Skip to comments.Middle-Class Wealth Protection, Post-Fiscal Cliff
Posted on 12/02/2012 4:07:37 PM PST by betty boop
Middle-Class Wealth Protection, Post-Fiscal Cliff
By Jean F. Drew
I dont know about you, but Im a lifelong, middle-class working stiff who has managed to accumulate a certain modest amount of wealth designated to be sent to the future, to supply my support and lifestyle needs when I am old and no longer have employment income. Im speaking of my 401(k)s and IRAs.
The way I have assets deployed in these accounts very likely will need to change, given the absolutely predictable outcome of the much-hyped impending fiscal cliff. At least, that is my supposition.
Consider: We get the fiscal cliff if the GOP does not abjectly cave to every demand being made by this ersatz president: a tax hike on the most productive citizens of our society, to the tune of $1.6 trillion dollars over ten years; deficit reduction of $600 billion (all cuts being unspecified at this time); plus a $300 billion stimulus package for infrastructure investment. No interest in reforming entitlement programs, such as Social Security and Medicare, which are currently running at least $47 trillion in unfunded future liabilities. Needless to say, such a proposal does absolutely nothing to restore the exploding federal budget to anything remotely sane or within the ability to pay by the increasingly hamstrung (thanks to federal taxation and regulation, etc.) productive capabilities of our nation.
People are fooled if they believe 0bama only wants to tax the wealthy. Allowing the top tax rate to rise to 39.6 percent on the top 1 percent of taxpayers yields only about $86 billion dollars (over ten years). The federal government spends $86 billion on its current operations every eight days. So, how serious a deficit reduction proposal is that?
The middle class, meanwhile, thinks it will not be touched by tax increases in any way. But please do note there is a vast difference between the $86 billion that can be wrested away from the wealthy by means of a rate increase on the top 1 percent, and the $1.6 trillion in new revenues that the presidents plan proposes. Guess who gets stuck with paying the difference?
If the GOP fights the president over his insistence on raising tax rates, while showing no deficit savings in his proposed budget, then the president will blame them for hiking taxes on the middle class. For if the GOP holds the line, tax rates will rise on everybody, to the tune of about $2,000 per year per middle class household.
0bama doesnt mind this result in the least. So, what is the possible basis of any compromise between 0bama and Speaker Boehner? 0bama believes he wins either way, whether we go over the fiscal cliff; or have to live with some entirely unprecedented new reality designed to avert it.
Elections have consequences, as he likes to remind us. Since he feels he has a mandate, not only will he not back off; he will double down. As he has done to the extreme discomfort of the roughly half the American populace who did not vote for his reelection. The other half the morons who voted for him are about to find out what they actually voted for. I doubt they will like it.
For so many reasons, this last election was unprecedented, and of lasting historical significance, I daresay. Which brings me back to certain investment decisions I will have to make soon.
Making investment decisions necessarily involves making predictions about the economic and investment climates as they evolve in the future. It would be very helpful to me to know, as an investor, whether we as a nation are on an inflationary, or a deflationary course, mid- to long-term.
Two years ago, I was pretty much convinced that the future course was decidedly inflationary. So I put 20 percent of my investment portfolio into physical precious metals gold and silver U.S. Eagle Proof coins. Given the history of QE I, II, and III, plus Operation Twist, it would seem this was a good move: For when the Fed prints money out of thin air in order to buy totally crappy mortgage-backed securities, just to juice the money supply and the stock market in the short-term (coincident to an impending presidential election), then any sane person would have to say, there is something terribly wrong going on here. The effect is, We the People had our pockets picked to buy tons of crappy mortgage-backed securities. What value did we get in return? How did we get money out of nothing?
We didnt. We were mugged, and our wealth stolen perfectly legally, I hear.
Did you know that, at the time of the Federal Reserve Act of 1913, a U.S. dollar was worth exactly 100 cents??? But that now, 99 years later, that same U.S. dollar is worth exactly 2 cents? So much for the good stewardship of the Fed as the regulators of the money supply and, thus, of the value of money.
One saves for a lifetime, only to have his wealth SUBTILY, silently stolen in this manner? But where did the wealth go? Wealth is the by-product of human creative activity and, once created, it doesnt just magically disappear. It can only be transferred from one persons pocket to another persons pocket, by means fair or foul.
