Argentina has done it. Ireland has done it. Poland has done it. Could the United States government be the next to confiscate some or all of the retirement accounts of its citizens? Do you need to worry about the security of your IRA or 401(k)? In this week’s Market Report, we try to bring clarity to a debate that has many of our clients concerned.
Mark Alyn: This is the Miller Report from the Birch Gold Group. Hi, I’m Mark Alyn. Our guests today, Phillip Patrick and Will Hart from the Birch Gold Group. Gentlemen, welcome to the program. We want to talk today about something that is in the news: IRA confiscation or nationalization.
Phillip Patrick: Yeah, definitely argument for it in the current climate. I think a lot of people have concerns. Places like Argentina, Ireland, and most recently Poland have all nationalized retirement accounts in some way, shape or form, and there are early noises here in the United States that we may be considering similar options here.
Mark Alyn: Why would somebody do that? Why would a government want to nationalize retirement accounts?
Phillip Patrick: I think that’s very simple. The government is rapidly running out of cash. China, our banker for so long, now selling U.S. Treasuries, not buying them, with lots of other countries joining in. Tax revenues are simply a joke, so the money has to come from somewhere. Right now, the government itself estimates that over $5 trillion is tucked away in American retirement accounts.
Mark Alyn: And so they want to get their little greasy fingers on that money so that they can spend it.
Will Hart: Yeah, it’s ripe for the picking.
Mark Alyn: Will, what’s happened in Poland regarding the nationalization of retirement accounts?
Will Hart: Sure. So basically they call it a pension overhaul. In essence, they’ve confiscated half of the private pension funds and that’s just it. There’s nothing anyone can do about it. People watched half of their retirement accounts just go to the government because Poland was broke.
Mark Alyn: They still have access to that money though? Or not?
Will Hart: To the half that was left.
Mark Alyn: Right. But the other half?
Will Hart: The other half? That’s gone.
Mark Alyn: Is there any indication that that could potentially happen here, Phillip?
Phillip Patrick: There is. First of all, it wouldn’t be new territory for the United States. The Treasury Department grabbed government pension funds at least three times since 2011 alone in order to plug temporary funding gaps. So it wouldn’t be brand new territory here in the U.S. The thing that a lot of people are concerned about is the My-R-A, or MyRA legislation that came out and was introduced by Obama in his State of the Union address. Under the plan, they’re suggesting that employees that work for companies that don’t offer 401(k) plans may be forced to undertake this plan and the plan will dictate exactly what you’re invested in.
Mark Alyn: In other words, if I’m working for Company X that does not have a 401(k), out of my weekly salary, they’re going to take a percentage and put it in there regardless.
Phillip Patrick: Absolutely correct, yeah.
Mark Alyn: What is that going to do to the value of the dollar?
Will Hart: I don’t think that would necessarily affect the value of the dollar. I think the government is doing a good job of printing the dollar and devaluing it themselves. But I don’t think this MyRA is going to have any effect on the valuation of the dollar.
Mark Alyn: It’s just the fact that we don’t have any control over our own money.
Will Hart: Correct.
Phillip Patrick: Correct. It’s early days and I think at this stage, it probably isn’t a huge concern. The concerning aspect is that you lose control over your retirement. The government ultimately can force you to invest in what they call a ‘G-Fund’, which, by the way, had a 1.5% return in 2012. It’s frightening, I think, more longer term. This could certainly be the first step in something a little more drastic like what we’ve been seeing in Poland or Argentina, etc.
Mark Alyn: Americans are not known for being savers. I think we’re among the lowest Western country that saves on a regular basis. We make money, we spend it. It’s time to start taking care of ourselves by saving money. The government has a need for cash. We all know that all governments need to operate. We’d like them to operate efficiently and they don’t always do that. During World War II and other times during our history, the government encouraged people to invest in America. And they did that by issuing bonds, they were called “war bonds”. And people would buy bonds every week with part of their paycheck as a savings account. People in the 50s and 60s and 70s and 80s, for gifts, for birthdays, would give American savings bonds. They pay very low interest rates, but America, the government, would get the use of that cash. Is that still going on?
