IMF proposals to bail-out government!!!!!!

[murphy_p_t]

http://www.zerohedge.com/news/2014-07-0 ... oman-world

What adjustments to make to the PP to protect against these proposals? Maybe a "bunker PP"?

-Coins buried out in the forest somewhere
-Cash buried out in the forest somewhere
-and/or cash in standard broker account safer than Treasury only fund?
-only hold EDV in your IRA (to minimize total dollars allocated to bond portion)
-or look for non-callable corporate bonds?
-Vanguard mutual fund to S&P

These proposals potentially effect 2/4 to all 4 assets of the PP, including retirement accts!

Seriously, just the idea that they're thinking about these kind of draconian things...

No worries, dow 17k! Alls' well!

[Kshartle]

Avoid loaning your purcahsing power to governments since they can never and will never return that value back to you. You'll be lucky to get half of it back if you loan it out for 30 years.

You're probably better off spending it on anything else, stocks, gold, real estate, more food, bullets, vacations etc.

Anything is better than loaning it to governments so they can pay off the welfare voters and their public sector pension promises.

[Pointedstick]

Short answer: typical ZeroHedge fear-mongering.

Long answer: My personal answer to the extremely remote chance of anything like this is to live in the USA, which has a well-known tendency to react with extreme and overwhelming violence to things like this. The IMF trying to mess with U.S. businesses to bail out currency-user socialist banana republics would likely be seen as tantamount to an act of war to whatever administration was in power at the time. Remember, the IMF has no real power. They rely on member states to enforce any decisions. Who's a member state? Us. Which country has the most powerful and violent military in the world? Us. Not worth worrying about.

[murphy_p_t]

Avoid loaning your purcahsing power to governments since they can never and will never return that value back to you. You'll be lucky to get half of it back if you loan it out for 30 years.

You're probably better off spending it on anything else, stocks, gold, real estate, more food, bullets, vacations etc.

Anything is better than loaning it to governments so they can pay off the welfare voters and their public sector pension promises.

Although I'm sympathetic to this view, there were high opportunity costs in 2008 and 2011 to this approach.

[murphy_p_t]

Short answer: typical ZeroHedge fear-mongering.

It looks like the basis of the article are the linked reports from the IMF...

[Kshartle]

My personal answer to the extremely remote chance of anything like this is to live in the USA, which has a well-known tendency to react with extreme and overwhelming violence to things like this.

PS, look at the quality of your fellow citizen. Look at his/her education. Look at the fact that only a small percentage of them have any savings at all and that group is dwindling.

Wait until the next currency or economic crisis hits and the "wealthy" are blamed. "Wealthy" being anyone with even a small amount of savings. They will be sacrificed for the good of the collective.

I mean for god's sake look at what the Americans have twice elected as president. Can you not see the trend or do you just want to ignore it because it's more comfortable that way?

Seriously look at the trend. They might have a difficult passing such measures here in the next year. They might not have a tough time in 5 years.

The smart money will already be out. If you don't see the writing on the wall now I don't think you'll see it later. I mean that sincerely because I care about you guys.

[Pointedstick]

Kshartle, if I seriously worried about this sort of thing, I would take extreme and drastic measures, such as fleeing the country, going off-grid, that sort of thing. That I haven't necessarily implies that I don't think things are that bad yet.

Because if this happens and you still have a job, a house, a savings account, and a bunch of stocks, do you think that crap is going to be safe? No. Nothing will be. The only possible way to prevent a government from taking your stuff is to escape from its reach or not having anything worth taking. Anyone who worries about large-scale asset confiscation or wealth taxes or the like is fooling himself if he thinks he can evade them while remaining a wealthy resident of the country in which they are imposed. Throughout history, the reaction of the wealthy has been to simply leave. If I think it's getting that bad, I'll leave. If I don't, I won't. But it's not like this sort of thing is going to sneak up on you. You'll have plenty of warning outside of conspiracy theory sites like ZeroHedge.

[Kshartle]

Avoid loaning your purcahsing power to governments since they can never and will never return that value back to you. You'll be lucky to get half of it back if you loan it out for 30 years.

You're probably better off spending it on anything else, stocks, gold, real estate, more food, bullets, vacations etc.

Anything is better than loaning it to governments so they can pay off the welfare voters and their public sector pension promises.

Although I'm sympathetic to this view, there were high opportunity costs in 2008 and 2011 to this approach.

Murphy....holding just stocks and gold during 2008 would have definately set you back....that year. BFD. The government's cannot allow even the tiniest bit of deflation so they blasted us with money printing and zero percent int rates. And low and behold stocks/gold have killed fixed income.

The fewer asset classes you own the more volatility you will see in the short run no doubt. Keep some paper stuffed under the mattress if it makes you feel better or maybe in a safety deposit box. Loaning it to these creatures seems like playing with fire to me.