But I digress.
My investment portfolio is geared to inflationary conditions, what with the precious metals, and its around 70 percent commitment to equities; i.e., the stock market. Historically, on a long-term basis, both asset categories have been shown to be excellent performers in terms of the preservation and growth of the purchasing power of invested capital.
My late research, however, suggests that what we as a nation face is not inflation, but deflation. Massive deflation, on a 1930s depression scale.
If the recent activities of the Fed were the only determinative principle of the value of money, then, taken in isolation, we face an inflationary future. And my precious metals purchases are entirely warranted.
However, recently I have been drawn to demographic considerations, which may very well be the main driver of future economic developments, which the force majeur of Fed action cannot overcome.
The story goes this way: The Baby Boom (of which I am a card-carrying member) is the single biggest generation, demographically speaking, in the history of our nation. Roughly around the Clinton years, this generation was in the prime of its earning and spending capabilities: It could afford the big-ticket purchases that fuel the economy bigger houses or second homes, nice cars, lifestyle purchases of all descriptions, etc.
But as any generation ages, sooner or later, its spending on lifestyle needs declines in favor of saving behaviors. That is to say, Baby Boomer monies increasingly are being diverted from current consumption, to long-term savings designed to provide for a comfortable retirement.
In other words: This biggest generation is now in hunkering down mode. Their consumption is down. If their consumption is down, then the business enterprises that had heretofore catered to this demographic will lose customers. If they lose customers, they lose revenues; if they lose revenues, this will shrink manufacturing capabilities; if manufacturing capabilities are shrunk, then this necessarily entails less demand for commodities and labor.
Looks like a depression to me.
The generation following the Baby Boom is typically characterized as the Baby Bust. Comparatively, demographically speaking, there is not any comparable spending power to drive a flourishing economy in this demographic cohort.
And so, given the perfectly calculated ministries of Captain Zero and Friends, We the People are about to reap the whirlwind.
But we can all console ourselves with the truism: Elections have consequences.
Speaking for myself, Id rather experience death by a coup de gras, than death by a thousand cuts.
And so I say: The sooner this fiscal cliff is realized, the better.
Let the people actually see what they voted for. Let them feel the pain of it; for pain is surely coming.
And pain is often an excellent teacher.
And yet I must say, as a human creature, that I wish to avoid pain. To that end, my best friends are personal experience and lessons to be gleaned from human history.
Short-term predictions: No "Santa Clause effect" in the stock market this year. I am referring to the typical short-term bump in stock prices that more often than not follows Christmas most years.
This year, stock investors have a prime incentive to dump their holdings under the present tax regime (the so-called "Bush tax cuts") than wait 'til next year, when the rates will be much higher.
Look for a sell-off by year's end.
What could go wrong with that???
I'd love to hear your views, dear friends!
I am clueless, dear Betty, and am too poor to do anything. But, I love to read about all this stuff.
If I had any spare CASH, I would be buying (and taking personal possession of) silver coins, in various sizes. Probably what is commonly called “junk” silver, which you can buy in bags.
Obviously, you need to keep “fiat” paper on hand to pay bills, etc., but the rest - something that has true value.
In really bad times nothing is as valuable as a can of black beans, a bag of rice, a roll of toilet paper, water, tools, a toothbrush. All the basic things we take for granted will be invaluable if it really his the fan.
What could go wrong with all cash?
One word; inflation.
If I could I’d do some metals; however all my assets are in a 401k which does not have that option....
We’ve offset any baby bust effects with immigration.
target retirement funds (vtinx and others )did worse than the market in the 08 meltdown.
my 3 fund hold forever asset allocation
>>I’m going ALL CASH by year’s end???
What could go wrong with that???
I’d love to hear your views, dear friends!<<
If by that you mean precious metals, you probably have a good plan. But, as always, diversify.
Just cash and bonds aren’t making squat.
That is the best comedy, very funny
Our government has broken faith with us. One of the ways that it has done so is to corrupt our currency. By printing so much “funny money” that is mere paper, they undermine the value of money in circulation, including that in your bank account and 401(K). The dollar is no longer the store of wealth that it was two or three years ago and you can see this every time you visit the grocery store or gas up your car. With Obama doubling down on his failed economic policies, this situation will continue to get worse until reality intrudes in some dramatic way. The nly reason the dollar is holding up right now is that things are worse elsewhere.
