Federal Reserve losing control

[JackRiddler]

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Re: Bloomberg v. Federal Reserve.

A very important case. A verdict for Bloomberg might be the moment when the "Federal Reserve loses control." As with the spook complex, their power derives from secrecy. If the books are thrown open, they become a branch of the government.

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[ninakat]

Karl Denninger with some serious doom (is he correct? -- I don't follow him):

What's Dead (Short Answer: All Of It)
March 5, 2009

Just so you have a short list of what's at stake if Washington DC doesn't change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can't believe, and they're showing it as an imminent event - like perhaps today imminent.)

► All pension funds, private and public, are done. If you are receiving one, you won't be. If you think you will in the future, you won't be. PBGC will fail as well. Pension funds will be forced to start eating their "seed corn" within the next 12 months and once that begins there is no way to recover.
► All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can't earn anything off investments, and if you have a claim in process at the time it happens, it won't get paid. The probability of you getting "boned" on any transaction with an insurance company is extremely high - I rate this risk in excess of 90%.
► The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they're doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.
► Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to....
► Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.
► Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what's left of it, or an IRA, consider it locked up in Treasuries; it's not yours any more. Count on this happening - it is essentially a certainty.
► Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to....
► The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.
► Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won't be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go "feral"; witness New Orleans after Katrina for how fast, and how bad, it can get.

The good news is that this process will clear The Bezzle out of the system.

The bad news is that you won't have a job, pension, annuity, Social Security, Medicare, Medicaid and, quite possibly, your life.

It really is that bleak folks, and it all goes back to Washington DC being unwilling to lock up the crooks, putting the market in the role it has always played - that of truth-finder, no matter how destructive that process is.

Only immediate action from Washington DC, taking the market's place, can stop this, and as I get ready to hit "send" I see the market rolling over again, now down more than 3% and flashing "crash imminent" warnings. You may be reading this too late for it to matter.

In 3 minutes, what's coming.....

http://www.youtube.com/watch?v=CGWMs5cdQ2k

[slow_dazzle]

Today the BoE announced "quantitative easing" aka "we have lost control and don't know what else we can do". Hyper inflation here we come once the lack of buyers for the government bonds shows that the emperor has no clothes.

It's close mate, real close. They don't know what else to do now that the options have ran out, the economy ain't going to do a Lazarus and the gig is basically up.

We have time though. A few weeks at most.

I wish anti would post here - his prediction has come to pass.

[Fat Lady Singing]

So, smart folks, tell me: my husband works at an academic-type non-profit, and has for more than 25 years. He has the non-profit equivalent of a 401K; the organization recently froze their matching funds to the current level for, well, forever; should we, can we, pull our money out of the plan? You get docked somehow if you do -- the particulars escape me -- but it sure sounds like if we don't get out what we can now, we may never see any money.

Don't worry, I wouldn't take action based on advice someone I don't know gives me over the Internet, but I do wonder what the prevailing opinion is. Would it be worth exploring, anyway? Or is it just plain old too late?

Or am I being an alarmist?

[rrapt]

Ooops. Is it past time for discussion already?

[slow_dazzle]

So, smart folks, tell me: my husband works at an academic-type non-profit, and has for more than 25 years. He has the non-profit equivalent of a 401K; the organization recently froze their matching funds to the current level for, well, forever; should we, can we, pull our money out of the plan? You get docked somehow if you do -- the particulars escape me -- but it sure sounds like if we don't get out what we can now, we may never see any money.

Don't worry, I wouldn't take action based on advice someone I don't know gives me over the Internet, but I do wonder what the prevailing opinion is. Would it be worth exploring, anyway? Or is it just plain old too late?

Or am I being an alarmist?

FLS - up to you how you proceed. FWIW I've got out of anything financial long ago and have since invested in useful stuff. But it's up to you. Sorry for the heavy disclaimer. Good luck.

I'm no seer but my hunch is we hit a tipping point today.

rrapt - Google "GEAB 30" and "GEAB 31". Good luck to you too.

[ninakat]

Fat Lady Singing, I've been an alarmist for several years now. Ruppert and a few others scared the hell out of me in 2004-5 and I changed course, which included cashing out my IRAs and annuities, paying the penalties for early withdrawal, and then paying taxes on the income. I used the money for preps and non-dollar assets.

I hope that Denninger (above article) is wrong in his timing and severity -- but I tend to agree with slow_dazzle that there are only a few weeks before things start to unravel. Hard to tell what form it might take. Trouble is, even the Mad Max scenario seems to be on the table.

You could at least inquire as to the possibilities regarding your husband's retirement money, and then decide if you think it's worth the risk.

Hard to believe that this is happening, even with all the "alarmist" warnings I've been reading for years. Frightening really.

*waves at s_d*

[slow_dazzle]

Fat Lady Singing, I've been an alarmist for several years now. Ruppert and a few others scared the hell out of me in 2004-5 and I changed course, which included cashing out my IRAs and annuities, paying the penalties for early withdrawal, and then paying taxes on the income. I used the money for preps and non-dollar assets.

I hope that Denninger (above article) is wrong in his timing and severity -- but I tend to agree with slow_dazzle that there are only a few weeks before things start to unravel. Hard to tell what form it might take. Trouble is, even the Mad Max scenario seems to be on the table.

You could at least inquire as to the possibilities regarding your husband's retirement money, and then decide if you think it's worth the risk.

Hard to believe that this is happening, even with all the "alarmist" warnings I've been reading for years. Frightening really.

