Author Topic: Mustachian thoughts about the predictions on an upcoming financial crisis  (Read 20001 times)

mudo007

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Hello everyone. Ive been reading and watching a lot of videos on how The quantitative easings from the FED is going to push the USA and the rest of the world into hyperinflation, and other armageddon stuff. But I didnt notice any topico on it on this forum. So Id like to know what are mrmustache and his legions thinking about this:

http://www.youtube.com/watch?v=tj2s6vzErqY

and this video series starting with this:

http://www.youtube.com/watch?v=DyV0OfU3-FU

This guy is getting censored on facebook and he predicted the 2008 real state bubble in 2005, so everyone should check it out, even if you disagree with him.

Topic edited to alleviate readers rage.
« Last Edit: March 03, 2014, 07:00:48 AM by MMM »

iamlindoro

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Re: Mustachian thoughts about the upcomping financial crisis
« Reply #1 on: February 24, 2014, 08:28:48 PM »
My thoughts are:

a) Even a broken clock is right twice a day (if you continually predict a meltdown, you'll eventually be right)
b) Sweet!  A meltdown!  I am gonna make so much money buying straight through it!
c) If you are bothered by a few bad years, up to and including a recession/depression, then your asset allocation is wrong.

So, basically, I'm not worried.  Non event (even if it were true, and there's no sign that it is).

PS, you should probably edit your subject to be something more like "Mustachian thoughts about the predictions of upcoming financial crisis," since there's absolutely no reason to believe that such predictions are correct.

iamlindoro

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Re: Mustachian thoughts about the upcomping financial crisis
« Reply #2 on: February 24, 2014, 08:35:50 PM »
and of course d) You mean a company trying to sell me gold and silver wants to make me afraid of investing my money in the market?

and

e) This is spam.

mudo007

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Re: Mustachian thoughts about the upcomping financial crisis
« Reply #3 on: February 24, 2014, 08:54:57 PM »
Im not trying to prove a point here, and yes, I think his predictions are exagerated due to his ownership of a gold dealing business. But I think the fundamentals are pretty solid and if you visit http://www.shadowstats.com/alternate_data/inflation-charts, where they calculate nowadays inflation using the 90s formula, the USA shyould be experincing around 10% inflation nowadays, and one of the fundamentals of the 4% rule is that inflation should be 3% a year.

The threat of inflation is basically what I wanted Pete and other early retirement experts to take a look at, since it is a very sensitive variable to early retirement.


arebelspy

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #4 on: February 24, 2014, 09:40:52 PM »
Shadow stats is bunk.

I agree that inflation is the number one enemy of an early retiree, and I think one should hedge against it with their asset allocation, IMO.

Use historical inflation numbers via a tool like www.cfiresim.com to make sure your plan would have survived historical inflation issues (double digit at times) and you should be okay.

one of the fundamentals of the 4% rule is that inflation should be 3% a year.

Clearly you haven't read the Trinity study on which the 4% rule is based.  Your statement of "inflation should be 3% a year" is flat out false.  The 4% rule says nothing about what inflation "should" be.
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cowstash

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #5 on: February 25, 2014, 01:18:21 AM »
This guy is getting censored on facebook and he predicted the 2008 real state bubble in 2005, so everyone should check it out, even if you disagree with him.

Translation: Users report our spam to scare rubes into buying gold on Facebook, so let's try to build legitimacy elsewhere.

Grateful Stache

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #6 on: February 25, 2014, 05:40:50 AM »
There will always be talking heads, and I don't mean the band. You have to be selective in whom you listen to.

kyleaaa

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #7 on: February 25, 2014, 08:41:47 AM »
Shadow Stats is proven to be false by MULTIPLE private independent inflation measures, so I wouldn't worry about that.

KingCoin

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #8 on: February 25, 2014, 09:26:59 AM »
Man, 10 seconds into that video and I was already informed that "You're going to get slaughtered. You're going to get slaughtered." Tell me more! Where can I sign up for your news letter?!

The truth is, the people who buy into the bunk of fear-mongering hucksters are the ones who get slaughtered.

Think this guy is some sort of sage? Here's a presentation from almost 4 years ago where he gets everything impossibly wrong. If you had followed his advice then, you would have gotten slaughtered. You would have gotten slaughtered.
http://economicedge.blogspot.com/2010/09/mike-maloney-schools-bankers-on.html

This stuff is utterly contrary to the recent Warren Buffett piece in which he advocates buying productive assets and ignoring macro exuberance and fear mongering. This guy argues that we should focus on macro fear mongering and buy unproductive assets!
« Last Edit: February 25, 2014, 10:45:26 AM by KingCoin »

Eric

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #9 on: February 25, 2014, 10:29:54 AM »
This stuff is utterly contrary to the recent Warren Buffett piece in which he advocates buying productive assets and ignoring macro exuberance and fear mongering. This guy argues that we should focus on macro fear mongering and buy unproductive assets!

