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 I was scanning the news today when I came across an article that caused me to say, "Damn! I'm going to be right again."

 WASHINGTON -- Debt ceiling negotiators think they've hit on a solution to address the debt ceiling impasse and the public's unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress...
   Legislation approved by the Super Congress -- which some on Capitol Hill are calling the "super committee" -- would then be fast-tracked through both chambers, where it couldn't be amended by simple, regular lawmakers, who'd have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.
 I will let others address the Constitutionality of this new legislative body, and instead focus on a target of the budget cutting - retirement savings.

  I'm a certified "Doom-and-Gloomer". I won't deny it. Many of my posts focus on negative things that I want to see changed. For this and other reasons, many of my predictions have been ignored and dismissed
   For instance, three years ago I started ranting against the 401k system. I said that the numbers didn't add up, and that all the profits were being siphoned off by Wall Street. Two years ago I said this:

Unless the federal government simply defaults on its Social Security and Medicare promises then taxes will have to be raised dramatically. You can bet the trillions of pre-tax money sloshing around in 401(k)s and traditional IRA's will be at the top of the hit list.
 The reason I said this is because of cold, hard math. Today, this was in the news:
 [The tax reform proposal] would reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings like individual retirement accounts and tax-free savings accounts known as 401(k)s, and tax credits for families with children.
 Don't kid yourself. This is merely the start. Governments have a history of ignoring past promises and changing the rules when crunch time hits. Even the Democrats have been looking at removing the tax break promises for 401k's and IRA's for two years now.
   My predictions of a government 401k cash-grab were mostly dismissed at the time. I wonder how long people will refuse to believe it?

  Cassandra was cursed by the gods with the ability to see the future, but have no one believe her.
   I do not claim that ability. I only claim the ability to do math. When a trend can't continue, it doesn't.

  18 months ago I said that Greece would eventually default and have to leave the Euro-zone, and that this would spread to other peripheral nations. As we stare at the second round of bailouts, with no long-term solution at hand, it appears more likely than ever before.

 The market rally that followed last week's Greek bailout could be short-lived, say financial analysts.
    They claim the package proposed by eurozone finance ministers fails to tackle the underlying problems and sets a dangerous precedent in permitting a country to default.
 It didn't take a genius to see this one coming. Just someone who can do math. It is strange and disturbing that many of the largest investment firms in the world have been taken by surprise by this development.

  When you think outside of the box, people tend to dismiss you as a crank. For example, I recommended buying gold in late 2005, when gold was at $500 an ounce. The response was less than enthusiastic.
   17 months ago, with gold at $1,100 an ounce, I tried to burst the popular opinion that gold was in a bubble.
   Today gold is at $1,600 an ounce and finally hitting the mania Asia.

 "Record high prices won't scare away investors," said Shi Heqing, an analyst at Antaike, a state-backed metals consultancy based in Beijing.
    "Investors are likely to chase the rally and continue to buy gold because paper money feels increasingly worthless and they are worried about inflation."
 Until the debt situation in America and Europe plays out the price of gold isn't going to drop, but most American investors are still thinking in terms of the 1990's - buying houses and putting money into their 401k. Even Wall Street is bringing back the oldies.
   I'm afraid to say that I think most of the American public will continue to invest by the rules of the last trend until the housing market finally washes out, their 401k withdrawals lose their tax break status, and the gold bull market is ready to peak. It is safer to lose money with everyone else than to think for yourself and go against the herd.
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Comment Preferences

  •  Tip Jar (24+ / 0-)

    "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

    by gjohnsit on Sun Jul 24, 2011 at 09:55:01 AM PDT

  •  Feeling a little pessimistic today (8+ / 0-)

    Sorry for the negativity.

    "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

    by gjohnsit on Sun Jul 24, 2011 at 09:55:49 AM PDT

    •  Coulda been worse (1+ / 0-)
      Recommended by:

      Thanks for sugar coating it.

    •  No need to apologize...can't place a value... (1+ / 0-)
      Recommended by:

      judgment on the truth.

      I just got called out within another diary's comments for quoting that same Ryan Grim article. This commenter said Grim was saying it's unconstitutional, which he's not.

      If only it were.