Phillip Patrick: Well I would say this is perhaps a modern equivalent. I mean, we’re in big trouble today, albeit different to World War II, but certainly financial trouble. And the government craves access to capital. If this plan comes into effect and they force individuals to invest in government treasuries, I would say there would be many, many similarities.
Mark Alyn: What is a way of protecting ourselves from this potential takeover by the government?
Will Hart: Well, again, how do you dodge something like this? This is bigger than all of us and again, the way we look at it here at Birch Gold is that this is an option. Moving your paper, your dollars, your digital one’s and zero’s, into something that’s physical or tangible, like physical gold or silver, this is just, again, another option. Instead of just lining up.
Phillip Patrick: Yeah, I want to address that as well and, perhaps, talk about this. I mean, this is a very interesting topic, it’s one that a lot of our clients are really concerned about. The more I look at it, the less concerned I become, and I’ll tell you why. It doesn’t look like from Day 1 this administration has had a great deal of interest in paying down on our debt. We’ve opted instead, really, to inflate currency, to print money and to use that money, essentially, to stimulate the economy. I would say this government is doing what everybody is afraid of but I think that they’re doing it in a much, much smarter way. Instead of reaching in, Mark, and seizing your IRA, they can just print that money. Now, that gives them access to the capital that they crave. It gives them the money to go off and use. And the effect is still exactly the same, Mark, but instead of reaching into your account and directly stealing your wealth, they’re doing it longer term and they’re doing it through inflation.
Mark Alyn: They’re doing that on a daily basis, anyway.
Phillip Patrick: Correct, and that’s where I think gold becomes relevant to this. Because ultimately that’s where I see the issue and that’s where gold helps.
Mark Alyn: And Will.
Will Hart: Yeah and I agree actually with Phil. I mean, we may be all wrong and the government’s going to do what they’re going to do, but I think it’s just a sneakier way to slowly devalue the dollar and get what their long term goal is, which is basically to take what we have and move it over to them. And I think doing it kind of under the radar is America’s, at least our government’s, move.
Mark Alyn: That’s what they’ve done in the past for generations.
Will Hart: Exactly.
Mark Alyn: Not only this administration, but others before it and, unless we change it, even the future administrations will do it as well. We use the word ‘hedge’ which means protection. So let’s talk about physical assets – gold, silver. Can we take our retirement accounts and turn at least part of them into a hard asset easily, to protect and hedge against the government reaching their fingers into our pockets.
Phillip Patrick: Absolutely, Mark. That’s exactly what we do here at Birch and it’s a very simple process to achieve. So, yes.
Mark Alyn: And it’s easy to do, you take care of all the paper work and all of that.
Phillip Patrick: Of course.
Mark Alyn: You do all that. Is it an effective protection tool?
Phillip Patrick: Gold has shown over time to absolutely be an effective hedge and method of protection in terms of buying power, inflation and currency.
Mark Alyn: In fact, Birch Gold, one of your primary specialties is taking retirement accounts and turning them into hard assets. Is it not?
Will Hart: Absolutely.
Mark Alyn: Listen, if you have questions about turning your retirement account into gold and silver, and you have a question, you can email us at firstname.lastname@example.org. That’s email@example.com. Check out the tons of information from the strategists at Birch Gold by going to www.birchgold.com, that’s www.birchgold.com. And even easier yet call to speak with one of the Gold Specialists at Birch Gold. The number is (800) 355-2116, that’s (800) 355-2116. We’ve been talking with Phillip Patrick and Will Hart from the Birch Gold Group.
Will Hart: Thank you Mark.
Phillip Patrick: Thank you Mark.
Mark Alyn: Thank you. And thank you for tuning in, we appreciate that a lot. I’m Mark Alyn and we’ll see you on our next edition.