. government the cash that it requires.
Don’t forget… the national debt is just part of the picture. There’s also $1.2 trillion in state debt and $2 trillion in local debt. The real fun, though, comes in unfunded liabilities, which are future expenses that Uncle Sam has committed to paying but doesn’t know where he’s getting the cash from, like $20.7 trillion for Social Security and $32 trillion for Medicare…
Add it up, and America’s total unfunded liabilities stand at $154 trillion.
Faced with a still-escalating debt burden, the U.S. government might then go “where the money is” – to paraphrase 1930s bank robber Willie Sutton, when asked why he robbed banks.
Biggest Transfer Of Wealth In U.S. History Has Begun
A Maryland multimillionaire says the biggest legal transfer of wealth in American history has just gotten underway. Here’s #1 step you must take…
One very obvious destination: the $28.7 trillion in Americans’ retirement assets, including around $8.3 trillion in individual retirement account (“IRAs”) and in employer-sponsored 401(k) plans, according to the Investment Company Institute. It wouldn’t be difficult for the U.S. government to gets its hands on your retirement assets.
We can hope that this never happens. But it’s far better to be prepared. Right now, there’s still time to put a Plan Z in place.
It’s not clear exactly how the dollar’s dominance will end, or what comes next. But if history rhymes, the chances are good that for our children, the greenback won’t be the global financial traffic-stopper that it is today.
And then, Uncle Sam’s seemingly endless borrowing extravaganza will crash to a halt. Short of a debt jubilee of Biblical proportions – or a wholesale repudiation and default of the U.S. government on its debt, which would reduce the global financial infrastructure to a smoldering dumpster fire – the American government would have to do what everyone else on earth must eventually do: make ends meet.
As a significant portion of retirement funds are invested in stocks and other assets, the nationalization of these assets would dramatically increase the government’s role in, and control over, the corporate world.
Americans’ retirement assets are potentially more than just a source of cash – to be used for debt repayment, or whatever else the politicians of the moment feel like spending it on – for the U.S. government. As a significant portion of retirement funds are invested in stocks and other assets, the nationalization of these assets would dramatically increase the government’s role in, and control over, the corporate world.
But wait, you might say… back up. The American government can’t just take your 401(k) and your IRA. It’s your hard-earned wealth, held in your name. Laws protect you. The government can’t just barge in and take what’s yours. Right?
That’s what people thought in Argentina (2008), Ireland (2009), Hungary and the U.K. (2010), Portugal (2011), and Poland (2013). In each of these countries – and many others – the government nationalized and/or confiscated pension assets, and individuals and investors were disadvantaged by bureaucrats under the dense fog cover of the greater good.
And it’s not just “over there”… It’s happened in the U.S. before, too. From Executive Order 6102, signed on April 5, 1933:
“I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and… hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates… All persons are hereby required to deliver… to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them.”
That wasn’t outright confiscation. Gold was swapped for fiat currency (which was soon thereafter devalued). Every American was allowed to keep the equivalent of $100 in gold. But whatever the qualifiers, the government took assets from its citizens for its own purposes.
There are plenty of ways today that Uncle Sam can raid your retirement. Here are the three most likely…
1. Tax retirement account balances that are more than a certain level. This would be a “wealth tax” wearing plaid slacks and eating dinner at 5 p.m. Alternatively, the government might remove the tax-deferral element of certain retirement programs and make taxes due on gains earlier.
2. Require that a certain portion of retirement assets be invested in government bonds. That would create a new, guaranteed, and permanent market for Treasury securities. And if interest rates are pushed below zero – so that savers pay the government interest, rather than vice versa – all the better (for the government… not for your retirement).
3. Print more and more (and more) dollars in serialized quantitative easing programs… This is already happening in ongoing COVID-19 stimulus programs. The classic tin-pot dictator way of getting rid of local currency-denominated debt is to inflate it away – print currency to pay debts, and soon enough the currency won’t be worth much. (I carry the bill in the photo above in my wallet, a memento from a trip to Zimbabwe several years ago.) That’s not dissimilar to what’s happening in the U.S. now.
What can you do to protect yourself? One option is to go Greek, as explained by none other than the Social Security Administration…
For the ancient Greeks, economic security took the form of olive oil in amphorae. Olive oil was very nutritious and could be stored for relatively long periods. To provide for themselves in times of need, the Greeks stockpiled olive oil and this was their form of economic security.
An olive oil 401(k) might have worked as a Plan Z a few thousand years ago. But retirement needs – Botox visits, cryogenic freezing payments, Chardonnay-of-the-Month Club subscriptions – are a lot more diverse today.
But the Greeks had the right idea by going analog: In a world where it takes just a few keystrokes to turn what’s yours into something that’s theirs, one way to protect yourself is to convert at least a portion of your retirement savings into real assets.
One way to keep your retirement assets away from Uncle Sam is to buy silver, gold, and other precious metals somewhere safe and far away, like Silver Bullion, a vault and much more in Singapore that’s run by my friend Gregor Gregerson. Closer to home, Maryland-based Asset Strategies International is a good first stop for gold coins and other precious metals.
Buying retirement-oriented real estate can serve two Plan Z purposes: It can put some of that retirement cash to work… while also removing it from the clutches of Uncle Sam. (I wrote about some international real estate options here.)
That’s part of the best way to protect yourself against sticky government fingers in your retirement plan: a Plan Z that spreads your risk across banking systems, currencies, citizenships, countries, cultures, real estate markets, and languages. Being forced to convert your IRA into government bonds hurts a lot less if you have other retirement assets elsewhere.
None of this is easy or convenient or cheap. But it’s a lot less inconvenient than, say, Uncle Sam channeling Willie Sutton… and finding that the money he’s looking for is yours.
Kim Iskyan is editor of the Chaos Chronicles at American Consequences. Kim is one of the most experienced and well-traveled financial writers in the world today. From covering Iran’s emerging stock market… to landing in Ukraine in the middle of a war… to booking a flight to Thailand as soon as martial law was declared – Kim has been there and helped investors figure out the risks and the opportunities in these “blown out” markets.