    •  Don't be sorry, 401K's were always a Wall (2+ / 0-)
      Recommended by:
      gjohnsit, joe shikspack

      Street scam.  Investment advisors have been talking up Roth IRA's for awhile.  My guess is that is what will be offered up.  Let's face it, we are a country of swindlers, our rich have always made their money the old fashion way, they stole it....with the help of our government.  FDR put an end to much of it and Reagan and his hoodlums reinstated it.

      •  I'm hoping you are wrong (1+ / 0-)
        Recommended by:

        about Roth IRA's for two reasons: 1) Roth IRA's are post-tax money, thus there are more rules to change in order to get at them (i.e. not the lowest hanging fruit), and 2) I have a bunch of money in Roth IRA's. I put the money there before I got religion, and now its trapped.
           I think they will go after traditional IRA's and 401k's first for a couple reasons: 1) there is more money there, and 2) all they have to do is change tax rates rather than completely go back on their promises and tax the same money twice.
           That's not to say that Roth IRA's are safe by any means. I just think they are safer.

        "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

        by gjohnsit on Sun Jul 24, 2011 at 11:57:48 AM PDT

        [ Parent ]

        •  I did not state my meaning clearly, I (1+ / 0-)
          Recommended by:

          think as you do that they will try to eliminate the tax advantage of 401K's(actually all middle class tax deductions) and they will use Roth IRA's as an alternative so people will not understand or rebel at how soundly they are being screwed.  

  •  Why not just "Cut to the Chase' and Crown a (3+ / 0-)
    Recommended by:
    PhilK, gjohnsit, joe shikspack

    God-Emperor with all the Powers of The Three Branches of Government plus The Press plus The Executioner plus The Tax-Man plus The Keys to the Gates of Heaven an be done with it instead of this "slow-march to the same goal" crap like this "Super-Congress"BS.

    •  It's important (3+ / 0-)
      Recommended by:
      defluxion10, Jim P, joe shikspack

      to keep up the pretence of this being a democracy.
        Hell, Julius Caesar ended the Roman Republic while claiming he was trying to save it.

        If people believe that things haven't changed then they are less likely to fight back.
         It's the frog in the boiling pot scenario.

      "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

      by gjohnsit on Sun Jul 24, 2011 at 12:00:25 PM PDT

      [ Parent ]

      •  That pretense is the only leverage remaining (2+ / 0-)
        Recommended by:
        gjohnsit, joe shikspack

        us. We, and that's Americans beyond party and faction, need to organize and use it right away. This twitter #fuckyouwashington shows that there's a chance the boiling pot might overpressurize and surprise the chef.

        Until we break the corporate virtual monopoly on what we hear and see, we keep losing, don't matter what we do.

        by Jim P on Sun Jul 24, 2011 at 09:14:15 PM PDT

        [ Parent ]

    •  the scotus has already created a "super people"... (0+ / 0-)

      so a "super congress" is the logical next step.

      the current bought-and-paid-for robed masters have (with citizens united) put the final touches on creating an electorate of "corporate citizens" that was started in the 1860's with the introduction of corporate personhood.

      these bastards have been at it for a long time and it looks like they are just about to finish the job.

      professional sanctimonious purist

      by joe shikspack on Mon Jul 25, 2011 at 06:22:17 AM PDT

      [ Parent ]

  •  But where would the new Super Congress (2+ / 0-)
    Recommended by:
    gjohnsit, Sychotic1

    by physically housed?

    there's already rumblings of discontent with the old one: Congress Threatens To Leave D.C. Unless New Capitol Is Built

    •  My Mother has been suggesting (2+ / 0-)
      Recommended by:
      gjohnsit, Roadbed Guy

      (quite cannily I might add) that we should move some of the federal agencies out of least all but a small cadre of overprices execs whose job it is to brown nose the legislature.  

      Move Labor to Michigan, Education to Georgia, etc.  The beauty is not only will you save on employees having to work in high cost of living areas, legislators from those states will be mighty slow to want to cut the crap out of those agencies.

      If you think education is expensive, wait until you see how much stupid costs

      by Sychotic1 on Sun Jul 24, 2011 at 12:43:01 PM PDT

      [ Parent ]

      •  Well, Senator Byrd was trying (2+ / 0-)
        Recommended by:
        gjohnsit, Sychotic1

        mightily hard to ship the entire operation to WV.

        And that's the beauty of the Pentagon - I don't have it at my fingertips - but there's a website somewheres that details military spending as is occurs in EACH AND EVERY congressional district.  Is it any wonder why that never gets cuts (or why it is always SPECIFICALLY EXCLUDED from even the possibility of cuts)?