If you're going to act you have to be emotionally prepared to be early and appear wrong in the short run. You will always be wrong to everyone else until you are right. Then they will be wrong and it will all look so obvious in hindsight.

[moda0306]

My personal answer to the extremely remote chance of anything like this is to live in the USA, which has a well-known tendency to react with extreme and overwhelming violence to things like this.

PS, look at the quality of your fellow citizen. Look at his/her education. Look at the fact that only a small percentage of them have any savings at all and that group is dwindling.

Wait until the next currency or economic crisis hits and the "wealthy" are blamed. "Wealthy" being anyone with even a small amount of savings. They will be sacrificed for the good of the collective.

I mean for god's sake look at what the Americans have twice elected as president. Can you not see the trend or do you just want to ignore it because it's more comfortable that way?

Seriously look at the trend. They might have a difficult passing such measures here in the next year. They might not have a tough time in 5 years.

The smart money will already be out. If you don't see the writing on the wall now I don't think you'll see it later. I mean that sincerely because I care about you guys.

Seriously... LOOK AT IT, PS!

40% tax rates (unless it's muni, dividend or capital gain income, then it's 0%-20%)!  Loan guarantees for homeowners and preferred industries!  The federal reserve!  Public education!


How will we ever get through this!?

God I miss the fabulous '50's.




Sorry K.  Snarkitude Switch: Off.  But seriously I'd love to hear your response to my questions to you regarding us being in a far-more socialistic country now than in 1950.  We have some more welfare programs and (some) regulations are higher, true, but our taxes on the wealthy are far, far, far lower.

Oh and we don't have the worst confiscatory program in our history anymore.... the draft.

[Kshartle]

Anyone who worries about large-scale asset confiscation or wealth taxes or the like is fooling himself if he thinks he can evade them while remaining a wealthy resident of the country in which they are imposed. Throughout history, the reaction of the wealthy has been to simply leave. If I think it's getting that bad, I'll leave. If I don't, I won't. But it's not like this sort of thing is going to sneak up on you. You'll have plenty of warning outside of conspiracy theory sites like ZeroHedge.

Is it easier for them to come steal gold from everyone's homes, or steal the ownership of companies, or is it easier for them to say we're not going to pay back the loans you made to us, or we're going to run slips of paper off a printing press and you have to accept them?

I'm not wealthy, though I might leave. Either way I can look at the situation and identify the risks, the probabilities, the impacts and take action to mitigate those risks.

I don't understand your argument I'm sorry. The IMF is litterally disclosing their options/plans for purchasing power confiscation and transfer from savers to the governments there. Just because Zero-hedge is reporting rather than CNN doesn't make it less credible, that is an argumentative fallacy. Something isn't correct or incorrect because of what one group said or didn't say.

[Kshartle]

But seriously I'd love to hear your response to my questions to you regarding us being in a far-more socialistic country now than in 1950.  We have some more welfare programs and (some) regulations are higher, true, but our taxes on the wealthy are far, far, far lower.

Oh and we don't have the worst confiscatory program in our history anymore.... the draft.

No one paid those onerous tax rates. The individual tax burden is much higher today on average than back then and government spending as a percentage of the economy is much higher.

You're confining yourself to looking at the top rates of strictly federally taxed income correct?

Dear God man the level of economic freedom now compared to the 1950s is not even close in the least. Can anyone please address it? I only have so much interest in dispelling these misstatements because I think moda you do not actually beleive what you are saying. If I really thought you sincerely believed it I would have more interest because, as you know......you should "prefer" the truth, I sure do 

[murphy_p_t]

K...I recall you invest in mining shares...have you looked at direct registration of the shares?

[Pointedstick]

I don't understand your argument I'm sorry. The IMF is litterally disclosing their options/plans for purchasing power confiscation and transfer from savers to the governments there. Just because Zero-hedge is reporting rather than CNN doesn't make it less credible, that is an argumentative fallacy. Something isn't correct or incorrect because of what one group said or didn't say.

Key word: "there." There is not here. EU countries are screwed because they're in the financial situation of U.S. states: they are currency users, so they have to beg for money from someone else and tax their citizens harshly, and there's a higher sovereign than them that they have to answer to if they're fiscally irresponsible. And that's exactly what's in the middle of happening. The ECB and IMF are cooking up plans to punish the residents of countries that have been fiscally irresponsible.

The United States federal government does not operate under this constraint because it is a currency issuer nation that happens to have the biggest military in the world. If the IMF pitches this idea to the president of the United States, he'll laugh and tell Christine LaGarde to eat a dick. There's literally no reason for this to happen here. Nobody in power would benefit from it. Any politician who authorized or voted for it would be thrown out of office, no matter how much cutsety socialist rhetoric they wrapped it in. It would be far preferable to print the money they need (because they can, remember?) than impose such taxes or go along with a globalist confiscation scheme. Money printing is always easier and has fewer political consequences, if you can get away with it. So I can't see why we wouldn't just keep on doing it.

