Remember the CYPRUS ‘bail-in’ earlier this year? No? Well, to refresh your memory it was when the heavily indebted Cypriot government took it upon itself to make up some of the debt by stealing money from their own people (refer link 1).
They confiscated up to 40% of the private bank savings of ordinary Cypriot people. These poor souls were given no choice and almost no warning. To prevent people quickly emptying their accounts the banks were shut (a ‘bank holiday’ it was called) and strict daily limits were placed on all ATM withdrawals. In return for up to 40% of their life savings they awarded shares in a failed bank which were and remain almost worthless. Sound like a mafia operation to you yet?
Fast forward to the last quarter of 2013…the great city of DETROIT in the United States. This once proud city is often referred to as the ‘Motor City’, the industry dominated by massive car manufacturing plants. These now lie almost completely dormant with only a single plant remaining entirely in its borders. Needless to say the ensuing unemployment and lack of public funds have contributed to the complete deterioration of the city over the last 30 years. Today it is basically a huge, crime ridden ghetto (refer link 2).
Detroit is so heavily indebted it has recently been declared legally bankrupt. The federal government has deliberately chosen not to bail out one of its major constituent cities and will instead allow it to fail. This should be seen as a very stark warning sign about the wider status of the finances of the federal government, or perhaps the lack thereof.
Anyway to the nub of this post. Recently I read a Los Angeles Times article which I found quite chilling regards the setting of frankly dangerous precedents.
To summarise, following recent bankruptcy rulings, the heavily indebted city of Detroit is taking it upon itself to make up some of the debt by stealing money from its own people. Sound familiar? However instead of stealing it direct from bank savings it is rather taking it from the state pensions of private individuals.
The city will use state pension money to pay its debts. This means the people currently receiving or due to receive their state pensions will get less regardless of what they paid in or for how long. This is theft whichever way you look at it.
Now other US cities (and I predict other indebted governments, which is all of them) are keen to get some of that action too…
“…A bankruptcy judge’s ruling that Detroit’s pension funds — like its other creditors — can take a hit might lead other financially troubled cities down the same path…Financially troubled cities in California, Illinois and Pennsylvania will soon face decisions on what to do with chronically underfunded pension funds, and…the Detroit ruling has made it easier for cities to argue that pensions must be cut…”
“…For decades, representatives of public-sector pensions have depended on constitutional provisions…that protected pensions. Now, U.S. Bankruptcy Judge Steven Rhodes’ ruling has shown that federal bankruptcy laws pre-empt those state provisions. Any city that has underfunded pensions and troubled finances could soon look to bankruptcy as a way out of paying pensions…”
“…Now eyes will be on Detroit as it decides how to pay its pensioners and other bondholders while still providing essential city services…how…to divvy up what’s available among creditors when there’s not enough to go around…That’s now about to unfold in Detroit…”
As one commentator on the LA Times article stated: “..What is America going to do with all the homeless seniors?…”
I have been saying for a while now that the next step after bank ‘bail-ins’ (confiscation of private savings like Cyprus) is the confiscation of pensions; first public pensions and then private pensions. Yes they CAN do that… (refer links 3, 4, 5).
It is not difficult or surprising to predict a massive new financial crisis will hit soon (in the next few years, possibly as soon as next year), which may bring about a complete collapse of the US dollar and the US economy. The collapse of the world’s largest economy would naturally create a massive dip in market confidence (the fuel of all financial markets) and this would of course have a very rapid trickle-down effect on the other economies round the world.
This could very well set in motion the following:
– global bank ‘bail-ins’ (confiscation of all or part of your savings)
– public pension cuts (confiscation of all of part of your state pension)
– private pension cuts (confiscation of all of part of your private pension) (refer links 3, 4, 5)
– After this things can get really nasty with material wealth confiscation like privately held gold, silver etc. After all the US government confiscated privately owned gold in 1933 during the Great Depression, passing legislation making private possession of ‘monetary gold’ illegal. Likewise, in 1966 the UK government banned private individuals from holding more than four gold coins or from buying any new ones, unless they held a licence (refer links 6, 7).
– Needless to say all this will cause massive unemployment, massive food price rises, and a huge upsurge in crime.
– The government answer to the above usually comes in the form of soldiers on the streets, martial law (refer link 8).
Don’t expect this sort of behaviour to remain in little territories and far away dictatorships. None of these things are unprecedented in history (refer link 9). It is coming home to your country in the not too distant future. Governments and cities around the world are drowning in debt and see all these big pots of private money as irresistible life preservers. Now they are starting to reach out for them.
Governments around the world (and the USA in particular) are preparing for imminent economic collapse due to unserviceable debt. (refer links 10, 11, 12).
You too would do well to prepare accordingly.