  •  Aftermath after the math (1+ / 0-)
    Recommended by:

    So gjohnsit, as one gloom & doomer to another I have a question. Given all that you say; given the predictions that have been borne out; given the inexorable trends you describe so well, how should people be positioning themselves going forward? How should people, individuals, adapt to this coercive economic insanity?

    Myself, I'm feeling that diagnosing the problem is important, but once you've more or less gotten it nailed, how do you manage to get out of the way of the worst of it, for you and your loved ones?

    For instance, should everyone immediately cease 401(k) contributions and put it in gold or an asian currency CD? Prepare for a hyper-inflationary spasm? Move to the woods?


    •  Boy I wish I had all the answers (2+ / 0-)
      Recommended by:
      nchristine, joe shikspack

      Unfortunately I don't. I only have a couple pieces of the puzzle worked out.

        I can tell you for certain that the Eurozone can't continue in its current capacity. How it ends up depends as much on the citizens of Europe (how much austerity will they put up with?) as with the political leaders. My guess would be that several countries have to exit the Eurozone and that rules will be changed for those that are left.

        I can say for certain that the housing bust isn't over yet, but we are most of the way there. Probably another five years until we reach the absolute bottom.

        I can say for certain that Medicare can't continue in its current capacity. Social Security can, but politicians and Wall Street seem determined to gut it, and I think the public will eventually let it happen.
         But even after they gut what's left of the safety net the numbers still don't add up. I'm looking for QE3 and possibly QE4, and that means higher commodity prices. This includes gold, oil, food, etc. Until the power of the international bankers is broken we will continue to see money printing aimed at banker's assets, deflation from things we want (i.e. can be cheap made overseas, like iPods), and inflation on things we need (i.e. food, energy, etc).
          Thus my investment strategy is to invest in real things. Things that can't be inflated by the government or Wall Street.

        In the end, the government is going to need more money, real money, not freshly printed stuff. That means your Social Security, your 401k, your IRA. Things that are invested in companies and commodities. Thus I expect taxes to be drastically raised on withdraws from your retirement savings.

        I think the bloated military budget will be one of the last things to see the much-needed axe.

        Taxes on the rich will never be raised until the power of the bankers is broken. That won't happen until the banks are broken up like Standard Oil was. None of that will happen until people take to the streets and protest. It might require violence before the government listens.

      "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

      by gjohnsit on Sun Jul 24, 2011 at 01:50:00 PM PDT

      [ Parent ]

      •  where are these real things (1+ / 0-)
        Recommended by:
        joe shikspack

        to invest in? There's housing, that's real, but as we know, subject to bubbling and inflation by gov't and Wall Street. There's commodities, but they're even more manipulable by those market forces. Frankly I think there's only investing in my own ability to work, and work as long as possible. That's real and not subject to inflation.

        Are you suggesting that the gov't will raise taxes on 401(k) retirement withdrawals to more than regular income tax rates? That would spell the end of that program immediately.

        In terms of adaptation, I've noticed that in third world economies there is alot more underground economic activity - bartering, kickbacks, baksheesh, it has many names and forms. Look for these to increase as the business of survival becomes more splintered and decentralized.

        •  Re: (2+ / 0-)
          Recommended by:
          nchristine, joe shikspack

          Normally housing would be a great default. Unfortunately, we are at the end of a record bubble.

             Are commodities manipulated? Sure, but not nearly as much as bonds and stocks. Wall Street doesn't want to see oil prices go up because it hurts the general economy. Wall Street doesn't want to see gold prices go up because it reflects poorly on their commodity - paper money.
             In spite of what Wall Street wants, gold, oil, and commodities in general are in the middle of a 10-year bull market with no end in sight. Why is that? Because the market is stronger than the money printers.
             For instance, if you need some gas to put into the tank of your car, and someone on Wall Street says "Instead of gas, I'll give you these new gasoline credit default swaps." You might accept them, but you will still need to put gas in car? Understand?

            I'm predicting that tax rates on 401k withdrawals are going to go up - a lot. Yes, that will stop people from putting new money in there, but we are talking about trillions of dollars of existing money already trapped there. And if there is one thing the government is certain to do, its short-term thinking in the time of a crisis.

          "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

          by gjohnsit on Sun Jul 24, 2011 at 02:45:06 PM PDT

          [ Parent ]

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