Guest Post by Mickey Ellison:
There have been rumors going around for years about how the government wants to take over our retirement accounts. If you have email, someone has probably sent you an email that looked really scary regarding this very subject.
Last year I began to tell people that under the right circumstances, many Americans would give their 401(k)s and IRAs to the government for security rather than those retirement accounts being taken. Let me give you that theory.
Many believe that the meteoric rise in the stock market has been driven by the Federal Reserve. I’m not here to debate that in this writing. The 401(k) has been around since about 1980, and the first people to start retiring with their 401(k) savings as a major source of retirement income would have been around 2000. Remember those days just prior to 2000 when making 20% returns was easy? Then the unthinkable happened, the technology bubble burst, and from March of 2000 to October of 2002, many lost more than 50% of their savings. From 2003 through 2007, many were able to recover from those losses only to see that same thing happen to them in 2008. The stock market hit a low in March of 2009 and today we are back to all-time highs.
Since the crisis of 2008, the US government has added about $7 trillion in new debt with no end in sight, and the Federal Reserve is the biggest customer. Also, much of what the Fed bought was short term meaning that it will need to be refinanced relatively soon. Recently the Fed has begun to buy fewer treasuries. There is no market large enough to buy all of the debt that we are creating every year, and if there was, who would buy that debt at the low rates necessary to keep us from going bankrupt?
As I mentioned earlier, the 401k came into existence around 1980, and over two decades it has become the primary retirement savings vehicle for most working Americans. The year 2000 would be about the time those people that started saving in 401ks would be needing that money for income. We’ve had two 50%+ drops in the stock market since then, and if there is a 3rd, I think people will beg for security, and conveniently there will be the MyRA.
Now if I had debt to sell, and no market for that debt at the interest rates I want to pay, how could I create the demand? If I could cause the stock market to crash, voila, the demand is there. Not only for the trillions that are currently in the retirement accounts but an never-ending demand for Americans saving for retirement; All in the name of SECURITY.