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Governments Targeting Retirement Funds… and What You Can Do About It
Doug Casey

International Man: Most Western governments, especially the US, have debt loads and spending commitments that guarantee they will eventually—likely someday soon—try to grab as much wealth as possible.

Retirement savings are a juicy target. But, unfortunately, they’re among the lowest-hanging fruit for any desperate government.

What’s your take on the situation?

Doug Casey: Let me remind you of something that I’ve said a number of times in the past. But it bears repeating because it’s so critical but overlooked, even while it’s so obvious.

And that is that the prime directive of any living entity—an amoeba, an individual, a corporation, a government, anything—is to survive. The government is an entity as distinct as General Motors or Apple Corporation, with its own peculiar interests. It isn’t “We the People”; that’s just a promotional catchphrase—propaganda. Its prime directive is to survive. And it will attempt to do so at any cost.

However, the US Government is already manifestly bankrupt. It has vastly more recognized liabilities than assets—forget about its huge contingent and hidden liabilities. But that’s just its balance sheet. Its income statement is equally out of control, running trillion-dollar deficits as far as the eye can see. To finance itself, it can only tax, borrow, and inflate the currency. Of course, it will do more of all three, but that will no longer be enough. It’s finally at the end game.

It’s inevitable that the government will now move towards confiscating, directly or indirectly, the huge pool of retirement savings some Americans—the prudent, productive ones—have put together. They’ll justify it with patriotic lies.

It’ll probably happen when the stock market melts down in earnest, we’re in the midst of a financial crisis, and the public is panicking. They’ll say, “people have lost so much money in the stock, bond, and real estate markets that we must safeguard what’s left. It’s best that we put all pension funds, IRAs, HR-10s, and what-not into a well-guarded communal pot, funded with sound government securities. We’ll put it in a lockbox and watch over it”.

Safety will be one way they’ll sell it to the scared and ignorant public. They’ll say we’re all in this together. They’ll say it’s time for solidarity. They’ll say that we have to keep “our” government solvent for reasons of patriotism. So let’s all hitch our wagons together and pull as one. They’ll conflate the interests of the government with the interests of society—which can sometimes overlap, of course, but are essentially different or even antithetical.

International Man: Argentina and several other countries have forced private retirement funds to buy unwanted government debt in the recent past.

What are the chances we will see measures like this again? Could it happen in Europe and North America?

Doug Casey: The only investment asset that governments can provide is debt—their bills, notes, and bonds. As I’ve said before, bonds are absolutely the worst place possible for your capital right now.

They’re a triple threat to your capital.

First is the inflation risk, which will vastly depreciate the dollars that the bonds are denominated in.

Second is the interest rate risk. Interest rates have already risen somewhat from all-time low levels, but they can and will go much higher. Higher interest rates mean proportionately lower bond prices.

Third is default risk.

Of course, the US Government is unlikely to default, per se, because it can print up unlimited numbers of dollars to pay off its debt. But governments can and do default, just like corporations.

The Argentine government is a classic example of that. I used to collect worthless currencies from various countries. There are hundreds of them. The Argentines alone have had several different pesos, plus something called the austral, just in living memory. The Brazilians have been almost as profligate. They’ve had several different cruzados, some cruzeiros, and are now using the most recent incarnation of the real.

I also have a bunch of defaulted bonds somewhere, typically with attached but unpaid interest coupons. I’ll have to dig them up. They’re excellent artwork, as well as object lessons in human stupidity.

International Man: Young adults saving into IRAs, 401(k)s, and other retirement accounts won’t be able to cash out for several decades.

What are the chances the government will change the rules before they retire?

Doug Casey: The chances are 100%. One proof of that is how they’ve changed Social Security over the years. Right now, individuals pay 6.2% of the first $147,000 of earnings, plus an equal amount from their employer. So over $18,000 goes to the fund as a “contribution.” It’s a major tax. Today, people pay so much in Social Security taxes that it makes it much harder for them to put aside money on their own. Plus, its very existence seems to obviate the necessity of saving for retirement. It’s a self-perpetuating disaster.

