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401(k) as Dangerous as the Dollar

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July 05, 2009 – Comments (12) | RELATED TICKERS: GLO , O , M

Disclaimer: I am neither a Republican, nor a Democrat. To me, there is very little (if any) difference between the two parties. I am a conservative that believes in free-market capitalism.

That being said, the speed with which the current administration is passing sweeping, massive legislation that will have life-altering consequences for every American is alarming. This article takes a look at the massive overhaul of 401(k) plans that may (or may not) be in the works. It also offers some other 'doomsday' scenario preparation. I wouldn't go as far as the article suggests. I do, however, have about 3 months worth of living expenses in cash at home, 2-3 months of food, and a portion of our liquid assets in physical gold and silver in a safe.

It would not surprise me in the least to see something like this come to pass (probably sooner than later). It would present another 'wonderful' opportunity for the government to get their grubby, little hands on the money of private citizens. If they strike while the iron is hot (like now - right after many 401(k)'s have lost 30-40% of their value), they could even spin it as the government graciously stepping in to 'rescue' the little guy from these types of market catastrophes. Anyway, here's the link and an excerpt:

401(k) as Dangerous as the Dollar

Prophets are famous for being without honor in their own country, and it isn’t any fun being Cassandra.  We’re considered alarmist nuts until what we have foreseen comes to pass–and repulsive thereafter if we say “I told you so!”

Well, we told you so about a lot of things, including the plans that the Obama Nation has for your 401K.

To be brutal, the rape artists are moving on their plans to hijack your 401K and replace it with a handsome certificate suitable for framing which says you got a Guaranteed Retirement Account in return for one of your old, unsafe means of preparing for the grim future.  Actually, I made that part up.  You probably won’t get a certificate large enough to frame and hang over your computer as a constant reminder never to trust government with your money, or not to change the rules on you.  What you’ll get is a dud IOU.

Given the speed with which the Left Wing Congress and the “I just sign what they send me” President move, you have at most days to contemplate what is left of years of thrift and deferred gratification.  Those people don’t mess around when they have prey in their sights.

I’m no expert on how a 401K can be restructured, but if I were you I’d be on the ‘phone to my CPA or financial advisor immediately to see if there is any exemption anticipated, any way to get your meager security th’ hell outta Dodge.  What I would really do–and did two years ago–is pay the penalty and close the position out.  You’re going to have to pay taxes on those funds eventually anyway, and far better to snatch two-thirds or so of the prize away before it gets dumped into the general fund and is spent on housing for Hamas, the snail darter, uniforms for the Obama Youth, excruciatingly bad modern “art,” or more perquisites for Congress.  Even half a loaf will be better than none…if you turn it quickly into objects of intrinsic value, such as gold, silver, diesel oil, and emergency rations.

This freight train is building up speed, folks, and actions which were objects of scorn two years ago can be discerned now quite clearly.  Here are some serious warnings:

1.  Empty out your safety deposit box.  Your bank manager will confirm that if there is a Friday surprise he can not guarantee that you will ever have access to it again.

2.  Start pulling your cash out of banks.  Again, turn as much of it as possible into real property–which does not mean “real estate”but tangible assets.  It doesn’t matter if the banks crash before the bond market does or whether the dollar crashes or is devalued first.  The interests rates are so low it is very inexpensive insurance to remove your personal wealth from sinking Bernankes and store it in metal, C-rations (sorry, MRE, “meals, ready to eat”), or cowrie shells.  I’m famous for saying, “The worst that can happen is…” and the worst that can happen is you will lose the premium you paid for gold coins (there are better ways to buy metal), forfeit the 1.13% your funds are accruing in the bank, and have to pay the premium to sell silver ingots back much later.  Don’t stand there like a deer caught in a jack light, and don’t expect any sympathy if you go to the bank one day and see signs that say “Bank holiday.  Closed until further notice.” or “Daily withdrawal limit $300.” There are proposals for those very restrictions floating around, and that limit is going to include transferring funds between banks.  Mr. Paulson asked for permission a while back to post SWAT teams to prevent bank runs.

3.  You’ve been warned repeatedly to accumulate a bare minimum of three months’ supplies of food, water, and Sudoku puzzles, those representing whatever you, personally, would not wish to be without in times of stress and crisis.  Don’t forget the Tullamore Dew.

4.  If the dollar is devalued again history shows that the usual amount is on the order of two-thirds.  If you want to risk getting roughly thirty-three Amero coins for a Bernanke, you keep your innocent faith that this is “just another bump in the road” and that Mr. Obama couldn’t possibly do what Roosevelt and Nixon did.  When the dust settles from what at best will be a controlled demolition you have watched go whoomp-whoomp-whoomp-whoomp-whoomp in a series of rapid shocks you will take what you are given on any assets you haven’t squirreled away in hard money of various kinds including tobacco, soap, fifty pound bags of rice and pinto beans, and canned corned beef.

Our world is a-swirl with forces building hurricane speed, each having an impact on the others.  The concatenation of instability in the bond and stock markets, housing and commercial real estate, the mushroom cloud of increased “money” supply, job losses developing in the auto and tobacco industries due to recent legislation, the Chinese and Japanese at least eying manipulating our currency or replacing the dollar as the standard against which other currencies float, and the possibility that the government is going to appropriate the health industry are just some of the warning signs that indicate it is time to head for the storm cellars with the kiddies, the livestock, a kerosene lantern, a good book, and an enormous picnic lunch.

