Things are Getting Interesting

When the paychecks of politicians start getting withheld due to insolvency, then you know things are bad, and about to get worse for taxpayers, as politicians will redirect their pain to the masses faster than you can say “increasing taxes slows growth”.

Since Central Bankers will maintain interest rates as low as possible for as long as possible to prevent the excessive govt debt from blowing sky high, it will not only be Chicago pensions that find themselves insolvent. As Chicago and other bankrupt govt’s have also realized, raising taxes to paper over govt lies and mismanagement only weakens the economy more, as businesses and people simply leave. So, what is a desperate govt to do when they are unwilling to look in the mirror and admit their mistakes? The answer can be found in your 401K and IRA.

Even though a 5th grader could figure out that keeping interest rates near zero for over 7 yrs would harm pension and insurance funds, not to mention seniors that now can’t live on fixed income and need to take part time jobs away from the youth who are supposed to pay for the decades of abuse by govt; our Ivory Tower policy makers, with no practical experience, are finally concluding that exceptionally low rates may be dangerous.

If you don’t think that the “solutions” being discussed behind the curtain are real, you will be financially disappointed.  Twisted pointed out quite a while ago that the treasure trove of real capital sitting in retirement accounts would prove too tempting for self-interested bureaucrats, who have already proven with the theft of Social Security and the forced tax of Obamacare that they are more than capable of stealing your retirement (for the the good of the nation, of course). As was pointed out last week, the Social Security and healthcare Ponzi will come into focus next year when they move into cash deficit.

Since Europe and Japan are already in the twilight zone of negative rates, and their banking systems and public debts are in worse shape than ours, you will see the resulting civil unrest erupt in the periphery first, as career politicians choose to support their lifestyle over those of the great unwashed sheeple. The European voters will have their next opportunity to eject the establishment in June, when Brits vote to exit the unelected EU establishment. The US establishment and Chief, predictably started the fear campaign by saying Britain would go to the back of the queue if it exits the EU. The irony is that Britain used the same scare tactics to prevent Scotland from succeeding from the UK in 2014.

How many Americans would favor a political Union with Canada and Latin America, where an unelected tribunal like the EU can supersede the US Constitution and laws? Obama and his clueless clan would overtly have no problem with it, but the sad reality is freedom loving Americans are actually doing the same thing everyday with only token outrage. US elections will demonstrate how pissed off they really are, while the French and Germans will have to wait until 2017.

Unfortunately, our days of wilful neglect will come to an end as worried capital from the periphery starts accelerating towards the core (US Dollar), killing exports, increasing dollar-based debts, and stock prices (which due to being the only market outside of the debt market that is big enough to absorb global capital flows, will likely double again, as the govt debt bubble pops). Blue chip stocks will be the new safe haven because they have never defaulted and you will get something back, provided you register your shares in your name, versus the standard method of “street name”. When govt’s default, you get nothing.

The Fed, being a decade late and a few trillion short, will raise rates to pretend to save govt pensions and to avoid being labeled a serial bubble blower, which will only attract more capital from abroad and destroy the balance sheets of companies and countries holding too much debt, which includes the balance sheets of the Fed, ECB, and BOJ.

Keep your ear to the ground like the Indians used to do , things are starting to get very interesting…and keep your hand on your wallet (and retirement account).

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