Are Your Retirement Savings in
merica’s national debt has soared more than $4 trillion this year alone... It now totals $26.7 trillion. That’s $81,000 for every man, woman, and child. It’s around the value of every residential dwelling in the country. It’s about 130 of Jeff Bezos’ fortunes. It’s an astronomically large figure...
to fund the government – and there are plenty of buyers. Until those buyers disappear, that is. Over the past six centuries, there have been six different reserve currencies – each lasted for around a century, give or take a decade or two. Depending on how you measure it, the U.S. dollar is in the last inning or two of its dominance of the global financial system. There may come a time – sooner than you think – that the dollar falters. And then, even the heroic efforts of Fed Chairman Jerome Powell won’t be able to deliver the U.S. government the cash that it requires. Don’t forget... the national debt is just part of the picture. There’s also $1.2 trillion in state debt and $2 trillion in local debt. The real fun, though, comes in unfunded liabilities, which are future expenses that Uncle Sam has committed to paying but doesn’t know where he’s getting the cash from, like $20.7 trillion for Social Security and $32 trillion for Medicare... Add it up, and America’s total unfunded liabilities stand at $154 trillion. Faced with a still-escalating debt burden, the U.S. government might then go “where the money is” – to paraphrase 1930s bank robber Willie Sutton, when asked why he robbed banks. One very obvious destination: the $28.7 trillion in Americans’ retirement assets, including around $8.3 trillion in individual retirement account (“IRAs”) and in employer- sponsored 401(k) plans, according to the Investment Company Institute. It wouldn’t be difficult for the U.S. government to gets its hands on your retirement assets.
And it could be paid off tomorrow if the U.S. government raided one of the biggest pools of capital on earth... one that partly belongs to you. Right now, Uncle Sam can get all the money he requires with a few keystrokes at the Federal Reserve. That’s thanks to the virtually insatiable and (for now) guaranteed demand from governments and investors around the world for the U.S. dollar, the world’s reserve currency, for its usefulness as a medium of exchange, store of value, and unit of account. There may come a time – sooner than you think – that the dollar falters. And then, even the heroic efforts of Fed Chairman Jerome Powell won’t be able to deliver the U.S. government the cash that it requires. The U.S. dollar enjoys “exorbitant privilege” – a term coined by French politician Valéry Giscard d’Estaing – as the world’s reserve currency. Without dollars, nations are essentially frozen out of international trade and the global economy. So the Fed can sell unlimited volumes of U.S. Treasury securities
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September 2020
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