This was the situation in Germany between WW1 & WW2. The Germans lost WW1 and were ordered to pay the allies reparations. They also had a lot of widows & orphans to take care from WW1. Since it was politically unpopular to pay reparations, the Germans just printed the money. The predictable result was a period of hyperinflation, which spawned politcal and civil unrest which gave rise to Hitler and the Nazis, who restored order by imposing a rigid socialism. The parallels with our situation today is sobering. Read “The Coming of the 3rd Reich” by
Here are a few things you can do to protect yourself:
Be nice to your kids - they may have to take you in.
Have a few friends you can trust and count on.
Have some precious metals on hand: this is an alternate currency that will hold it’s value and may be a godsend at a critical time. During WW2, diamonds were a good and compact store of wealth and used by spies to bribe enemy officials. It often worked.
Stocking up on canned goods, guns, ammo, and drinking water is always a good idea. Like in many 3rd-world countries, outages and shortages may become commonplace. Stealing and street violence will also become more common. You don’t want to be a clueless victim like the people in New Orleans Stadium after Katrina.
For the short term, meaning the next year or so, you might want to consider investing in energy and shorting all but the big industrial stocks. The government is making it difficult to do business and so the smaller and less efficient are bound to go under, but whatever happens, they are going to need energy and the Dow Big Boys have the clout and global presence to play along with mendacious politicians.
Work hard. As long as you can do a days work or have a valuable skill, the government and its agents will think twice about consigning you to a FEMA camp or designating you as a “useless eater” and making you disappear.
Make your peace with God - now, today - don’t wait. The world is unraveling and the time of tribulation and return of Christ is imminent. Read Revelation Chapter 13 for a preview of what’s coming to a neighborhood near you.
I would welcome your thoughts.
If the Kenyan wins a one party rule in 2014, he is going to nationalize 401ks and replace real value with worthless treasuries.
Then all the prissy libertarians will see that winning is better than being dickheads.
Give them nothing but the ashes of a past consumed by fire. For that is their future and their sustenance.
Pay off all debts, such as your home mortgage and credit card debt. This has a guaranteed rate of return equal to the interest rate you were paying.
You could diversify by buying nearby real estate to rent out. Real estate prices I expect will plunge in January when the Medicare surtax and higher income taxes kick in.
Stocking up has some value. A cache of canned meat, bottled water and valuable trade goods that you too will consume is invaluable, since it is both a form of savings and protection against disaster.
I know people investing in lead (bullets / guns), but I don’t know if that is a bubble about to burst.
thats ok ytd avg rtrn for me is 6.4 I ll take it
401k, I am still a long-term retirement investor, where I think my dividends are re-invested tax free, and its one way to beat inflation. One family of funds had a mining company option, and from one thing I learned, own the thing that owns the thing.
scuse me total rtrn for me 6.4
I think my dividends are re-invested tax free
Illusory, all of it.
The Marxists in power will never rest until all assets are the property of The State.
On one pretext or another, and usually under the rubric of “the good of the people,” The State will slowly but inexorably seize all assets until everyone is dependent on The State for the necessities of life, at which point The State insures its hegemony on political power forever.
This reality is currently striding down main street with a neon sign on its head, but few amid the hungering mob choose to see it amid the glories of government handouts.
in a total economic collapse the most valuable commodity will be ammunition, not food, not gold, not guns , not nothing else.
the police will not be any help and civilization will disentegrate into chaos
Paying off debt when great inflation is coming is a foolish thing. Wait until you can pay back $1 of debt with a dollar that is only worth $0.25. Pay off all debts, such as your home mortgage and credit card debt. This has a guaranteed rate of return equal to the interest rate you were paying.
I think owning rental property is a good move. Inflation is your friend when you are renting living space. And, you get to pay back the mortgage with inflated dollars again.
I, personally, have benefitted greatly from inflation, both as a homeowner and as owner of rental properties.
Some stocks do well in inflationary times, some not so much. About all one can say for sure is that stocks beat money in a bank account over the long term.
I thought it was $86 Billion/year??