IMHO.

[Kshartle]

K...I recall you invest in mining shares...have you looked at direct registration of the shares?

No. I actually own shares in the ETFs GDX, GDXJ and GLDX. I have been worrying about the safety of this form of "ownership". I just haven't done any research into identifying and mitigating this risk.

[Kshartle]

Money printing is always easier and has fewer political consequences, if you can get away with it. So I can't see why we wouldn't just keep on doing it.

IMHO.

How are your bonds better off with growing negative interest rates year after year? This is actually the frog in the pot syndrome and possibly worse in the long run.

Also, regarding the bolded statement, this is an unsupported belief. As the population has less savings in the form of cash in the bank or bonds and that type of wealth storing is increasingly done by fewer people.....the political consequences to direct default will lessen. As more and more people go on fixed income pensions or SS or welfare or whatever.....the bite of inflation will get ever more painful. The balance in the form of political support for confiscation over inflation seems to be shifting, even as the media tries relentlessly to sell inflation to the population as a positive thing.

I think the politicians would love to print their way out of this. I think they will try. Ultimately I hope they decide that is a worse option. Everyone shouldn't have to suffer to pay back people who have loaned a completely bankrupt bunch of theives trillions. The bondholders deserve to share some of the pain and so do the public sector unions that got fat pensions above the market value of their output because they paid dues and got their scumbags elected to steal for them.

Bailing out bondholders and public sector unions by debasing the currency creates moral hazards. We can set aside the fact that it's immoral theft to begin with.

At least a default on bondholders would be honest. The bank should not get to pass it's loss off on everyone when it loans money to deadbeats and the bondholders shouldn't get to pass of their losses to everyone else when they loan money to a bunch of deadbeat politicians.

[Pointedstick]

You are veering off into repeating your standard monetarist argument, even though that's not what is at issue here. Correct me if I am wrong, but this article is about the IMF implementing a tax or wealth confiscation program on individual citizens to bail out various insolvent European currency user governments, not defaulting on boldholders or unions or bailing them out through inflation.

My argument is that given two choices: 1) implement a heavy tax on everybody or 2) expand the money supply, every government will choose option 2 if it is available for them, because its effects are more concealed, and hence easier to get away with. People notice a big additional 10% flat tax. They don't notice the "frog in the pot" situation.

[Kshartle]

You are veering off into repeating your standard monetarist argument, even though that's not what is at issue here. Correct me if I am wrong, but this article is about the IMF implementing a tax or wealth confiscation program on individual citizens to bail out various insolvent European currency user governments, not defaulting on boldholders or unions or bailing them out through inflation.

My argument is that given two choices: 1) implement a heavy tax on everybody or 2) expand the money supply, every government will choose option 2 if it is available for them, because its effects are more concealed, and hence easier to get away with. People notice a big additional 10% flat tax. They don't notice the "frog in the pot" situation.

PS I don't anything about the monetarists so I'll take it as a compliment. 

You are partially correct about the article. It is referring to a wealth tax but it also referring to a plan to default on the bondholders. It's just the don't call it a default. Essentially they just extend the maturity. This is a default though, make no mistake. If you loan someone money under the agreement to pay you a year from now and they tell they can't/won't pay for another 30 they have defaulted on you. You cannot get your money back.

You can sell your bond sure.....but since it's at the same interest rate as before the price has now plummeted. It's like the supply of 30 year bonds has gone up 3, 4, 5 times instantly even though the demand hasn't, and your rate is potentially lower than higher coupon bonds.

It is an outright default, just maybe not according to the government's lawyers.  The government has refused to pay back it's obligation. Ohh wait it just postponed, I'm sure you'll get it back in 30 years ahahahahahahaha. You're better off selling and taking the 50% los or whatever.

[Kshartle]

My argument is that given two choices: 1) implement a heavy tax on everybody or 2) expand the money supply, every government will choose option 2 if it is available for them, because its effects are more concealed, and hence easier to get away with. People notice a big additional 10% flat tax. They don't notice the "frog in the pot" situation.

Why do you think those are the only 2 options?

Look, half of Americans live paycheck to paycheck. You and I have stocks, money in the bank, gold, bonds (in your case). We have good incomes. I can't speak for you but mine is a multiple greater than 2 of the national median income. My assets put me in the top 80-90% and soon enough this will spill into the 90%.

We might not think of ourselves as wealthy. Trust me, we are. Everyone on this forum is probably wealthier than half the population. That disparity is growing. Even if we don't feel wealthier every year.....we are likely moving up the relative ladder.

