Socialism collapses rapidly when the public realizes that its government cannot pay its obligations AND taxes no longer cover those obligations. It is at this point the government will have lost the confidence of it own people. This is the catalyst that will bring everything down.
Nearly 600 State & Local governments are now in the hole and has reached nearly $1.2 trillion of unfunded pension liabilities in FY 2014. This reflects total pension liabilities of $4.798 trillion and total pension assets (or fiduciary net position) of $3.607 trillion. This staggering number is nearly 25% of the annual GDP and accounts for roughly 97% of all public pension funds in the United States. California is raising taxes to cover the short-fall for now, but this is going nowhere fast.
There are people on Capitol Hill who support confiscating all private 401 K plans in the country and replacing them with a monthly allotment. We know what will happen to that one, so you better have something else besides cash. The government cannot meet the promises for its own employees and they will turn to increasing taxes and confiscating private property. This will happen just as it has always happened in the past.
Government pensions are what destroyed the Roman Republic Empire and history is going to repeat sooner than later.
In our September InsidersPower newsletter, we detailed that the end of Socialism was coming and a global sovereign debt crisis was going to lead the way. The sovereign debt crisis is what led to the great depression and it is what is started again at the end of September 2015. It is expanding rapidly throughout the world now.
The latest polls show that most people who voted for Trump are satisfied. When the same questions have been asking about Hillary, the opposite response appears. The polls are actually showing that Trump would win a greater margin today than last year. This is interesting for it is confirming the collapse in socialized government with that began on September 30st, 2015. It was the start of the collapse in confidence in government. This cycle should intensify starting in 2018 running head long into 2020.
This is all good for the volatility in markets we see ahead. This is the same trend that produced BREXIT and just wiped out all mainstream parties in France.
Should you keep your money invested? Where should you invest? What should you buy? Should you own Gold? Should you own Stocks? The traditional Buy & Hold theory is going to wipe out millions of peoples retirements just like it does at the end of every debt cycle in history.
You Never Own Your Home.
The reality is that as long as there are property taxes in your country, state, province, county, or city . . . you are a renter until taxes are raised to the point you would rather walk away than pay them. Even if you no longer have a mortgage! That is why property taxes exist; to confiscate if necessary.
Recently, the government fabricated tax increases based upon renovations that never took place. For one woman, they simply took the money out of her account sending her into overdraft conditions when they claimed she did $79,780 in renovations to her tiny 860 square foot home when no work was ever done.
Governments are going bust everywhere and are desperate. This system of government pretending to represent the people when they act more like paying the Mafia for protection. In this case, you have to pay the government or else they take your home. You have no right to simply retire and die in peace. They tax you until you are dead and then demand taxes from your estate. We have all become simply economic serfs working for the landlord and we own nothing for they have the right to take everything if we cannot afford to pay what they demand. In this case, they just pretend you did something and send you a bill.
This is why I rank property dead last as an investment during socialisms deflationary global cycle. It is not movable in tough times. It always takes the greatest decline in value because of its illiquidity.
The population of Rome collapsed from 180AD because taxes kept rising and people were just forced to walk away. History repeats itself over and over again. So caution is advisable with real estate. Obviously, we need a place to call home. However, it should not be 80% of your assets. It should be limited to a portion of your portfolio that you can afford to walk away from and survive.
It’s a shame government turns so aggressively against its people. They are always the great destroyer of civilization.
This collapse of socialism globally started September 30, 2015 as I wrote then, it has started to pick up steam as you have seen with Greece, Brexit, the US elections, the progressive demise of the EU, and that of Brazil, Venezuela, and South America. Politicians do not want to get real jobs and will not go quietly as they never have in history.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.