Mother Government and your 401k

I was talking with a friend yesterday; he’s very concerned about what’s happening in our country (and rightly so). One thing he said that stuck with me is this: he’s afraid that when everything gets worse economically (and it will) the government, having run out of money, will go after our retirement accounts.

Mr. Government: “here, Mr John Q. Public—since your 401k is pretty much the same as Social Security, why don’t we take that money and invest it for you? After all, we’ve been administering the SS program for decades, and we’re happy to take care of your money for you. And oh, by the way, we’re going to invest your money in U.S. Treasury bonds because China doesn’t want them anymore.”

Think that’s outlandish? Well, consider this line from a 17 June 2010 in the Beijing Review: “China's holdings of U.S. Treasury securities rose by $5 billion to $900.2 billion in April, the U.S. Treasury Department said on Tuesday. Total foreign holdings rose by $72.8 billion to $3.96 trillion.” Now consider these words from 247WallStreet.com: “What happens when China decides it no longer want to buy U.S. Treasuries? For those who believe that China will eventually use its holdings in long-term US debt to pressure America to keep open trade and not press too much on the value of the yuan, there is the evidence that the People’s Republic sold $21.2 billion in US paper in June. That brought the balance held by the world’s most populous nation down to $839.7 billion.

So it bought in April and sold in June? What does that tell you? And how many of you believe we’ll never get to a place at which China decides Treasuries aren’t worth the paper they’re printed on, and starts selling? What will we do then? In case you didn’t know, China holds more U.S. Treasuries than any other country (Japan is next. And who among us thinks that Japan will buy what China is selling?). Does that concern you? It should.

So—the government arbitrarily takes the retirement money we’ve worked so hard to save and unlawfully manages it for us. Sound familiar? Our doom (at least one aspect of it) was officially signed into law on 14 August, 1935, when FDR signed the Social Security Act (H.R. 7260, Public Law No. 271, 74th Congress) approximately 3:30 p.m. Welcome, citizenry, to legalized theft and years and years and years of servitude.

Think your 401k is safe? Don’t bet on it.