Diversification!  That's what that means, right?  ;)

soccerluvof4

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #10 on: February 25, 2014, 10:52:40 AM »
The farmers almanac was finally right about it being a long cold winter! :-)

Ayanka

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #11 on: February 25, 2014, 11:21:39 AM »
Honestly, part of me is fearing that financial crisis. Though not for whatever article they posted. I am concerned about the rise of the debt/GDP ratio of the USA. Yes you can go a lot higher without getting into incredible trouble, but solving that will be a mess. As in like Greece. In my humble, not educated opinion, it does produce an increased risk for a higher inflation. And no, I don't mean hyperinflation, I mean as in 5% inflation every year, consecutive years. This will however, have its influence for early retirees. Not that it necessarily has to be bad, in the eighties we had 7-8% inflation years, but also savings accounts that yielded more than that (10-15%?).

the fixer

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #12 on: February 25, 2014, 11:31:48 AM »
I agree that we're at higher risk of inflation in the future due to some pretty simple macroeconomic factors: high debt that can only be paid down by inflating it away, and high unemployment. The unemployment thing might not cause increased inflation if it becomes structural, but in that case it will be a drag on future growth instead; same result from a real rate of return perspective. This could all get paired up with a few years of high growth, though, and we won't even notice these effects.

Of course, my crystal ball is just a toy meant for amusement purposes only. None of this is actionable data anyway.

gillstone

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Re: Mustachian thoughts about the upcomping financial crisis
« Reply #13 on: February 25, 2014, 11:48:37 AM »
a) Even a broken clock is right twice a day (if you continually predict a meltdown, you'll eventually be right)

Damn, someone beat me to my pithy opening statement.

Also, for the love of Christ, no we are not Greece or anywhere near what Greece experienced.  Michael Lewis gives a decent rundown of the problems facing Greece here: http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010

The short answer why we aren't Greece includes....
1. We control our own currency, as a member of the EU, Greece has no control
2. We have a Congressional Budget Office, General Accountability Office, and other non-partisan internal mechanisms to track funds and ensure money goes where it needs to.  Greece never had this and its one of the reasons why they had so many "off the books" government positions and why no one knew how bad the economy was until the old party was voted out and no longer holding the purse strings.
3. While we aren't fans of taxes here, in Greece tax avoidance is nearly a civic religion

A large national debt can be a concern, and we do need to address the US debt levels; however, we would do better to compare to similar-scale economies such as Canada or Japan.

Ayanka

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #14 on: February 25, 2014, 01:18:34 PM »
@ Gillstone: I meant the measures they took in Greece, not the financial status... I think you are right in saying it would be difficult to compare them.

The short answer why we aren't Greece includes....
1. We control our own currency, as a member of the EU, Greece has no control
Which is not necessarily against the Greek economy, it has saved their backs. Without the monetary union, they would be bankrupt now.
2. We have a Congressional Budget Office, General Accountability Office, and other non-partisan internal mechanisms to track funds and ensure money goes where it needs to.  Greece never had this and its one of the reasons why they had so many "off the books" government positions and why no one knew how bad the economy was until the old party was voted out and no longer holding the purse strings.
This is part of the fat they have cut in the last years. You do however have an army that costs an incredible amount, not discussing whether it is a good expense or not, but it is an expense.
3. While we aren't fans of taxes here, in Greece tax avoidance is nearly a civic religion
In Belgium the traditional joke is that it is our national sport. We still have a lower debt/GDP ratio than the USA. ( A lot of our debt is historical, which makes the numbers look worse than they are in reality)

A large national debt can be a concern, and we do need to address the US debt levels; however, we would do better to compare to similar-scale economies such as Canada or Japan.
You are absolutely right in this

I would also like to point out that the article you posted is over 3 years old. In those 3 years draconic cuts have been made, with the EU and the IMF watching every move the Greek government they made. A more recent article would be this:
http://www.reuters.com/article/2014/01/24/greece-current-idUSL5N0KY0TX20140124
While I assume it might be optimistic, I think it shows a good sign of improvement (financially).
The USA is not Greece, but whether it is necessarily better, I don't know.

gillstone

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #15 on: February 25, 2014, 01:35:56 PM »
[
@ Gillstone: I meant the measures they took in Greece, not the financial status... I think you are right in saying it would be difficult to compare them.