The repayment of debt in devalued currency requires you to have large amounts of the devalued currency. Since high inflation tends to cause higher unemployment, I’d rather own my home outright than worry about having the money to make the monthly payments. And if inflation is high, even a slightly higher pay check may be stretched just to cover food, utilities and a few necessities.
then again you have govt workers of all stripes, who never gave anything for most of them into their fat defined pension plans....MAKE THEM FIX THAT PROBLEM FIRST~
All my investments are in an IRA and a 403B, and it’s almost two years until I’m 59 1/2 so I cannot merely ‘dump’ them now without paying a big penalty and taking a tax hit. It’s too bad there isn’t more content to this article regarding people in my position, since the author goes on about baby boomers quite a bit.
What could go wrong with that???
Investment-wise, seems to me we baby boomers will make certain businesses solid for the next 20-30 years: retirement homes, assisted living homes, skilled nursing facilities and funeral homes.
Convert to assets that hold their value:
1. Precious metals (primarily gold coins)
2. Good quality rifles and handguns
3. Fertile land
I also recommend stocking barterable items such as tools and seeds, and if you can store it safely and securely, bulk propane and gasoline.
(( ping ))
I’m buying me a ‘Brown Coat’.
Communist Obamanation File.
BTW IMHO, the Obama Administration is ONLY interested in achieving the REVENGE of the late Communist Party Member Frank Marshall Davis, Obama’s Uncle/Dad Frank.
My late research, however, suggests that what we as a nation face is not inflation, but deflation
What he doesn’t address is confiscation.401’s and IRA’s nationalized to prop up Social Security. It is on the table
I don't think the poster was referring to cashing in the retirement funds, but rather going to all cash. You can certainly buy money market funds in these accounts.
A research firm I much admire suggests that what we as a nation face is an impending "roller coaster ride" of first, a massive asset deflation (read, collapse of equity prices), followed by a vicious hyperinflation.
This seems to stand to reason; for whether or not any "compromise" is reached between the House Republicans and the president, we're still going over the fiscal cliff. That's because, among other reasons, no proposal addresses the critical need to cut real government spending the proposals only modestly slow the future increase in spending. If the president gets what he wants, we'd still be experiencing trillion-dollar annual budget shortfalls as far as the eye can see.
They're still "kicking the can down the road" vis-a-vis the Social Security, Medicare and Medicaid programs which are conservatively estimated to be running $47 trillion of actuarially determined unfunded future liabilities, and (surprise, surprise!!!) NO MONEY in their respective "trust funds" to pay for them.
To my way of thinking, the president's plethora of new taxes, including excise taxes on investment, real estate sales, plus the application of the AMT with a vengeance to a vastly larger pool of taxpayers (with retroactivity to 2012 income), etc., etc., will have a devastating impact on economic activity. People are being systematically looted by the government first, by taxation, and second, by the devastation of the value of the U.S. dollar by Bernanke's money-printing operation e.g., "QE Infinity." Hyperinflation makes us poor, but it allows the government to pay off its obligations with cheaper dollars.
But impoverish the people this way, and you have less discretionary money, less demand, in the overall economy. Businesses may well retrench against this background, cutting payrolls, production, etc. It's "a perfect storm" in the making.
Figment, you are absolutely right about the threat to the private retirement assets of the American people the 401(k)s and IRAs, 403(b) plans, etc. I recently read that there are a couple-three trillion dollars sitting in such accounts all privately held (which is anathema to a socialist!). There are politicians in Washington right now who are simply licking their chops over the prospects of getting a piece of this action....
So, I did somewhat exaggerate my decision to go "all cash." I continue to hold precious metals (gold and silver). However, I am withdrawing from stocks for a while. I do expect a sell-off by year's end, as investors take their profits at this year's lower tax rates.
Anyhoot, I fully expect that "2013 is going to be a wild ride." I cannot predict the future with any great specificity, though roughly next year looks like a return to recession to me (maybe even a worse one than the 20082009 recession). But inevitably, the effects of the Fed's Qualitative Easing (limitless increase in the printing of new dollars) cannot fail to be hyperinflationary before too long.
Inflation: the "hidden tax," the cruelest, most universal tax there is.
Though 0bama assures us he's "helping the middle class," which is why he has to "ask" the "rich" to pay their "fair share," the fact is We the People at all income levels, of whatever financial condition, are being systematically looted by the federal government. It's that simple. One has to do what one can to try to protect one's self.