The money you put into Social Security has always been after-tax money, but it started out at 1% with a $3000 cap. The camel got its nose under the tent by making it seem trivial. But at least when you got money out of Social Security, it was tax-free. Since 1984, though, it’s been mostly taxable. In the future, I suspect, they’ll raise the retirement age for full benefits as well.

Social Security is bankrupt, despite constant increases in “contributions.” But since it’s always been “pay as you go,” the very definition of a Ponzi scheme, bankruptcy was always guaranteed. Worse, the “fund” has never been invested in productive assets but only in more government debt. This means its assets are—at this point—just a phantom, a chimera.

Young people who count on Social Security are relying on an ill-conceived, poorly managed, and immoral welfare program. They’ll wind up getting what they deserve—not what they expect.

International Man: Retirement funds are typically weighted towards so-called “safe” assets like bonds.

How do you think the traditional way of saving for retirement will work going forward?

And, what can the average person saving for—or in—retirement do to avoid becoming financial roadkill?

Doug Casey: Despite—or in many ways because of—all the dangers in the financial markets today, it’s more important than ever that young people diligently produce more than they consume and save the difference. Everyone should build and accumulate capital to sustain themselves, as well as take advantage of opportunities when they arise. If you don’t do that, you’re no better than a serf.

It’s critical that you save to build capital. The question is where you should put it.

We are in an era where governments have become overweening; their currencies are all heading towards the dust bin. Investing—which is to say, allocating capital to produce new wealth—has become much harder and more unpredictable with insane taxes, inflation, and regulation levels. Other than saving with physical assets, precious metals, land, things of value, or perhaps a business that you understand and run yourself, you’re forced to be a speculator.

Most people, however, don’t understand speculation. They confuse it with gambling and try to second guess the fluctuations of the markets. It usually ends badly.

It’s most unfortunate, but in the chaotic world of the 2020s, the world of the Great Reset, and the Greater Depression, we can only be sure that traditional methods of saving are pretty much dead ducks.

It’s hard to say how the world is going to sort itself out and reorder after the current system changes radically. But the world, including the US, is heading for some very rough times.

As the impetus behind the International Man project, Doug Casey is an American-born free market economist, best-selling financial author, and international investor and entrepreneur. He is the founder and chairman of Casey Research, a provider of subscription financial analysis about specific market verticals that he has focused his investing career around, including natural resources/metals/mining, energy, commodities, and technology.

Since 1979, he has written, and later co-written, the monthly metals and mining focused investment newsletter, The International Speculator. He also contributes to other newsletters, including The Casey Report, a geopolitically oriented publication.

Doug Casey is a highly respected author, publisher and professional investor who graduated from Georgetown University in 1968.

Doug literally wrote the book on profiting from periods of economic turmoil: his book, Crisis Investing, spent multiple weeks as #1 on the New York Times bestseller list and became the best-selling financial book of 1980 with 438,640 copies sold; surpassing big-caliber names, like Free to Choose by Milton Friedman, The Real War by Richard Nixon, and Cosmos by Carl Sagan.

Then Doug broke the record with his next book, Strategic Investing, by receiving the largest advance ever paid for a financial book at the time. Interestingly enough, Doug’s book, The International Man, was the most sold book in the history of Rhodesia.

He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, Maury Povich, NBC News and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People, and the Washington Post.

Doug, who divides his time between homes in Aspen, Colorado; Auckland, New Zealand; and Salta, Argentina, has written newsletters and alert services for sophisticated investors for over 28 years. Doug has lived in 10 countries and visited over 175.

In addition to having served as a trustee on the Board of Governors of Washington College and Northwoods University, Doug has been a director and advisor to nine different financial corporations.

Doug is widely respected as one of the preeminent authorities on “rational speculation,” especially in the high-potential natural resource sector.

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