The short answer why we aren't Greece includes....
1. We control our own currency, as a member of the EU, Greece has no control
Which is not necessarily against the Greek economy, it has saved their backs. Without the monetary union, they would be bankrupt now.
2. We have a Congressional Budget Office, General Accountability Office, and other non-partisan internal mechanisms to track funds and ensure money goes where it needs to.  Greece never had this and its one of the reasons why they had so many "off the books" government positions and why no one knew how bad the economy was until the old party was voted out and no longer holding the purse strings.
This is part of the fat they have cut in the last years. You do however have an army that costs an incredible amount, not discussing whether it is a good expense or not, but it is an expense.
3. While we aren't fans of taxes here, in Greece tax avoidance is nearly a civic religion
In Belgium the traditional joke is that it is our national sport. We still have a lower debt/GDP ratio than the USA. ( A lot of our debt is historical, which makes the numbers look worse than they are in reality)

A large national debt can be a concern, and we do need to address the US debt levels; however, we would do better to compare to similar-scale economies such as Canada or Japan.
You are absolutely right in this

I would also like to point out that the article you posted is over 3 years old. In those 3 years draconic cuts have been made, with the EU and the IMF watching every move the Greek government they made. A more recent article would be this:
http://www.reuters.com/article/2014/01/24/greece-current-idUSL5N0KY0TX20140124
While I assume it might be optimistic, I think it shows a good sign of improvement (financially).
The USA is not Greece, but whether it is necessarily better, I don't know.

The critical part of dealing with national debt is that its causes and realtive urgency varies across nations, circumstances and years.  While Greece is instructive on the issue of the role of monetary policyand debt as well as the use of austerity to correct the balance sheets, it cannot be used as a reliable comparison to larger economic entities.

Off of 1: While being part of the European Union opened up avenues of financing for Greece, having no control over their own currency meant they could not use the same monetary policy tools most nation states use to deal with economic crises.  Its like building a house but not having a hammer.  It can be done but its really difficult.

Off of 2: The lack of CBO/GAO equivalents pre-dates the collapse of their economy.  In the run up to the Greek collapse the party in charge was also in charge of reporting on the budget. So when they wanted into the EU, they cooked the book and no one said anything because there was no budget entity inside the government that wasn't an instrument of the ruling party.  In addition, that meant they werent in a position to receive non-partisan advice on how to deal with outside firms such as Goldman Sachs who played a large role in their bond mess.

And for the article: The article is 3 years old, but explores HOW they got there.  Understanding how Greece turned into a giant mess is critical in understanding how debt-heavy developed (1st World, Global North, the West, etc) nations can avoid the problem. 

workathomedad

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #16 on: February 25, 2014, 01:41:56 PM »

Use historical inflation numbers via a tool like www.cfiresim.com to make sure your plan would have survived historical inflation issues (double digit at times) and you should be okay.


That is awesome!! Thank you.

PeachFuzzInVA

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #17 on: February 25, 2014, 05:42:58 PM »
I'm reasonably sure the emperor has no clothes, but the fact of the matter is that it doesn't matter. Precious metals aren't the only asset class that will keep pace with inflation over the long term. Historically speaking, the stock market has done a pretty dang good job of that as well. The mustachian lifestyle is perfectly adapted to the upcoming financial crisis, as those living a minimalist lifestyle won't suffer the way those who haven't invested in themselves will.

Annamal

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #18 on: February 25, 2014, 05:55:37 PM »
A lot of people thought that real-estate was in a bubble in 2008 (or actually 2007), even I called it (well ok I called it for New Zealand as well where the property market did not crash).

I don't think a single correct prediction is grounds for any kind attention.

For what it's worth I still think NZ and Australian real-estate is bubbly and since both countries depend on trading with China in some very singular ways (Aus for what it mines, NZ for dairy exports)  they are both at risk for any large changes in the way China does business I'm holding off on buying a house for the moment.

No reason not to keep a broad spread in the stock market.

MissPeach

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #19 on: February 25, 2014, 06:28:25 PM »
I think the video is bunk too but I do think we're in for an interesting time because we have a lot of factors happening at once. Historically we have usually raised or accessed taxes to pay for wars and other spending in in the last 10 years or so we actually lowered taxes. Honestly I'm more afraid the government will raise taxes to pay our debts and will make a mess out of a lot of our tax strategies to accumulate more money faster in order to FIRE.

