The Cycle of Retirement Nest Egg Destruction

I’m beginning to put the pieces together now how governments have destroyed most retirement nest eggs of the people who trusted them.

Doing what they advocate is almost guaranteed to destroy your nest egg. They cannot help themselves. Whilst ever governments control the money supply of a country, nest eggs will continue to be destroyed unless you take control.

You are told you should invest for the long term but every year most governments find they need to tweak the tax system, or the retirement system, or the investment regulations. Unfortunately they think short term – the next election. The reason – they have increased spending which they believe they need to do to keep themselves in power and the only way to do that is to take your money.

That’s the first problem you have with this great big self funding retirement experiment.

The next problem is governments keep eyeing the mountain of retirement funds being “managed” by the wealth industry and become jealous of all that money which they cannot put to good use, again to keep them in power.

Right now in Australia our government is trying to convince the wealth industry to “invest” in public housing where they are telling them they can expect a return of over 9% a year but have to rent out the houses at 20% below the prevailing market rent. That makes good economic sense.

Some funds have taken up this “investment” using your money. These funds are supposed to be looking after your money. On what basis do they believe the government when it says you can expect over 9% per annum on public housing – for the next 20 years maybe!

Just drive around some of the public housing estates and look at the destruction of your tax dollars. Now it will be the destruction of your nest egg too.

It won’t be long before governments force public investments on the funds – for the good of the country of course.

Back to your Nest Egg destruction.

We have governments on turbo-Keynesian economics strategies that all but destroyed the western world economics of the 70’s and 80’s. Borrowing and printing money to keep the economy in it’s bubble and avoid the economic cycle to complete is stupid and destroys wealth or redistributes it to favoured government supported organisations or people able to gain government favours.

We have the IMF virtually giving the western worlds wealth away to the “have-not” world with no strings attached. All this is sanctioned by our governments.

I heard the other day the “have not” world is looking to take 30% of the “have” world’s GDP under this “climate change” wealth distribution machine. This is what they will be asking for at Copenhagen. This is yet another tax on your Nest Egg.

Just look what a drop of less than 10% of GDP did to our wealth this past 18 months. Now we are expected to give 30% of our efforts to other nations. Don’t they know everything is marginal and this will destroy the capital base that help us create our wealth and probably most of our incentive to work, save and invest?

That capital base is the wealth of our nations created over the last 200 years through the efforts of those who went before us and whose efforts pulled us out of serfdom and poverty. Is this how we respect their sacrifice and savings? Now we are expected to just give it away because bureaucrats who are guaranteed their pay and benefits want us to give it away, with no strings attached either.

No one put a gun to the “have not’s” head and said you cannot do for yourself what the western world has done for itself – worked!

Most of the government’s of the world are either corrupt or on the take for anything they can steal from their people or from other countries. Even the UK has been shown to have this problem with MP’s being caught with their hand in the till.

How well do you think these “have not” countries will spend our money? How well have they spent it in the past with all the billions we have given them?

Last we have the Central Banking System and the Fractional Reserve Banking System. You can have the best investment strategy in the world but these two evils can destroy your nest egg overnight. The first can print money, debase the currency and manipulate the credit markets for their governments benefit even though they are supposed to be independent of government.

The second is based on a fraudulent banking system which allows banks to legally lend the same money out over and over again apart from having to keep a fraction of each loan. This leads to the boom and bust cycle that has destroyed your nest egg twice in ten years.

We have this great big money machine which technology has now made so easy for governments and wealth managers to manage and manipulate. The FED lowers interest rates to kick start the economy. The banks start lending again (eventually) and a big credit cycle starts. Everyone starts to feel confident and begins investing in the stock market and it takes off. Boom times are here again.

The fund managers start throwing your nest egg at the stock market to make their huge bonuses. The banks leverage their loans even more and take on risky deals as those are the only ones left.

Eventually the boom turns into a bust and you lose 30% of your nest egg in a few days. Then the FED flood the economy with money because the government debts are so large they cannot afford deflation or an economic contraction. They need to maintain prices. Most people don’t realise that increasing the money supply to maintain prices in the bubble economy is inflation.

So after creating a boom and then a bust your government destroys your wealth through inflating the currency.

Bernanke is on record as saying he will do whatever it takes to avoid deflation. Now I know why.

If you go with the herd investments where the wealth managers are in control you could lose your money a third time in ten years. Technology is making the boom bust cycle much faster. Nothing has changed.

Just think about this. The wealth managers have now seen that with government help they can manipulate the stock market. After dropping 50% by March 2009 it has recovered and is up over 50%. Many wealth managers and the investment bankers have made billions or millions in the last few months. This could be the “new normal”. The money is in the bounce stupid!

If you go with the herd make sure you have an exit strategy when the bounce falters. That way when the rest of the herd go over the cliff you can pull back and keep much of your nest egg.

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