*waves at s_d*

Waving back ninakat - I'll e-mail you soon.

Take care mate.

[Fat Lady Singing]

Fat Lady Singing, I've been an alarmist for several years now. ...
Hard to believe that this is happening, even with all the "alarmist" warnings I've been reading for years. Frightening really.

Oh, I know. Thanks for your (and anyone else's) opinion. Funny, I just said to my husband, "Maybe we should look into getting our money out of your 401K," and he replied, "Have you been reading RI again?" With all good humor, of course.

[rrapt]

Hey I was right - is time for action and less talk, at least for me.

Thx slo_daz for the links. Now I hafta muster up the gumption to cash out of the market at 50% loss, pay off my debts & loans and see if there's anything left to buy a few bags of beans for the coming drought.

Not that I haven't been well warned for the last year or so.

[freemason9]

Fat Lady Singing, I've been an alarmist for several years now. ...
Hard to believe that this is happening, even with all the "alarmist" warnings I've been reading for years. Frightening really.

Oh, I know. Thanks for your (and anyone else's) opinion. Funny, I just said to my husband, "Maybe we should look into getting our money out of your 401K," and he replied, "Have you been reading RI again?" With all good humor, of course.

Well, that's how it works, right? 80% of individual investors buy into the market when times look good . . . the market is high and rising. When the regularly scheduled recession hits, though, the market sinks. When it sinks low enough--and after enough people become unemployed and underemployed--those same poor saps pull out of the market, taking a big loss. Later, when the market bottoms, big institutional and aristocratic "investors" buy those same stocks at a deep discount, and watch as they grow in value in the subsequent recovery. When the recovery is mature, that 80% decides it must be safe again (and most are employed again), so they invest in the market. And the cycle repeats itself.

The stock market is the biggest criminal enterprise on Americans ever devised.

Check the shift in relative income distribution since Reagan (the original Wall Street president) encouraged Americans to "invest." We've lost tremendous ground insofar as income distribution.

So, I would say resist the urge to shift investments; that's what nails people recession after recession.

Of course, this may not be your run-of-the-mill fruit picking. This could actually be the Real Deal. In that case, it probably doesn't matter what you do anyway.

Obama's great gamble is expending great wealth in anticipation of a recovery, and subsequently taxing the aristocracy to return wealth to the working class. It may not work; it may be too late. Wish him luck.

[Fat Lady Singing]

So, I would say resist the urge to shift investments; that's what nails people recession after recession.

Upon further discussion, that is my husband's point of view.

Of course, this may not be your run-of-the-mill fruit picking. This could actually be the Real Deal. In that case, it probably doesn't matter what you do anyway.

And that is my fear.

Obama's great gamble is expending great wealth in anticipation of a recovery, and subsequently taxing the aristocracy to return wealth to the working class. It may not work; it may be too late. Wish him luck.

I certainly do wish him, and us all, luck. That was very well put, by the way, freemason9; I'm not sure I've seen his plan described so succinctly. Of course, there are people who would say that Obama's nowhere near as sincerely interested in the working class as you say -- I just hope he is. These are truly confusing issues for me...

[isachar]

So, smart folks, tell me: my husband works at an academic-type non-profit, and has for more than 25 years. He has the non-profit equivalent of a 401K; the organization recently froze their matching funds to the current level for, well, forever; should we, can we, pull our money out of the plan? You get docked somehow if you do -- the particulars escape me -- but it sure sounds like if we don't get out what we can now, we may never see any money.

Don't worry, I wouldn't take action based on advice someone I don't know gives me over the Internet, but I do wonder what the prevailing opinion is. Would it be worth exploring, anyway? Or is it just plain old too late?

Or am I being an alarmist?

FLS, no, you're not being alarmist at all. I've seen a few trial balloons about this very possibility - seizure/conversion of retirement fund assets - and it must be taken seriously.

When i last checked, there is a 10% early withdrawal penalty on amounts withdrawn prior to age 59. They'll also withhold another 20% towards any taxes owed. If your tax liability is greater, you'll pay more in April. Less, and you'll get some back.

For certain defined benefit plans you may only be limited to withdrawing 10% per year so you're pretty much hosed there. Check with your accountant/tax adviser.

I'm still debating. Will probably withdraw half and pay the penalty. Will invest it in hard assets. Very hard. Or do as ninakat has wisely done. If I make back 30% I'll break even, as opposed to losing 100%, or losing access to 100%, for however long the Feds want to lock up the funds.

[isachar]

freemason sez:

"Of course, this may not be your run-of-the-mill fruit picking. This could actually be the Real Deal. In that case, it probably doesn't matter what you do anyway"

That is one of the most foolish, ignorant, and dumbest statements I've ever read on RI. Beats any of the nonsense orz and nomo have ever posted.

It matters very greatly. And if you can't tell by now that this isn't the 'run-of-the-mill' fruit picking you're not terribly observant.

[ninakat]

Obama's great gamble is expending great wealth in anticipation of a recovery, and subsequently taxing the aristocracy to return wealth to the working class.

Believe that at your own peril. First, you have to believe that Obama is a representative of the people, not the aristocracy. Second, you have to believe that Obama expects a real recovery (i.e. that he doesn't have a clue about where the economy is actually heading -- that'll be "the incompetence theory" after the SHTF). Third, you have to believe that he's actually planning on taking from the rich and giving to the poor, not just giving the idea lip service.

That's an awful lot of blind faith, none of it based in fact.