SnackDog

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #20 on: February 25, 2014, 06:48:48 PM »
Based on the feedback here, I won't view the video. However, I do have a nagging sense that the piper must eventually be paid. The tech bubble burst caused Greenspan to react by lowering rates which in turn inflated the housing bubble. When that burst we didn't want any fallout so Bernanke inflated the current market bubble by printing money. Most of the reaction since 2000 has been to wildly sell bonds to China. China is starting to choke on them, so a currency crisis is expected and could include sustained high inflation until all these bubbles definitively deflate.

The only potentially hopeful sign I see for the US is the stunning increase in oil and gas production which has lowered our trade imbalance and strengthens the dollar.

Cromacster

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #21 on: February 25, 2014, 06:59:17 PM »
I think the video is bunk too but I do think we're in for an interesting time because we have a lot of factors happening at once. Historically we have usually raised or accessed taxes to pay for wars and other spending in in the last 10 years or so we actually lowered taxes. Honestly I'm more afraid the government will raise taxes to pay our debts and will make a mess out of a lot of our tax strategies to accumulate more money faster in order to FIRE.

I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.

I personally find this a fairly far fetched scheme.  Maybe its just me defending what I am working hard to do.  But to me it seems the amount that could be tapped in retirement accounts would be much smaller and more detrimental than other sources.

AdrianM

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #22 on: February 25, 2014, 07:24:46 PM »
I think the video is bunk too but I do think we're in for an interesting time because we have a lot of factors happening at once. Historically we have usually raised or accessed taxes to pay for wars and other spending in in the last 10 years or so we actually lowered taxes. Honestly I'm more afraid the government will raise taxes to pay our debts and will make a mess out of a lot of our tax strategies to accumulate more money faster in order to FIRE.

I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.

I personally find this a fairly far fetched scheme.  Maybe its just me defending what I am working hard to do.  But to me it seems the amount that could be tapped in retirement accounts would be much smaller and more detrimental than other sources.

Don't be so quick to dismiss this though. The term you will need to learn is called Financial Repression.
http://www.financialsense.com/contributors/daniel-amerman/financial-repression-a-sheep-shearing-instruction-manual

The essence of Financial Repression is using a combination of inflation and government control of interest rates in an environment of capital controls to confiscate the value of the savings of the world's savers.

MissPeach

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #23 on: February 25, 2014, 11:44:47 PM »
I think the video is bunk too but I do think we're in for an interesting time because we have a lot of factors happening at once. Historically we have usually raised or accessed taxes to pay for wars and other spending in in the last 10 years or so we actually lowered taxes. Honestly I'm more afraid the government will raise taxes to pay our debts and will make a mess out of a lot of our tax strategies to accumulate more money faster in order to FIRE.

I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.

I personally find this a fairly far fetched scheme.  Maybe its just me defending what I am working hard to do.  But to me it seems the amount that could be tapped in retirement accounts would be much smaller and more detrimental than other sources.

I don't think they will raid the accounts but I do think they might let the Bush tax cuts expire, close loopholes like the back door Roths, limit values on certain accounts, change capitol gains, or start taxing on net worth like some EU countries do. Look at how different income tax was 100 years ago (there wasn't any - US made most of their money on taxes like tariffs and was trying to pass laws to tax the rich). I have every reason to believe it will look totally different in my lifetime looking the next 50 plus years down the road.

GlassStash

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #24 on: February 26, 2014, 08:36:52 AM »
I think the video is bunk too but I do think we're in for an interesting time because we have a lot of factors happening at once. Historically we have usually raised or accessed taxes to pay for wars and other spending in in the last 10 years or so we actually lowered taxes. Honestly I'm more afraid the government will raise taxes to pay our debts and will make a mess out of a lot of our tax strategies to accumulate more money faster in order to FIRE.

I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.

I personally find this a fairly far fetched scheme.  Maybe its just me defending what I am working hard to do.  But to me it seems the amount that could be tapped in retirement accounts would be much smaller and more detrimental than other sources.

I don't think they will raid the accounts but I do think they might let the Bush tax cuts expire, close loopholes like the back door Roths, limit values on certain accounts, change capitol gains, or start taxing on net worth like some EU countries do. Look at how different income tax was 100 years ago (there wasn't any - US made most of their money on taxes like tariffs and was trying to pass laws to tax the rich). I have every reason to believe it will look totally different in my lifetime looking the next 50 plus years down the road.

I'm interested in your opinion of the various changes you mention. How soon do you think they will be implemented? Are any of them wise changes? J/w.

Undecided

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #25 on: February 26, 2014, 09:31:38 AM »

I don't think they will raid the accounts but I do think they might let the Bush tax cuts expire

I'm genuinely curious---do many people who aren't already paying the AMT or above the thresholds for the already-occurred expiration of the Bush tax cuts actually stand to pay much more if those cuts were reversed?

