From the January 2010 Idaho Observer:

Government wants your 401K - Again

The Obama administration appears to have come up with a novel way of financing trillion-dollar budget deficits – demanding IRA and 401(k) holders buy trillions of dollars in Treasury bonds.

With the Treasury needing another $1 trillion in debt this year to finance the anticipated federal budget deficit, and the Federal Reserve about to discontinue its 2009 program of buying Treasury bonds for the Fed’s asset portfolio, the Obama administration is scrambling to find ways to sell government debt without having to raise interest rates.

The private sector acted rationally after the 2008 collapse by increasing savings. The government, on the other hand, added more debt and now wants the 401(k)s converted to Treasury bills to cover government entitlement programs like Medicare, Medicaid and Social Security, wrote Karl Denninger of

CNBC’s Rick Santelli remarked in early January about the potential to effectively force money into the Treasury market. According to Businessweek:

“The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry.”

Forcing people into Treasuries as an “annuity” is what Social Security would be, except that the Treasury stole the money that was collected in FICA taxes and spent it.

In this latest plan you would “invest” your savings in Treasuries, which are effectively a CALL option on the future taxing ability of the government, according to Denninger.

The agencies are getting serious pushback from the mutual fund industry, objecting to what some financial planners see as a government attempt to divert hundreds of billions of dollars of private retirement accounts into federal government debt, regardless whether the investment in Treasury bonds is in the best interest of the retirement-oriented investor.

“The problem is that with an aging population and the immigrant problem, along with offshoring, the aggregate wage base will drop and thus this is the most dangerous investment of all,” Denninger added.

“What’s even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI - the “inflation index” - as they have for the last 30 years) so as to guarantee that you lose over time compared to actual purchasing power,” he said.

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