In case you haven't been listening to the national discussion.......the Americans increasingly view the wealthy as the problem. Confiscation of wealth in the western world is being pushed as a solution to economic problems and viewed as a moral good, even though it's despicable. No politician dares defend the rich. Hillary is trying to claim she was poor and so is Biden blah blah. Romney lost partially because he was wealthy.

Trust me, you have a bullseye on you. The politicians will do what they have to in order to get votes. Defaulting on your bonds, as well as Japan and China and taxing your greedy capitalistic wealth to help the poor and the elderly and the government workers will be an easy sell in the future. It may even be proposed as the solution to the ever increasing inflation that will be choking the voters and having them howling for your money. No one will rise up to defend you I'll sorry.  You might get hit with a wealth tax or a bond haircut but this is a democracy so will of the people yadda yadda.

Or maybe aliens will come down and start loaning the government money. Or maybe the government will shed the dependants and start running a surplus. Or maybe the economy will start growing faster than the money supply. Or maybe pigs will fly.

[Pointedstick]

If you are so certain of all of this... why are you still around instead of safely anonymous in Peru or somewhere, watching the USA crumble from the sidelines?

[Kshartle]

If you are so certain of all of this... why are you still around instead of safely anonymous in Peru or somewhere, watching the USA crumble from the sidelines?

1. My job is here
2. My girlfriend is here
3. My family is here
4. I only speak English and "barely get by" French
5. I am not used to any other culture
6. I think there will be lots of opportunity here if you can safeguard your wealth
7. I spend too much time on this forum and too little time researching safer places to move to 

[Pointedstick]

Those are all good reasons. I only ask because you speak about this issue in such apocalyptic tones that it seems to me that if that is truly your position, getting out of the way of the impending train wreck should be priority #1. I know it would be for me it I foresaw such a terrible future.

What are your plans for surviving the calamity given that all of your very good reasons point to you being in the good old US of A when the shit hits the fan?

[Kshartle]

Those are all good reasons. I only ask because you speak about this issue in such apocalyptic tones that it seems to me that if that is truly your position, getting out of the way of the impending train wreck should be priority #1. I know it would be for me it I foresaw such a terrible future.

What are your plans for surviving the calamity given that all of your very good reasons point to you being in the good old US of A when the shit hits the fan?

Well I expect the crisis to be in the form of increasingly high inflation, then interest rates rising to the point where the politicians decide it's in their best interests to have a more honest default of the government's obligations rather than continue the inflation. This will most likely be a combination of a default on pensions, a slashing of the government workforce, possible shedding of dependants and almost certainly a haircut of bondholders. It could possibly also be a bail-in for depositors at banks Cyprus style.

My plan is to continue to save and buy gold, silver and stocks that I think will propser from a decline in the purchasing power of the dollar. It is to avoid holding all but a little currency in the bank and certainly zero bonds or promises to repay me in fixed dollar payments.

I'm prepared if they just stick with an inflationary default or go to an outright one, or a combo. Nominally I will do better with inflation but an outright default that strengthens the dollar would be better for us all and that's what I hope for.

[Pointedstick]

Ya gotta do what ya gotta do, I guess.

[Kshartle]

Ya gotta do what ya gotta do, I guess.

I realize that anything can happen and nothing has to happen, I just can't see how the government can ever pay back the purchasing power that gets loaned to it (even if it repays the dollars nominally). I also hear nothing from the fed except how they are going to keep rates low and below inflation for probably a very long time. I believe them. I don't want to fight them, I'd rather profit from their actions.

If next week Yellen says they are going to start shrinking their balance sheet, raise rates and fight inflation I will sell all my stocks and hold just gold and cash because I expect the inflationary boom to end in deflationary crash.

I'm comfortable with the volatility that comes with a concentrated portfolio. Despite the bumps my 12 month return on all investments is over 18%. Of course I took a pounding in the couple months before when gold dropped 400 in two months or whatever 

[moda0306]

Ya gotta do what ya gotta do, I guess.

I realize that anything can happen and nothing has to happen, I just can't see how the government can ever pay back the purchasing power that gets loaned to it (even if it repays the dollars nominally). I also hear nothing from the fed except how they are going to keep rates low and below inflation for probably a very long time. I believe them. I don't want to fight them, I'd rather profit from their actions.

If next week Yellen says they are going to start shrinking their balance sheet, raise rates and fight inflation I will sell all my stocks and hold just gold and cash because I expect the inflationary boom to end in deflationary crash.

I'm comfortable with the volatility that comes with a concentrated portfolio. Despite the bumps my 12 month return on all investments is over 18%. Of course I took a pounding in the couple months before when gold dropped 400 in two months or whatever 

It doesn't get paid back. It only gets serviced. Because it is a government, not a household that needs to retire someday, they can afford to look at debt very differently.