Bill Bonner

Back to Venezuela. Yesterday, we noted that old Hugo is promising to give investors guaranteed returns from government owned industries (including those recently expropriated from private owners).

Well, if you want to make a lot of money by investing in foreign markets you should put your money where blood flows in the streets. And maybe Venezuela is getting close. It is the most mismanaged economy in the Western hemisphere – with the possible exceptions of Haiti and Cuba. In the past 12 years, it has exported nearly half a trillion dollars’ worth of oil. Yet, by all indications, the Venezuelan economy is falling apart.

Chavez has not been able to deliver on his promises. Key indicators – poverty rate, literacy, etc. – have generally improved, but not as much as in Mexico and other Latin American countries. And expropriations and continued rabble-rousing has scared off foreign investment.

Voters seemed to turn against Chavez in last month’s legislative elections, so the man has turned on the heat. More expropriations. More threatening rhetoric. More nonsensical policies.

We have not followed prices on the Venezuelan stock market, but brave investors might want to have a look.

But hey, if Hugo Chavez can guarantee investment returns, why not the US government?

It’s coming, dear reader.

Once again, we are grateful for the opportunity to see in real time such spectacularly stupid things as must make the gods weep. Or laugh.

When governments become desperate for money, they take it wherever they can get it. It’s probably just a matter of time before they begin to eye the American retirement system. They’ve been living on “excess” Social Security contributions for many years. That is, people paid more into the system than they got out of it. Until this year. Now the system is in deficit.

So, they’re bound to look at 401(k) and other retirement programs.

It was reported in the press that there was a proposal to seize these private retirement plans. Not so. But on October 7th, Teresa Ghilarducci, a professor at the New School for Social Research in New York, proposed to Congress that they introduce a program where workers could “swap their 401(k) assets…for a Guaranteed Retirement Account…that would be composed of the equivalent of government bonds that pay a 3% real return.”

How about that? A guaranteed return of 3%. Wait, is that AFTER inflation? Hmmm. Yep. That’s what the proposal calls for.

Another crackpot idea…but just wait. The feds will pitch it as a solution to the problem of negative returns in 401 k plans. After inflation, deflation, maybe even hyperinflation, and a bear market…these GUARANTEED returns will sound like a good deal. A guaranteed 3% ain’t bad.

This is, effectively, what Argentina did. It nationalized private pension plans to protect retirees! Could the US do it too? You bet.

Regards,

Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily ReckoningDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

  • Michael

    I have a framed stock certificate of the ‘old’ GM that is now essentially worthless. However, the new and improved government-approved version will be out soon…

  • Bruce Walker

    The whole 401-k plan has all along been based on a huge fraud; –specifically, that you can trust Wall Street to protect your financial interests. That the plan severely limits participants ability to get their money out, gives Wall Street an open ended opportunity to rip everyone off. Before blaming the government for nationalizing the plans, keep in mind that whatever is left in most folks 401-k plan is little more than the financial residue that Wall Street hasn’t ripped-off yet. Kind of like the old joke about “what is a financial planner?” Answer: Someone who puts YOUR finances in HIS plan.

  • Wimpy

    I’ll gladly pay you Tuesday for a hamburger today.

  • Fredo Tejano

    Re Venezuela, government issued poverty and literacy rates should be further scrutinized. Third party analysts and researchers have actually verified those figures and came to the conclusion that the Venezuelan government is actually fudging its data.

  • azrefugee

    I like that plan.The dollar is going to dive anyway,whether you invest with wall street or the gov.why not take a guaranteed
    3% on top of inflation.rates and yields are trash now.At least I will be able to spend my money overseas.the days of 10% returns are long gone.

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