February 4, 2014
By: Kelly Diamond, Publisher
Have you ever made a decision to do something… and later realized that you would’ve done things differently had you known about X, Y and/or Z? The decision you made was based on the information you had, and you needed to make a play one way or another. As my dad used to say, “You make the best choice you can with the information you have. No regrets.”
I live by that. I’m not all knowing. I won’t make all the perfect choices in life. I’d like to think that I make educated choices, and take calculated risks. But I absolutely have those moments where I say, “ARGH! If I only knew about XYZ!!! I wouldn’t have done things that way…” I don’t kick myself for long before I pick up and work with what I got and move on… but still, everyone gets that at one point or another.
I share this with you because on more than one occasion I’ve been accused of “selling fear”. Some say it with cynicism, others say it with praise… but either way, it boils down to the same allegation. I don’t think providing information is necessarily “selling fear”. Fear is often, in my experience, rooted in ignorance. So, for example, if you knew nothing of communism, but I constantly told you that communists are out to get you, and you bought into that, THEN I’d be selling fear. But if you knew what communism was, and I pointed out all the tenets of that manifesto unfolding in our society, and you agreed, I’d not be selling fear. I’d be making observations about something you already understood.
Obviously, I present everything through the lens of an unabashed libertarian who is painfully cynical of all things government. But my cynicism is not totally unwarranted given the preposterous behavior of governments around the world, with the United States leading the charge.
When the banking collapse hit Cyprus, there was very little anyone could do to sugar coat it. Even the politicians and the Eurozone officials struggled to spin their “solution” of taking pensioners’ money to “bail in” the banks as a “good” idea! And they were TRYING to make it sound good!
Through sketchy and irresponsible fiscal policies, encouraging risky banking, and reckless bailouts, some governments are proving to be unreliable with anything tied to money or wealth. However, there are a few spots left on the globe that see this as an opportunity. Governments like the United States are creating a market for responsible banking.
Let’s go over some of the things that have transpired in the past couple weeks:
1. HSBC London went through a little “phase” of denying account holders access to their cash above a certain amount. It’s one thing to ask what the money is being withdrawn for (although it’s really none of their business), it’s another to deny the withdrawal without PROOF of that reason!
One example given by BBC.co.uk is of a man who wanted to withdraw 7,000 Pounds to repay a loan he’d taken from his mother. First they asked what the money was for. He explained he was repaying a loan. The bank asked for a letter from his mother to corroborate his explanation! LITERALLY! Well, he didn’t have one, so he had to haggle down the amount he could withdraw. They finally allowed a 3,000 Pound withdrawal, stipulating that he could not make another withdrawal of that amount in the same day.
NOT paying out for large withdrawal requests is highly suspect and absolutely something to watch with great caution and concern. I don’t like the idea of banks NOT paying out to their customers. The excuse that it is for the customers’ “protection” is rather weak as well.
2. Well, you know times are rough when an article in PBS shows up with an economist strongly advocating a run on the banks! Did I mention that this article was from PBS??? (Take a moment to let that sink in…) He drives the point home that he’s not making a cent in interest on his money, which is reason enough to pull the money out. But he tries to even make the argument that we put money in banks to keep it safe. This would be true if banks operated with even a modicum of responsibility. They don’t. They lend up to 90% of their holdings and essentially could never pay out to all their customers if there was in fact a run on the banks. Moreover, the FDIC account doesn’t have enough to cover a full run on the banks either: “as of Sept. 1, about $41 billion in reserve against $6 trillion in insured deposits”.
The US Federal Reserve (a.k.a. “The Fed”) is seriously tampering with the American markets to the point where they are not just devaluing the dollar, and perpetrating a “reverse Robin Hood” of sorts by stealing from the poor and giving to the select rich, they are pouring money into volatile emerging markets like Argentina. Where did I last see something about Argentina? Hmmm… OH YES! HERE!
But Harvard Economics Professor, Terry Burnham, isn’t the only one who sees the writing on the wall. Matthias Chang from globalresearch.ca gives a rather stunning and disturbing break-down of how money deposited in a bank no longer belongs to you. Basically, as a bank account holder, when you hand over your money for them to hold, you are lending it to them. And by lending, I mean you are giving it over to them in hopes that they will pay you back as you request that money as withdrawals. Something to keep in mind, especially in the US and UK.
3. Perhaps you had nothing better to do than watch the State of the Union address from President Obama on January 28th? And by nothing better to do, I mean someone kidnapped you, strapped you to a chair in front of the television that was bolted to the ground and taped your eyes open. If that was you, then you might have heard the tiny little bit about the “MyRA”. (Instead of IRA, they called it My RA”. Cute right?)
If this were proposed in a total vacuum, and nothing else was amiss in the banking industry, perhaps I’d not think much of it. But the global (and even domestic) context in which this was proposed could be something with bigger implications moving forward. For now, it is basically a means of providing the working poor a path to saving money for retirement.
The barrier to entry is practically non-existent with a mere $5 requirement to start the account. Once they get to $15,000 the money must be rolled over to a regular IRA. They can withdraw the principle without penalty, and the money is deposited into their account post tax (as is the case with the regular IRAs).
The interest is something like 2%, but here’s the catch: it’s backed by US Treasury Bonds. So, essentially, Obama is selling the US debt to working-class Americans. Evidently the state lotteries and the inflation begotten by the Fed’s printing press wasn’t enough! Let’s sell poor people the debt!
Some are seeing this as a beginning to the US government making a grab for Americans’ pensions. I don’t know if that’s the direction in which this is necessarily heading. Right now, with the cut off at $15,000, I don’t see this as a path to paying off the debt or solving the lack of retirement savings amongst the poor. You can’t make more than $191,000 per year to qualify for this “MyRA” program. But who makes six figures and invests in the US debt, much less at a ripe 2% interest?!
While I don’t know where this program is ultimately heading, it’s a non-starter in terms of being something beneficial. Remember when people invested in GM and the government took that company over? The pay-out was tragic. The ones hurt most were the employees. I don’t see this program ending up much better.
What does all this mean? It means money isn’t safe in the US or England. That’s the cliff note summation. It means the US and Britain have good reason to prepare and worry about a run on the banks because they are both on unsustainable courses in terms of fiscal policy. It means they suck, and you can absolutely do better for yourself and your money than rely on some cut-rate government retirement program.
Self-directed IRAs or SDIRAs, provide a considerable amount of control to you, the account holder, and that alone is a valuable feature. More importantly, you can invest in non-traditional stores of wealth such as real estate and precious metals. This sort of flexibility can be tremendous if you are looking for more security, returns, and stability than the typical bank and government programs out there. Paul Seymour did a great, detailed run-down on SDIRAs for GWP Insiders. But if even this short synopsis of SDIRAs has piqued your interest, get a consultation and see if it really is for you.
What have you got to lose? Well, you lose 30 minutes of your time if you conclude they are not for you. You could lose a lot more if this turns out to be one of those, “I would’ve done things differently had I only known about SDIRAs…”