"When the Money Goes..."
Hardship withdrawals, barbarians inside
the gates and the burden of phony fiat.
by Bill Bonner
Baltimore, Maryland - "From ZeroHedge comes this update: 'More Americans Tapping Into Retirement Savings As 'Hardship' Withdrawals Rise.' "A new report from Fidelity, the nation's largest provider of 401(k) plans, reveals a troubling withdrawals and loans. The report shows that 2.3 percent of U.S. retirement plan participants took a hardship withdrawal in the third quarter of 2023, up from 1.8 percent in the third quarter of 2022.
Top reasons given for taking a hardship withdrawal were avoiding foreclosure or eviction and covering medical expenses. Besides hardship withdrawals, there was also an increase in the number of Americans taking loans from their retirement savings accounts, with this share growing from 2.4 percent in the third quarter of 2023 to 2.8 percent in the comparable period in the prior year.
Among employed Americans, 60 percent said their incomes haven't kept up with increases in household expenses due to inflation over the past 12 months, according to a new survey from Bankrate. That's up from 55 percent last year. Meanwhile, less than one-third (29 percent) said their pay has kept up with or exceeded inflation this year compared to 33 percent last year, and 11 percent say they don’t know."
Yesterday, through the eyes of former ambassador Jack Matlock, we looked at how US foreign policy changed dramatically from 1982 to today. After rolling along on a highway of high ideals and aspirations, the US took the low road exit towards bombing and bullying all over the world Today, we look at domestic policy.
Inside the Gates: The most notable change in our domestic situation is the one we follow almost daily. “When the money goes, everything goes,” we say here at BonnerPrivateResearch headquarters. We don’t pretend to have the cause and effect of it perfectly worked out; but the correlation is hard to miss.
In the space of the two periods – 1950-1980…and then 1980 to 2020 – we went from a nation that had real money, backed by gold (the actual change was made in 1968/1971…but it took a few years kick in) to a nation that relied upon paper money managed by a crew of bankers and economists. We were a nation of creditors…and became a nation of debtors. We made money – by selling goods and services; now, when we need an extra trillion, we just “print it” up. We went from a nation that ran a surplus in its national accounts, to one that pays $1 trillion per year just on the interest on its past deficits. We also went from being an export powerhouse to being a country with a trade deficit of nearly $1 trillion annually.
We saw yesterday that in 1955 we were on what Bishop Fulton Sheen called the “Way to Happiness.” The roadblocks and obstacles had been removed. No more war. No more deficits. Eisenhower had cut the defense budget; WWII debt was being paid off. And when France and England wanted the US to get involved in an ugly war in the Mideast, he told them that not only would Americans not participate; he said he’d cut off their military aid too. (The Suez war ended within hours.)
And for the next two and a half decades…millions of families found happiness in their own ways; with their higher wages, they could buy new automobiles…and new houses…and send their children to college.
That ‘70s Show: But those wage gains ended in the mid-70s. The reasons are widely debated, but our leading suspect is the post-1971 dollar. In 1971 the US Treasury changed the money system and things promptly began to get out of whack. A single dollar from 1955, for example, would be worth $11.48 today.
We have already served up this dish so often, our long-suffering Dear Readers are no-doubt gagging at the thought of another serving. So…we’ll rush along and settle into leather chairs for an after-dinner drink.
The most important feature of the new money system was that it favored debt over real wealth. Simply, it was easier to borrow money (often below the rate of inflation) than to make it honestly. Result? When Bishop Sheen saw the unencumbered roadway ahead as the ‘way to happiness’ in 1955, total US debt, even after WWII, was only $300 billion or 70% of GDP. Today, it’s almost $34 trillion; that’s 100 times more…and twice as much compared to GDP.
This debt, we remind ourselves, is the burden of yesterday’s expenses that yesterday’s public didn’t want to pay for. So now, tomorrow’s public gets the bill. And by our calculations, the annual interest alone represents about 15% of family income each year – a hefty price to pay for things you didn’t want and never will get. And it leads, inevitably, to an economy in which today’s workers are so burdened by the legacy rip-offs of the past…they can make little headway in the present.
Year after year, the burdens of the past accumulate…and become heavier and heavier. And it’s not just a matter of money itself. Laws, regulations, policy decisions – bought and paid for with fake money – distort and confuse the whole society. Bribery, corruption, incompetence, grift, waste and scam – the money that pays for them may be fake; but their effects are real…disastrous…and almost impossible to erase."
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