Those are only the more obvious evils building to gale force.  Ignore the urgency of the klaxons if you will, but this occasionally fey half-Irish lady thinks she knows “Dive! Dive! Dive!” and “Tora, tora, tora” when she hears them.

Call me Chicken Little if you must, but I’m off to stuff some more silver coins under the mattress.  Literally they make lumps which prevent fairy tale princesses from sleeping well, but figuratively you’ll sleep far better if you have prepared for the hurricane before it makes landfall...

12 Comments – Post Your Own

#1) On July 05, 2009 at 8:09 PM, anticitrade (98.03) wrote:

I would be cautious about taking the investment advice from a writer for "Whiskey and Gunpowder".  It may be wise to wait a while before emptying out your 401k savings account to buy a bunch of silver.

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#2) On July 05, 2009 at 9:00 PM, uclayoda87 (28.57) wrote:

I am not optimistic about the US economy in the short run (2 to 5 years), but if the government goes after 401K, these will likely be cashed out, which would trigger an implosion of the financial markets.  The last thing that the administration will say before being kicked out of office - Oops.

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#3) On July 05, 2009 at 9:49 PM, 119862913 wrote:

UCLA,

I wonder what the reaction would be? Having read report after report about the retirement savings of the vast majority of Americans being less than $50K we might just get an "all aboard" signal from congress (who will be serving its constituents no doubt to avoid a further decline in the false profit...err I mean economy).

MW

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#4) On July 05, 2009 at 10:14 PM, uclayoda87 (28.57) wrote:

ImOuttaHere2008

It's one thing when the government takes money from the "rich", but if they try to take people's "real 401K holdings" in trade for another government IOU, that probably won't go over well for us who don't believe that Social Security will be around when we retire.

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#5) On July 05, 2009 at 10:16 PM, russiangambit (28.72) wrote:

uclayoda is right, 401K is a big part of what kept the stocks bubble going last 20 years. If there is an attempt to convert 401K into some sort of government-garanteed/ interest-only/cash-only version, the stock market will deflate or actually it will rather crash since stocks will have to be converted into a cash equivalent and people will realize that the first to cash in will get the most. For this reason, 401K is a sacred cow that cannot be touched. Unless we see a true collapse of the stock market and nobody cares about it anymore, 401K s are safe. This fact actually gives me quite a bit of grief, I hate 401Ks. It is like taking candy from the baby. People put their hard earned money into 401K, not realizing that most of the time they are being sold second rate goods at premium prices.

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#6) On July 05, 2009 at 10:19 PM, FreeTruth (< 20) wrote:

I believe that it is possible that they could attempt to take our 401K's AND IRA's. This would not be a "hey just a heads-up, next June we are going to take your retirement funds", instead it will be a sudden item inserted into a bill at 2AM that taxes the funds if removed at dracconian levels which would prevent 95% of people from getting their money out. This will be followed by a plan to freeze these funds and replace them with a much "safer" government pension. I do believe that some folks will welcome this idea and happily give up what little they have and villify those of us who fight back.

The market reaction would be amazing!

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#7) On July 05, 2009 at 10:35 PM, 119862913 wrote:

UCLA,

I'd imagine that you were none too happy about the level of spending for say the last, oh 30 years or so. And what became of our collective disgust with the spending? Nothing. Which is exactly what will happen when the 401K's are nationalized. Nothing. The patriots will salute and keep the peace.

MW

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#8) On July 06, 2009 at 2:44 AM, uclayoda87 (28.57) wrote:

  ImOuttaHere2008

In the past I'm sure most people gave little thought to their 401K and IRAs, but now that even Rolling Stone Magazine has published an article showing how GS manipulated the market and is part of some government conspiracy, I think that people are getting a clue.  Many people that I work with have come to me in the last year asking about the market.  They know I read the WSJ and am an active investor/speculator.  These people are very aware now of what is and is no longer in their 401Ks.  They would rather cash out their 401Ks than risk being stuck with empty government promises.

California is now on its second round of issuing IOUs (it also happened years ago) and most recipients don't like them.  I doubt that the rest of America is much different from Californians in this regard.

 

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#9) On July 06, 2009 at 10:48 AM, jamasony2 (< 20) wrote:

This article has zero facts.

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#10) On July 06, 2009 at 11:21 AM, ChannelDunlap (< 20) wrote:

I'll tell you, when an article leads with - the rape artists are moving on their plans to hijack your 401K - it loses a whole lot of credibility.  When it continues to talk about - housing for Hamas, the snail darter, uniforms for the Obama Youth - the rest of it pretty much goes out the window.  However valid the point of the article may be, it is lost under the roar of extremist anti-Obama BS.  "Get out of the banks!  Pull your 401k!  - it is time to head for the storm cellars - Oh please.  Give me a freakin' break.  As bad as things may be, they certainly have no approached the point of heading for the storm cellar with a safefull of silver and a box of MREs.  And by choosing that as his stated solution, he officially sabatoged any valuable message this article could have had.  I'm very interested to know the potential changes to 401k, but give me someone a little more rational than this douche, please.

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#11) On July 06, 2009 at 1:54 PM, anticitrade (98.03) wrote:

This post inspired my new blog entry.

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#12) On July 06, 2009 at 2:10 PM, Rehydrogenated (33.43) wrote:

*yawn* I've heard this all before.

Have you ever been to craigslist.com? We have all the tools for a post-dollar barter economy. It wouldn't even take a week. 

I'll take all your dollars if you don't want them.

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