Thanks so much for your astute observations, Figment!
Yes you are right, Mike Darancette! I stand corrected.
Either way, that number is just a teensy drop in the vast ocean of unpaid (and I'm beginning to believe, unpayable) federal liabilities. There isn't enough money in the entire world to pay off the promises the American political class has made to the American people.
And evidently, we're just too stupid to realize this. And so, having reelected the criminal to office, we get to join the ranks of the PIIGS, and experience the wonders of the ensuing social chaos.
Have you considered that the interest rate you’re paying will shortly be less than the rate of inflation?
This is just my opinion, obviously. And what I think doesn’t necessarily apply to everyone, because everyone’s situation is different.
My belief is that economic collapse doesn’t look like Mad Max, it looks like a third world country past its prime. Which means to the naked eye, everything looks normal, it just isn’t. People have short memories, and they adjust, and your kids or their kids grow up thinking this is how its always been. Particularly if they are public school educated, they will accept a view of why things are the way they are that is simplistic and wrong, but they won’t care to think past it.
1. I think its important to have your house paid off. If you are in reach of it, I would consider cashing out a 401k to finish paying it off.
2. If you are upside down, or you owe more than what your 401k could pay off, you might consider cashing out to buy a small house that you could conceivably pay cash for. If you live in an area that is high-priced, you might look at buying in an area that is cheaper with the idea of owning it mortgage free (like trading the north-east for a place in the south-east).
I don’t like the idea of walking away from a mortgage you took on in good faith but at some point you may have to. If possible you need to own your home outright even if its a smaller one in a smaller town.
3. More and more I like the mormon idea of a year’s groceries in the basement. I like to watch the prepper shows, and they usually show rather nutty people doing what they do for its entertainment value. But you don’t have to believe in imminent nuclear war to prepare. For me, its an easy question. If you lost your job today, how long would it take to find another one? Thats how much you need in your pantry.
4. Friends and family have to stick together to help one another through. Probably, you wind up being the one everyone else relies on, so you have to expect that whatever you have for yourself, you’ll need a little more to cover the odd niece or aunt that winds up on your doorstep. But being that person puts you in position to ask a favor from time to time too.
5. Others have pointed out that in hard times it gets hard to buy a house, which oddly enough makes rental property more valuable. In collapsed economies people have oft times rented out their primary dwelling and moved into a smaller one or with relatives. Owning a piece of rental property isn’t for everyone and isn’t even an option for everyone, but if you are handy and can deal with the problems that go with it, it could provide an income when you have no income.
So, again, you have to make a judgement. You might consider using your 401k to buy a piece of rental property if you can pay cash. If you don’t have a good handyman in the family, though, you could wind up with more problems than you want. Its just something to consider.
I’m not so sure about holding cash if that cash is losing value. I know, some say we’re headed for deflation, others for inflation. Flip a coin. I like having your money in several places if you have the money (including stocks) precisely because you don’t know which way it will go. But have the basics covered first which means house and hard assets. I wouldn’t try to outguess the market until you’ve covered those first.
It doesn’t take a world-wide systemic collapse to bring you to the brink. It just takes losing your job in a market where you can’t find another one. In my opinion, all this talk about the “cliff” is nonsense. We already ran off the cliff.
“But impoverish the people this way, and you have less discretionary money, less demand, in the overall economy. Businesses may well retrench against this background, cutting payrolls, production, etc. It’s “a perfect storm” in the making.”
This is already happening, plus businesses ( and horror of horrors, academia) all see the handwriting on the wall with respect to Obamacare and are taking anti-recovery steps to make sure they don’t have to pick up the tab.
Also as Figment mentioned, the RATS are salivating over all the “private money” in 401k’s etc. Left to their own devices, they will “steal” these monies, give the “owners” a piece of crap annuity that will give us a pittance back, spend all the money, and leave us with Social Security II (another bankrupt government program). They will crank up the “death panels” to try and “off” the recipients to minimize their “exposure.”
If you wanted to devise a system to make bums out of a once productive society, you could not do better than what’s being attempted now.
Just hope the nutless House GOP grabs what’s left in their crotches and stands up against this assault on our lives and liberties.
I’m a Dave Ramsey fan. We’ve simply focused on paying off debt, since it has a great return if we have deflation and reduces our risk in case of layoffs.