Also, I don't think it's right to say they could expire at this point, is it? Weren't they made permanent?

foobar

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #26 on: February 26, 2014, 10:04:12 AM »
The tax cuts for the middle class  were much bigger than cuts for the rich, They were just spread out over 100x as many people. The rich guy got 100k off their taxes will the middle class got 2000.  The good news about repealing the Bush tax cuts is that ir will make the republicans happy as more people will be paying income tax. We will go from ~49% not paying federal taxes to about 45% in the studies I have seen.

It is a lot more than the rate changes. Things like the child tax credit going from 500 to 1k and being make refundable that really reduced the tax burden.  Take that average family of 4 making 60k/yr (after 401ks and the like).  They save ~800 do to the 10% bracket and 1k from the tax credit. Thats almost 2k more for them to spend/save every year.




I don't think they will raid the accounts but I do think they might let the Bush tax cuts expire

I'm genuinely curious---do many people who aren't already paying the AMT or above the thresholds for the already-occurred expiration of the Bush tax cuts actually stand to pay much more if those cuts were reversed?

Also, I don't think it's right to say they could expire at this point, is it? Weren't they made permanent?

mudo007

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #27 on: February 27, 2014, 09:07:29 AM »


I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.


http://money.cnn.com/2014/01/29/retirement/myra-accounts/
The retirement accounts heist has begun it seems. First they create a "risk free guaranteed returns" plan, something that if ti was offered by a private company would be labeled as SCAM. Then after it becomes popular its very simple to make a % of 401k and IRAs be treasury bonds.

And thanks for all the comments, I researched more deeply on recent Maloney Videos and he already say that the hyperinflation may occur from this year up to 2020, so I guess hes too much interested in selling gold to be a unbiased source.


matchewed

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #28 on: February 27, 2014, 09:32:37 AM »
I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.


http://money.cnn.com/2014/01/29/retirement/myra-accounts/
The retirement accounts heist has begun it seems. First they create a "risk free guaranteed returns" plan, something that if ti was offered by a private company would be labeled as SCAM. Then after it becomes popular its very simple to make a % of 401k and IRAs be treasury bonds.

And thanks for all the comments, I researched more deeply on recent Maloney Videos and he already say that the hyperinflation may occur from this year up to 2020, so I guess hes too much interested in selling gold to be a unbiased source.

Speculation is speculation. It is just as easy to say that they won't do it as it is to say they will. There is no lack of people buying T-bonds and with a Federal Reserve system who's actions are independent of the government and seem to easily choose whether to buy T-bonds or not (QE) what value is seen in the government requiring 401k or IRA holders to buy T-Bonds?

mudo007

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #29 on: February 27, 2014, 11:37:19 AM »
If the government is deeply in debt, then it makes sense for them to borrow money from their citizens (slowly enforcing T-bonds on retirement accounts) than from other nation or private institution. It happened and is still happening around the world, as in Argentina where the president recently "nationalized" all private pension funds.

There is even an alt story on the real reasons of the german holocaust.
It is said that the III Reich rebuilt itself based on debt with the jews. When the time to pay came, Hitler decided to wipe out the jews and their decendants, to extinguish the debt.

Im not trying to prove if the prediction is accurate or not, but it is good to take a good look on these "doomsdays theories" to be at least prepared for whatever the outcome is. After all, a true badass is always prepared for whatever the world throws at him :)

matchewed

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #30 on: February 27, 2014, 12:00:38 PM »
If the government is deeply in debt, then it makes sense for them to borrow money from their citizens (slowly enforcing T-bonds on retirement accounts) than from other nation or private institution. It happened and is still happening around the world, as in Argentina where the president recently "nationalized" all private pension funds.

There is even an alt story on the real reasons of the german holocaust.
It is said that the III Reich rebuilt itself based on debt with the jews. When the time to pay came, Hitler decided to wipe out the jews and their decendants, to extinguish the debt.

Im not trying to prove if the prediction is accurate or not, but it is good to take a good look on these "doomsdays theories" to be at least prepared for whatever the outcome is. After all, a true badass is always prepared for whatever the world throws at him :)

We are not Argentina. If you look into the history of their central bank it is not so much independent as it is in the pocket of their president source. Independence of the central bank is important to good monetary policy. Don't rely on a bad example of a central bank to say it makes sense to do something when it doesn't make sense and was a panicked over grab by their president. One which cannot be replicated in our current system.

Taxes is the first and foremost strategy for managing government debt, after that is spending. "Borrowing" via forced bond buying is a silly and inefficient way to get out of debt when you have a solid central bank system.

