The general case for holding silver continues to improve as the MFGlobal and HSBC scandals confirm the absence of any rule of law or justice in the global financial system. The Peregrine Financial fiasco only serves to verify this somewhat jaded viewpoint.
Furthermore, the Cyprus “bail-in” or savings confiscation debacle makes it perfectly clear that keeping more than a small portion of one's assets in the financial system is increasingly unwise and could be subject to greater risks than most investors think.
Add to this situation a dysfunctional government, the media's overwhelming daily propaganda, and the fact that the rest of the world is sick and tired of being bullied by the United States. Also understand that many nation deals are being forced to bypass the un-backed fiat U.S. Dollar, and it is becoming increasingly clear that the days of paper fiat currency are numbered.
Implications of the Cyprus Bail-in
Being “Cyprussed” is probably on the table if the U.S. dollar eventually collapses. The monetary powers did not state this quite so directly, but it was clear enough.
So what is left for the reasonable person who has worked hard and saved a few pennies? Not much, but silver is certainly high on the list as an investment vehicle and hedge against such a scenario.
Sadly, the majority of the American population does not have much saved, and the lucky ones who do have wealth stored are usually holding it in the form of real estate.
Perhaps one good thing is that before the projected fiat crisis is over, Keynesianism will have been debunked for a long time. They will just have to follow what the government says or what the real market dictates.
If Washington initiates a Cyprus type savings confiscation action here in the United States — which could occur as early as this year— most media consuming Americans will probably be conditioned to think it is a good idea, especially since it will not really affect them.
The growing confiscation of savings risk continues to make a good case for investing in precious metals that has been driving both new PM investors and the mainstream into the market. Silver confiscation currently seems unlikely given that it will be much easier to go after pensions, other retirement accounts, and/or bank deposits first, since they are mostly in electronic form.
Retirement Plans at Risk
We consulted with a retirement plan potential to get a sense of the vulnerability pensions and retirement plans:
The Federal government sees retirement plans as a form of "tax expenditure" in much the same way as the mortgage interest tax deduction. Nevertheless, retirement plan contributions are not an outright tax "give-away" like the mortgage interest deduction, but they are merely a deferral on taxes being paid.
Still, that logic will probably not matter for long. Thanks to the almighty ten-year budget window — and the fact that the U.S. government will need it all well before then — what you know today as 401k, 403b, etc… retirement plans will probably no longer exist in the not too distant future.
The Possibility of a Forced Treasury Allocation
Even if there is no mandated minimum U.S. Treasury bond allocation in pensions or 401k plans, even worse things could be in store. If the trend follows the healthcare and student loan template, no company-sponsored retirement plans will probably exist in just a generation.
Pension savers will very likely all get shunted into a version of the Federal government's "Thrift Savings Plan". In this scenario, you might expect a mandatory 50% Treasury bond allocation in your pension portfolio.
Salary Deferrals and Withdrawal Penalties
Such a bail in plan could even include a mandatory ten percent salary deferral for everyone earning money in the United States, perhaps combined with a roll-back of the tax-deductibility of those deferrals. These may even be considered "contributions" since you will see little back in return later on. As such, the incentive for an employer to "match" your pension plan contribution will become a relic of the past.
Furthermore, the penalties for early withdrawal will remain and will probably be made even more draconian. For instance, an increased 30% penalty for early withdrawal could be instituted versus the current 10% penalty, along with an increase in the non-penalized withdrawal age from 59.5 to 65 or higher.
When things get really serious — yes, even more serious than they are now — the retirement plan marketplace is a big target hanging right over the middle of the government’s financial bull's eye. They will come after these very tempting plans. And their tax-haven value will very likely decline over time.
About the time the typical person will say that, "it’s not even worth it to contribute anymore", they could easily mandate your contributions, in a similar way to how the Social Security system is currently funded.