Well, that's one way to get the Medicare/Social Security systems back "into balance." The "death panel" to which you refer is the IPRB the independent payment review board a collection of some 14 or 15 presidential appointees, who may or may not be doctors or other medical professionals that is to say, a gang of folks who weren't elected by the people they supposedly serve, who are answerable to nobody but the president.
0bama's chief healthcare theorist Ezekiel Emmanuel, brother of long-term presidential buddy Rahm Emmanuel, now mayor of Chicago articulates the "ideological" underpinnings of the "complete lives" theory which will likely drive IPRB decision-making as to what health care expenditures will be allowed, and for whom. It is completely clear from this this article that health care rationing particularly WRT elderly citizens is precisely what we're talking about here.
In short, if you're 25 years old, with your "future ahead" of you, you get full-boat coverage. If you're 65 or older the Medicare cohort you must realize that you have already lived a substantial portion of your "complete life," and are therefore less worthy of consideration for Medicare reimbursement than a person half your age.
Not for nothing is the IPRB accurately described as a "death panel."
Dear vette6387, you wrote:
If you wanted to devise a system to make bums out of a once productive society, you could not do better than whats being attempted now. Just hope the nutless House GOP grabs whats left in their crotches and stands up against this assault on our lives and liberties.I couldn't agree with you more.
Thank you ever so much for writing!
Logic without morals would show that bumping off the baby boomers who are no longer paying taxes will help to balance the budget. I pray the death panels will be staffed with moral people and the economy improves so this grim possibility never happens.
Ten years ago, in addition to our home, we had about 50% of our savings in stocks, 40% in money markets and other bank accounts, and 10% in precious metals. Today we have purchased a small piece of farmland with some of those funds (representing 20% of our savings), we have 10% in stocks (in IRAs), 20% in money market funds, and the remainder (about 50%) in precious metals -- gold, silver and platinum. Years ago, I would have thought that allocation foolish, even radical. I no longer do.
The mere fact that the Dow is at roughly the same level that it was five years ago, before the economic meltdown, and before the amassing of the Obama administrations trillions in additional debt, the fact that the tax climate for business and manufacturing is more bearish than it has been in decades, and the fact that our energy and natural resource sectors are being handcuffed by regulation, tells me that being in the market at all at this point is very dangerous. The irrational exuberance of several years ago was nothing compared to the unrealistic levels of the markets today.
In addition, we are spending some of our savings in order to become more 'independent'. We upgraded our generator system, installed another 1,000 gallon underground propane tank, installed a hand pump on our well, installed a wood-burning stove in the basement, and, this spring, will be installing a geo-thermal heating/cooling system.
In addition to protecting one's life savings, we believe it is also important to become as 'independent' as possible as regards energy and natural resource allocation.
When we sit on our porch and look at our home and land, and consider the forty-plus years we have worked and sacrificed, it angers us more than words can describe to realize that our own government covets all that we have sacrificed to attain, and they not only seek to confiscate much of it, but they also believe they have the moral right to force us to share it with others whom they (not we) deem to be deserving to benefit from the fruits of our lifetime of labor.
Most conservatives feel the same way -- and I am sure there are many others who will be hit much harder than we. The bottom line is that the evil that is represented by this government is unprecedented in the history of our republic. And the fact that that evil is sending good, decent, hard working patriots scrambling in order to be able to hang onto at least a portion of the material results of a lifetime of honest work is despicable beyond description.
Best to you and yours, dear betty. There are troubling times ahead ...
One possible explanation for the Dow to be "at roughly the same level that it was five years ago" is that the Fed has been "juicing" the money supply, via its Quantitative Easing operations (that is, they're just printing money like there's no tomorrow). Arguably this has had the effect of boosting the stock market to make it look "good" in the run-up to 0bama's reelection.
According to Mike Burnick, an associate of Weiss Research,
During QE I for example, the S&P 500 rose 50.8 percent and the broader CRB Commodity Index soared 27.9 percent on the belief that massive money-printing would inflate new asset price bubbles.With each successive Quantitative Easing, there's been "less bang for the buck" in terms of juicing stock market averages. Now that we have QE III a/k/a QE Infinity [because this time, there is no end date on it], it appears the Fed is desperate to make things look better than they are for the stock market, and economic performance generally.