I don't even know what to say to your second point. You're already admitting it is an alt story, should I even lend it credence by commenting on it?

Trying to account for any wild speculation of events that might happen means you'd have to be prepared for everything and you cannot. Let go of your illusion of controlling for everything in the world, you can only be as safe as is reasonable for life's regular curveballs.

Undecided

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #31 on: February 27, 2014, 12:15:09 PM »
I know that there's more than just being a debt alarmist going on here, but thought this was relevant.

The Chart the Debt Alarmists Don't Want You to See:

http://www.slate.com/blogs/moneybox/2014/02/27/debt_alarmist_chart.html

mudo007

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #32 on: February 27, 2014, 02:59:59 PM »
But what are those assets? Could you please bring us a breakdown data on what they are?




smedleyb

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #33 on: February 27, 2014, 03:59:12 PM »
News flash: we already had the financial crisis.

The next panic will be an entirely different animal, perhaps rooted in uncontainable geo-political conflict.


AdrianM

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #34 on: February 27, 2014, 05:06:38 PM »
We are not Argentina. If you look into the history of their central bank it is not so much independent as it is in the pocket of their president source. Independence of the central bank is important to good monetary policy. Don't rely on a bad example of a central bank to say it makes sense to do something when it doesn't make sense and was a panicked over grab by their president. One which cannot be replicated in our current system.

Politics, so I wont waste my breath.

Taxes is the first and foremost strategy for managing government debt, after that is spending. "Borrowing" via forced bond buying is a silly and inefficient way to get out of debt when you have a solid central bank system.

I disagree a far more insidious method is used. 

As published in a recent working paper on the IMF website, Financial Repression is what the US and the rest of the advanced economies used to pay down enormous government debts the last time around, with a reduction in the government debt to GDP ratio of roughly 70% between 1945 and 1980. Financial Repression offers a third way out - as it allows governments to pay down huge debt burdens without either 1) default or 2) hyperinflation. If you are a senior government official of a nation that has a huge "sovereign debt" problem like the United States and almost all of Europe, and you want to stay in power - this proven method is a topic of keen interest.

Learn More
http://www.financialsense.com/contributors/daniel-amerman/financial-repression-a-sheep-shearing-instruction-manual

Trying to account for any wild speculation of events that might happen means you'd have to be prepared for everything and you cannot. Let go of your illusion of controlling for everything in the world, you can only be as safe as is reasonable for life's regular curveballs.

I agree, How I found Freedom in an Unfree World
http://eiiiforum.com/picsfromusers/howifoundfreedom.pdf

MissPeach

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #35 on: February 27, 2014, 05:47:09 PM »
I think the video is bunk too but I do think we're in for an interesting time because we have a lot of factors happening at once. Historically we have usually raised or accessed taxes to pay for wars and other spending in in the last 10 years or so we actually lowered taxes. Honestly I'm more afraid the government will raise taxes to pay our debts and will make a mess out of a lot of our tax strategies to accumulate more money faster in order to FIRE.

I've had this discussion with a few people.  While people on this forum view the Roth, TIRA, and 401(k)'s as valuable vehicles for early retirement, some people I've discussed FIRE with are sceptical that these will remain around forever.  One of the arguments is the government debt and that eventually they will be seeking the tax revenue and one of the places they might look are retirement accounts.

I personally find this a fairly far fetched scheme.  Maybe its just me defending what I am working hard to do.  But to me it seems the amount that could be tapped in retirement accounts would be much smaller and more detrimental than other sources.

I don't think they will raid the accounts but I do think they might let the Bush tax cuts expire, close loopholes like the back door Roths, limit values on certain accounts, change capitol gains, or start taxing on net worth like some EU countries do. Look at how different income tax was 100 years ago (there wasn't any - US made most of their money on taxes like tariffs and was trying to pass laws to tax the rich). I have every reason to believe it will look totally different in my lifetime looking the next 50 plus years down the road.

I'm interested in your opinion of the various changes you mention. How soon do you think they will be implemented? Are any of them wise changes? J/w.

I don't think it's far fetched that the fed will try to start SOME inflation. That is something that has been done historically, especially in times of federal debt in order to make the debt easier to repay so to speak. I don't think anyone can imagine every scenario because the combination of tactics tried have never been done at one time at this magnitude.

