NIRP, Boomers and Yak Bones
How quaint, the concept of retirement. The very idea that the past 200,000 years of humankind’s social development — as evidenced by the oldest hand-drawn cave paintings and fossil records — ever included such a thing as a cessation of work prior to attaining truly old age — perhaps sitting around the campfire at a healthy 65, gnawing on a yak bone while the young hustled up the next dinner and were forced to give you the first few bites — is frankly laughable.
Rather, retirement it is a very modern innovation. Prior to Franklin ‘Surprise Attack’ Roosevelt’s official August 1935 transformation of the American free enterprise economy into a centrally planned, socialist wealth redistribution machine, no one expected to stop working until the day their bodies gave out in old age. Grandma and grandpa alike pitched in along with the young ‘uns to run both home and farm, doing whatever was necessary, with everyone well aware of the often razor-thin edge between having enough and having too little.
Things worked out pretty well for the ‘Greatest Generation’ who were fortunate enough to catch the artificial fiat money wealth creation boom launched amidst great disinformational fanfare at Bretton Woods in 1944 (by the same folks who brought you the Federal Reserve 31 years earlier) when the Federal Reserve Note (‘dollar’) was official classified as the world’s reserve currency. Over the next 50 years the phony expansion of the economy through a flood tide of debt-based money swept everything that floats, including household wealth, to the stars.
Case in point: Gordon’s parents bought a 3-bedroom home on a quarter-acre lot in Andover, Massachusetts in 1961 for the tidy sum of $30,750. Zillow has that same house pegged today at $388,973 meaning that it now takes 13 times as many pictures of George Washington — we’re speaking of the $1 bill, Dear Reader — to buy it.
That house is not on the register of historical places. It’s not sitting atop a gold mine. It’s just a house. And its been deteriorating for over 50 years.
– Is it really 13 times more valuable as a physical residence?
– Are there 13 times as many bedrooms?
– Is it sitting on 13 times as much land?
– Are the neighbors 13 times nicer?
The grand wealth illusion started to fall apart with the stock market crash of 2000 which marked the beginning of the secular bear market. Alas, for the vast majority of ‘Baby Boomers’ who are just now vigorously strolling across the retirement finish line and not even close to rolling over it in a wheelchair, it’s all coming to a very premature end. And now you can’t even make a buck on your retirement stash, as Eric Sprott explains:
“On July 18th, 2012, the German government sold US$5.13 billion worth of 2-year bonds at an average yield of -0.06%… investors knowingly and willingly bid… for bonds that will pay no interest and are guaranteed to lose them money on expiration. Welcome to the new status quo… NIRP (Negative Interest Rate Policy)… a symptom of a broken financial system… When so-called safe-haven bonds start to consistently produce a negative return, try charging advisory fees to clients while recommending a 50% allocation to negative-yielding government debt. Advisors can try it for a while, but investors won’t put up with it for long… The pension plans are also deteriorating… the funded status of US corporate pension plans hit a record low in July 2012.”
Dear, Dear Reader. Are you going to sit there and take this when math can be your ally and not a cancer that eats away at your retirement? You simply must become pro-active in seeking a higher yield for your money. Whatever you decide to do, making the decision to do something — anything! — would be a good first step.
Because one of these days the government is going to be all out of yak bones.
And May All Your Investments Be Profitable…
David Taylor and Gordon Philips, Directors
Prism Solutions, LLC
‘Better Investing Through Science’
July 2012 Performance Report
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