Meanwhile, the 10-year U.S. Treasury note dropped 5.3 percent and the dollar slid 6.4 percent.
During QE II, investors witnessed a similar, but more-muted response. Stocks rose 26 percent and commodities rose 26.5 percent while Treasury bonds slipped 3 percent.
But since QE III was announced on September 13, 2012, the results look quite different so far. The S&P 500 Index is DOWN 3.4 percent ... 10-year U.S. Treasury notes are UP 1.5 percent ... And the CRB Commodity Index has slipped 7.3 percent.
Once upon a time, the Fed was created by Congress, by the Federal Reserve Act of 1913, in which Congress conceded its Article I, Section 8 obligation to "...coin Money, [and] regulate the Value thereof...." to a wholly unaccountable new public institution.
I wonder: Is it constitutional for Congress to divest itself of a DUTY placed on it by the Constitution itself in the first place? If the Framers had wanted U.S. monetary policy conducted by an institution totally unaccountable to the People, they would have written the Fed into the Constitution. Rather, they left such matters mainly to the People's House, the Congress. ALL revenue bills must arise there in order to be lawful. But every single dollar of revenue has been depreciated each and every year, as if systematically, by the Fed itself.
Consider: a dollar worth 100 cents back in 1913 is worth 2 cents today. What on earth could it possibly be worth, after QE I, II, and III?
Dear Joanie, your precious metals position does look a tad radical. The 50-percent-of-portfolio allocation exceeds the "normal" guideline for long-term investors in more or less "normal" economic conditions: 20 percent (which is about where I am).
On the other hand, these days we are not in "normal" economic conditions at all.
Interestingly, it has been observed that gold always shows up "at the crisis points of history" times when monetary systems and governments collapse. Historically gold and other precious metals have tended to be excellent stores of real wealth even in times of crisis.
But here's a caveat: Because it was the "wealthy people" who bought gold to "store" their wealth, so to protect themselves during periods of economic crisis, Franklin Roosevelt confiscated all privately-held gold in 1932, by demanding (on pain of criminal prosecution) that all privately-held gold be surrendered to the Treasury at the conversion rate of $32/ounce. Why did he do this? Some observers say: Because he wanted all Americans to "share the pain" of the economic debacle of the 1930s equally; he thought it "undemocratic" that some might escape the pain because they had providentially laid up some solid independent means to get through bad times. [Plus the gold then became the property of the U.S. Treasury.]
If a socialist like Roosevelt could resort to a massive wealth expropriation of the American people such as this, why would we expect a radical Left Progressive like 0bama to pass up on a like opportunity now?
Dear sister in Christ, probably your best assets are your home and the farm land!
But it is my gloomy duty to remind you that ownership in land depends on security of contract. Yet at a time when our ultimate contract the federal Constitution is itself being thoroughly trashed, on what can we reliably depend as the basis of contract law? Plus there's also the risk of being expropriated by the IRS or even the local water-and-sewer board if you don't pay your requisite taxes, timely.... Or interventions by the EPA to tell you what you can and can't do with your own private property....
Lots of "moving parts" here!
Sigh, I'll just leave off, for now.
Thank you ever so much, dear sister in Christ for your (as ever) penetrating and gracious essay/post!
May God ever bless you and your dear ones, and hold you safe from harm!
Not to be over-looked is COPPER.. Copper ingots..
When gold, silver and platinum is seized.. copper may still be allowed..
An option that should be understood..
Fascinating. Depressing, but fascinating. Thank you so much for sharing your insights, dearest sister in Christ!
Not if it starts getting used.
Great observation, dear 'pipe! Thanks!
Oh, I so agree dear brother marron!
... to the naked eye, everything looks normal, it just isnt. People have short memories, and they adjust, and your kids or their kids grow up thinking this is how its always been. Particularly if they are public school educated, they will accept a view of why things are the way they are that is simplistic and wrong, but they wont care to think past it.0bama is counting on this.
BTW, I'm taking you up on your "advice": "I think its important to have your house paid off. If you are in reach of it, I would consider cashing out a 401k to finish paying it off."
I've been thinking about doing precisely that. But you have persuaded me to actually do it. :^) That, and to pay off all my debts which, fortunately, are not very large.
Thank you for your outstanding analysis, dear brother in Christ!
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