The rest of the debt will have to be paid somehow. Since our current political stance had been free trade I don't see us using tactics like tariffs like we may have in the past. We have very few federal consumption taxes (like VAT in EU countries) as most of that is at the state level in the US. They may try to increase these especially around unpopular or currently illegal areas. I also expect them to go after the corporations and people. Since the corporations fund so much of the political campaigns for Congress (who are authorized to tax) I think they may close some loopholes but slowly getting the taxes from the people will be more likely. I think first they will do things like close some high revenue loopholes. I think over time they will need to raise taxes. For a good chunk of time the top tier rate was as high as 90% (though I want to meet the rich guy who actually paid this - I expect most hid behind various methods to reduce this). I also see them changing the rules on retirement accounts or offer other types of fund in lieu of what we have now... maybe something like you can keep your 401K if you want but you can also do this. Or you can only do this after XXXX year.

KingCoin

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #36 on: February 27, 2014, 06:01:58 PM »
The rest of the debt will have to be paid somehow.

The debt doesn't have to repaid. The government can roll it over forever. With the deficit rapidly falling, I don't think a lot of hand-wringing about confiscatory measures is really worth the mental energy.


matchewed

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #37 on: February 27, 2014, 07:25:42 PM »
We are not Argentina. If you look into the history of their central bank it is not so much independent as it is in the pocket of their president source. Independence of the central bank is important to good monetary policy. Don't rely on a bad example of a central bank to say it makes sense to do something when it doesn't make sense and was a panicked over grab by their president. One which cannot be replicated in our current system.

Politics, so I wont waste my breath.

Besides the rest of your post being about politics, the actions of Argentina's Central bank is not just politics but how the actions of an independent central bank versus a not independent central bank would be different. You can't assume that just because Argentina did it that we would too. There is no current system in place that allows a president that power in the US. The decisions of the Fed are based on a committee not the will of the president. It seems kind of silly to write that off as politics and therefore an invalid point when it has nothing to do with politics and all to do with a solid central bank framework.

Your article on Financial Repression is a purely theoretical piece which has no evidence proving that people are having negative inflation adjusted returns at this point. It nearly invokes the "Wake up Sheeple" mistake of conspiracy theories (in fact I'd argue it does as the author uses a sheep shearing analogy [poorly]). If this method is so proven, where is the proof?

I'm just not going to get into the last one as I think you're missing the point of what I am saying. There are things in your control and things not. Insidious backdoor government boogeymen are one of those things you can't really control, not all their policies are out to get you. Some of it is actually reasonable legislation meant for the benefit of the people. But given the link I'm guessing we'll be talking past each other on that point.

arebelspy

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #38 on: February 27, 2014, 09:47:26 PM »
News flash: we already had the financial crisis.

The next panic will be an entirely different animal, perhaps rooted in uncontainable geo-political conflict.

Interesting.  And you don't think that conflict will also come with a financial crisis at the same time?

I agree, How I found Freedom in an Unfree World
http://eiiiforum.com/picsfromusers/howifoundfreedom.pdf

One of two books I think everyone should read.

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AdrianM

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Re: Mustachian thoughts about the predictions on an upcomping financial crisis
« Reply #39 on: February 27, 2014, 11:43:02 PM »
Your article on Financial Repression is a purely theoretical piece which has no evidence proving that people are having negative inflation adjusted returns at this point. It nearly invokes the "Wake up Sheeple" mistake of conspiracy theories (in fact I'd argue it does as the author uses a sheep shearing analogy [poorly]). If this method is so proven, where is the proof?

Mate, I know this shit is as boring as watching paint dry but to further your education I direct you to page two "Historical Precedent"
http://us.allianzgi.com/MarketingPrograms/External%20Documents/Financial_Repression_Whitepaper.pdf

And for the ultimate snoore fest
http://scholar.harvard.edu/files/rogoff/files/forgotten_history_of_domestic_debt.pdf


I'm just not going to get into the last one as I think you're missing the point of what I am saying. There are things in your control and things not. Insidious backdoor government boogeymen are one of those things you can't really control, not all their policies are out to get you. Some of it is actually reasonable legislation meant for the benefit of the people. But given the link I'm guessing we'll be talking past each other on that point.

No its the same subject. When you have finished reading the book or at least the chapter on Government trap you may realize this.

Read the book. Live free.

arebelspy

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U.S. Drops to #46 in Press Freedom (Below Romania)
http://www.zerohedge.com/news/2014-02-16/us-plunges-46th-world-press-freedom-index-below-romania

Please don't promote bullshit clickbait articles just because their titles sound catchy.

I'm no fan of the U.S. press, but that "study" is crap.

Read this: http://www.onthemedia.org/story/press-freedom-not-decline/

Then the slashdot comments here:
http://slashdot.org/story/14/02/17/1518246

Quote
look at the last few years worth of rankings
2002 17th
2003 31st
2004 22nd
2005 44th
2006 53rd
2007 48th
2008 36th
2009 20th
2010 20th
2011-12 47th
2013 32nd
2014 46th

Seems like a yo-yo, maybe this index is more about creating headlines than true measure.

