Posted on 10/26/2008 11:10:10 PM PDT by newbie2008
Monica Showalter is the South America expert on the editorial staff of Investor's Business Daily. Yesterday I wrote her asking for her thoughts the proposed expropriation of private pension funds by the government of Argentina. Tomorrow's paper will carry her editorial, which she has kindly authorized us to excerpt:
...U.S. Democrats in Congress are mulling like-minded moves to scrap 401(k)s and transfer them into government-managed "guaranteed retirement accounts" with a 3% return, according to James Pethokoukis of U.S. News & World Report (full disclosure: Pethokoukis is a former IBD reporter).
Before they charge ahead, they should look what happened since Argentina's announcement: Its stock market lost 23% of its value in two days, for a 57% loss since January. The losses spread to other markets in Brazil, South Africa, and Spain.
Markets don't like expropriation of private property -- including savings. And this takes away a key source of private capital. Moreover, one quarter of private pension assets were by law invested in Argentine stocks, making up about a quarter of the bourse's value. So the seizure of pensions amounts to government ownership across the entire private sector.
"It's a stealth nationalization of every single business in the country," explained Diana Mondino, an Argentinian economist at Universidad del CEMA in Buenos Aires. "Will (the government) influence those companies? I would think so -- anyone who owns 25% of a company will have a lot to say about how it's run."
***
Nationalization may pay the bills now, but it poisons prospects for growth. For that reason, Argentina's sovereign bonds now trade at 25 cents to the dollar and yield 30%.
With no growth, another default becomes more likely after the pension move. The market is acting accordingly.
Yet Congress resists reforming the U.S. public pension system as its liabilities pile up as baby boomers start to retire.
If the next president sees private corporations as the class enemy and taxpaying as "patriotic," and Congress continues to look at private 401(k) assets as a public piggy bank, there's little doubt the same mess in Argentina could happen here, too. It's worth thinking about.
Years ago I heard Jessie Jackson talk about pulling money out of personal pensions. I thought it was just rectal hot air.
I’m cashing out my 401k the nanosecond they do this.
It looks like we are reaching the point where the only thing standing forestalling complete government dictation of our control over our retirement funds is the slender reed of public opinion. Not the Constitution, not the Supreme Court, not centuries of Anglo-American legal tradition and philosophy, nothing but public attachment to their IRAs, which may rise and fall with the market.
I’m sure the first thing they’ll do is remove your right to do that.
3%! Oh man. That just blows. The return rate on our primary retirement accounts is going to be worse than your typical 1year CD. How truely........vomitous to think about how little your money will grow all in the name of dems controling our retirements.
Better move them while you still can to another investment vehicle without penalty. Why cash them out if you don't have to and pay all that tax? A nano second after legislation is too late.
Once 401ks mature and you begin drawing them down for reirement income, you are stuck paying tax on that income.
All 401ks are besides a good tax break while you are buying them, is a good source of guarantied revenue for the government for "retired" people once they are drawn down.
Add your old age security and other company pension income to the income from 401ks, and you could end up paying more back in taxes than you saved in the first place.
If that is the case, then you don't want to keep your 401k to maturity. You'd want to roll them into something else while you can. People really have to think their situation over carefully before retiring, to make sure they don't get screwed.
Folks, read the following about Argentina. It will give you a peek past the propaganda from global fascist government media sponsors and might save your life in the near future.
Lessons from Argentina’s economic collapse
http://www.powerswitch.org.uk/portal/index.php?option=com_content&task=view&id=2079&Itemid=2
You’ll discover some of the causes of the problem there near the end of the account (see “Benetton” and related).
You may not even be able to roll over your 401ks as it is.
There are 401k rules, and more rules to the types of IRA you can roll them over to, and from there to other investment vehicles like bank shares.
Everyone’s situation is different. but if you are hitting that age very close to 591/2, you’d better look what your options are.
“I’m cashing out my 401k the nanosecond they do this.”
You will be at least one nanosecond too late. They certainly aren’t going to let any of us get away with that. Once the Dems decide to confiscate our 401k’s, they will also decree a freeze on withdrawals; maybe even a retroactive freeze (meaning you have to repay anything you took out).
The Dems know that our 401k’s are actually their money, and they aren’t going to let us get any of it.
BTW...
The fair fixed exchange rate (1 Argentine peso per US dollar) did not cause the depression there, BTW (implemented way back in 1991). The depression was caused mostly by overly heavy deficits and subsequent defaults.
Foreign interests (in southwestern Europe and even less developed countries) were allowed to buy monopolies over Argentinian production, much of which production was then done in foreign countries. Argentina eventually imported more from those foreign interests than it exported. The deficit spending was done to cover the business deals between too few Argentinians and those foreign interests.
Finally, the inevitable default occurred. Does that seem like familiar policy?
From the progressive/collectivist/socialist/’rat crime syndicate... a WEALTH REDISTRIBUTION ALERT!
I remember that too and I believed he was serious. These ideas float around liberal circles until the time seems right to seize control. They are patient to wait.
Personally, I am very concerned about this idea of taking our 401K funds away. And yes, I DO believe that this is in the cards. Frankly, my wife and I have been discussing this since the news was first published that the Democrats in Congress were seriously looking at this idea.
So our plan is to immediately cash out and take the penalties as soon as we hear that Obama has been elected president. Keeping as much of our funds as we can is only smart and prudent.
Letting these thieves come in and take it is not only foolish but will encourage them to look at other sources to steal from. What would be next. Nationalization of the American Home. Everyone deserves a home! We, (the Congress), are taking yours to give to one of our poor constituents. Oh, you need a place to stay at now? Hmmm, come back in 60 days and we’ll see what we can do for, (to), you.
This is not just a slippery slop, but a full scale plummet off a high cliff.
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