| By Bill Haley 3/31/2016 updated 9-7-2019 For decades, liberal politicians, both Republicans and Democrats, have been eyeing the massive amount of money in personal retirement accounts. Retirement Assets Total $29.1 Trillion in First Quarter 2019. Most politicians and bureaucrats believe that all money belongs to the government and ponders how it is unwise to allow citizens to control so much money in private accounts. Political and economic realities inhibit politicians and bureaucrats from taxing your money above roughly 17% of GDP at the federal level. At the same time, federal politicians and bureaucrats spend over 20% of GDP. That 3% to 5% differential of GDP is the federal deficit. The total debt stands at $22.5 trillion in September of 2019 on a GDP of $21.3 trillion. That full $22.5 trillion and growing debt needs to be borrowed continuously. |  |
 | Basic economics state that the treasury department needs to set the interest rate on treasury bonds high enough to attract that $22.5 trillion. 1% higher interest rates cost taxpayers an additional $225 billion per year, inhibiting government spending. Requiring by law, a percentage of pension and IRA funds to be invested in treasury bonds directly would relieve a portion of debt burden and keep interest rates lower; however, would receive tremendous righteous pushback. |
Starting to Put Retirement Accounts Under Bureaucratic Control Over the last several years, the Department of Labor (DOL) has expanded the fiduciary rule. A greater percentage of retirement funds will need to be managed by a person with Fiduciary Responsibility. A fiduciary is increasingly under government control. Politicians and bureaucrats feel empowered to attain additional control over the types of investments that they made tax-exempt. |  |
 | Some politicians have thought of an underhanded way to control and take your retirement or investment money. Using fiduciary responsibility laws, bureaucrats could try to force more retirement funds into government bonds. Quite simply, bureaucrats could assert the power to decide what is responsible or what is irresponsible retirement planning. Misusing this power is corruption; however, corruption happens until someone stops it. |
The Nudge to Invest in Government Debt If the treasury department is having a hard time finding buyers of new or rolling federal debt, they will be under intense political pressure not to raise interest rates and consume a higher percentage of the federal budget. The members of the DOL could just inform money managers and pension plans that are fiduciaries; that a certain percentage of the money they manage needs to be in federal government bonds. If bureaucrats go down this path, to keep their certification or qualification as a fiduciary, money managers will need to push (nudge) their clients’ money in the direction of government debt. |  |
 | It does not need to be a good investment for the government to claim that it is. Many people will wrongly conclude that reason, and common sense would rule out, and they could prove that they could have a responsible financial portfolio without federal government bonds. Sorry, that is not how government bureaucrats work; they do not need to use common sense or prove their point. They are the government; thus, in their eyes, smarter and wiser by definition. So, what is the big deal if more of someone’s money is in government bonds, is that not a good investment? First, that is not liberty, and the people do not have to follow a government edict unless they can explain why they should not. There are numbers, stats, and other data that people could show that US debt bonds are secure and a good investment; however, the opposite can be concluded and demonstrated as well. This decision does not belong to politicians or bureaucrats. This is a liberty issue. |
The Inflation Tax Whenever the Federal Reserve (FED) creates new money from thin air, the value of those new dollars must come from somewhere. The FED has created many trillions of dollars since the 2008 market crash. The value for these trillions of new quantitative easing (QE) dollars comes from existing dollars and long-term contracts and investments. The people holding these $22.5 trillion of government bonds pay a large share of this inflation tax. |  |
 | The government through the Federal Reserve is stealing massive amounts of wealth from the dollars in your pocket, in your investments, in your bonds, in your pensions, in your contracts, in your salary or anything delineated in dollars. The inflation tax often takes years to be fully realized as there are many places for money to hide in the entire world. The Fed’s Balance sheet of $3.761 trillion (9-4-2019) cannot be paid easily in a year. Many relevant factors involved are hidden and complex; however, a 2% inflation rate demonstrates roughly $0.4 trillion of inflation taxes are paid every year. |
Never Letting a Crisis Go to Waste If the stock market crashes and people lose half of their retirement values, many politicians would be able to make a convincing, not good, but compelling case that it is not in a client's best interest for their retirement funds to be void of ‘secure’ government bonds. A fiduciary must give advice and manage retirement accounts in the best interest of their clients. In a very similar deliberation 14 years ago; unfortunately, liberal politicians won the debate regarding allowing a portion of Social Security funds into individually controlled accounts. In a time of crisis where people see half of their wealth vanish before their eyes, the free market proponents will have a tough time in that debate. |  |
  | Government outlays increased from 18.8% to 24.3% of GDP after the 2007-2008 crash, thus taking scarce capital from capitalism in a time of crisis. The Treasury Department will likely be scrapped for cash again if we go through another market crash, which many people are predicting will be much worse as a result of the heightened levels of government debt. That debt increased from 61% of GDP to 106% of GDP (2006-2019). $8.5 trillion in 2006 to $22.5 trillion in September 2019. The growth of the Fed’s Balance sheet is an additional deleterious condition as it grew from $0.87 trillion (2006) to $3.761 trillion (9-4-2019). In conclusion, with interest rates already at historically low rates, the debt at the highest levels, and the Fed’s balance sheet at unprecedented heights, the politicians will be looking hard at the untapped $29.1 trillion of retirement funds to bail America’s government out of the next recession. The Fiduciary responsibility laws are a door into this massive vault in which politicians and bureaucrats might try to enter. This would be disastrous, although, the temptation would be overwhelming with the populist calls of “do something!” |