Here's an article from an author who wrote an article about it two years ago, when he got tricked by the headlines, and who now takes a broader perspective: http://www.washingtonpost.com/blogs/worldviews/wp/2014/02/12/is-u-s-press-freedom-really-plummeting-not-if-you-look-at-the-data/

Quote
What this shows to me is that the U.S. ranking has alternated for over a decade between rankings in the 20s and in the 40s. That's a remarkably wide range to have jumped back and forth so often. More to the point, it shows that this year's "plummeting ranking" and "profound erosion" is something that seems to happen every couple of years, with U.S. press freedom miraculously and immediately recovering every single time.
In fact, according to this report, press freedom in the U.S. has actually improved in the rankings from only two years ago, when it was ranked 47th. And we're much better off than we were in 2006 or 2007, when the rankings were 53rd and 48th, respectively. So either press freedom has been wildly yo-yoing between good and bad every other year for the past decade, in which case this year's drop is nothing new, or maybe the ranking actually is just not a very effective indicator of press freedom in the United States.
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matchewed

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Don't agree with = bullshit, got it.
Glad we have the forum bullshit police so vigilant because if it isn't useful for Arebelspy it is useful to nobody.

Rather cry repression why don't you craft an argument as to why the article is not bullshit.

arebelspy

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Don't agree with = bullshit, got it.
Glad we have the forum bullshit police so vigilant because if it isn't useful for Arebelspy it is useful to nobody.

Rather cry repression why don't you craft an argument as to why the article is not bullshit.

+1. I cited multiple articles and quotes about why I think it's click bait bullshit.

Do you have any reason why you think saying "U.S. Drops to #46 in Press Freedom (Below Romania)" is important, relevant, or meaningful in any way?   Or do you just have an ad hominem attack against me because you've got nothing better?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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unitasking

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matchewed

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Economic Freedom
This article does a nice job of summarizing. If you can't read the article just google the title and you can the full article.
http://online.wsj.com/news/articles/SB10001424052702303848104579308811265028066
http://www.zerohedge.com/news/2014-01-15/level-economic-freedom-united-states-all-time-low

Press
http://youtu.be/BguFDmpmBYY?t=2m57s
https://www.youtube.com/watch?v=P1Dqofm71VE

Regarding the press, doesn't the mere fact that those stories are available invalidate your point?

matchewed

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The point isn't that there is not a free press, is that it is becoming less free, hence the ranking. Also that the major news networks are still the go-to source of news for many people and they are not presenting free news in many ways as this clip illustrates:
https://www.youtube.com/watch?v=P1Dqofm71VE

The alternative web-news is still free, but the major networks offer something that can't really be called news. Woody Harrelson does any excellent job of detailing this in the documentary, ETHOS: http://dvd.netflix.com/Movie/Ethos/70236294?trkid=1660

Okay so what you are saying is that the US deserves a score of 46 and that is is suddenly less free from the 2013 ranking because....

Or would the fact that they significantly changed their methodology of deriving their number change this concern (also noted in the slashdot thread)? Maybe I can rephrase the question, if not because of the methodology change, why did the US drop to 46?

As to your second point I'll just repost what I already said. Given the fact that alternative web news exists and is in English and meant for American consumption (or at least English speaking people consumption), and that many of them are US based, how is the overall US press less free?

matchewed

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Explanation posted in clips earlier.

OK, I can see you're not interested in a dialogue. That's cool, a forum is an odd place for that sort of interaction though. ;)

bk1

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I am worried about our out of control debt and spending problem as a country. The only reason we get away with just printing more money to buy the debt is we are the world's reserve currency so we command some extra respect. What if Greece could just print their own money to buy their debt? It just doesn't add up long term.

KingCoin

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I am worried about our out of control debt and spending problem as a country. The only reason we get away with just printing more money to buy the debt is we are the world's reserve currency so we command some extra respect. What if Greece could just print their own money to buy their debt? It just doesn't add up long term.

Buck up man.

The debt is leveling, not "out of control":
http://www.cbo.gov/publication/43907

The deficit is falling:
http://images.huffingtonpost.com/2013-10-22-deficitchart.jpg

Interest payments look pretty darn good:
http://www.cepr.net/images/stories/blogs/interest-share_of_GDP_5165_image001.gif

No one knows how this is all going to play out, but if you own and invest in productive assets, you'll be fine.
« Last Edit: March 05, 2014, 09:47:58 AM by KingCoin »

arebelspy

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We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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