The Plan To Raid Your Savings (And What To Do About It)

I recently came across a headline that made me do a double-take… for all the wrong reasons.

It reminded me of what happened with the bailout in Cyprus… and appears to be looming again in Europe.

What’s more, it bears an uncanny resemblance to what President Obama proposed in his latest State of the Union with his MyRA “plan.”

With each passing week, ideas on how governments should “manage your money” seem to be repeatedly echoing across the Atlantic.

The scariest part? With each echo, it’s beginning to take on the sound of the new normal.

But, you don’t have to sit by idly and listen…

The Threat Is Gaining Momentum

Back in November, we talked about how to become your own own central bank, and why.

One thing that prompted the topic was a comment from European Central Bank Chief Mario Draghi in a speech at Harvard. He told his audience that when he was governor of the Bank of Italy – owner of the fourth-largest gold reserve in the world – he “…never thought it wise to sell it.”

Draghi also intimated that gold reserves provide protection against U.S. dollar fluctuations and that risk diversification is why nations [read: central banks] have essentially stopped selling reserves.

Wow. How’s that for a little candor?

Becoming your own central bank is looking like an increasingly good idea.

That’s because governments in both the U.S. and Europe are progressively “normalizing” through repetition the idea of tapping into their citizens’ savings to bail themselves out of failed fiscal policies.

Just recently we saw in its October Fiscal Monitor Report, the International Monetary Fund (IMF) had quietly set the stage for what could eventually be a European, or perhaps even worldwide, “Supertax.”

Again, here’s what the IMF had to say: “The sharp deterioration of the public finances in many countries has revived interest in a ‘capital levy’ – a one-off tax on private wealth – as an exceptional measure to restore debt sustainability.”

We followed up with mention of Ireland’s Minister for Finance dropping a bombshell at the Future of Banking in Europe Conference. Yet you’d be hard pressed to find any mention of it in mainstream media.

He discussed the need for a “toolkit” aimed at dealing with failing banks, while preserving essential bank operations and minimizing taxpayers’ exposure to losses. Then he went on to say, “I think the new key phrase is ‘bail-in is going to replace bail-out,’ with all the implications that that carries.”

By all accounts, Cyprus was a rather successful European trial balloon.

Something the U.S. and E.U. Governments Can Agree On

And then there was Obama’s newly proposed MyRA account.

Given how these accounts will work, it’s easy to imagine they’ll eventually be used to support government bond buying, and even become compulsory.

And to make matters worse for savers, Obama’s now proposing retirement caps in his 2015 budget proposal in March. He plans to limit how much Americans can sock away in a tax-deferred IRA.

Now we’re seeing the latest echoes in Europe.

A recent Reuters piece headlined, “Exclusive: E.U. executive sees personal savings used to plug long-term financing gap.”

It’s enough to make your skin crawl.

The article went on to say the E.U. is searching for ways to lessen its dependence on bank financing, since “the economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment.”

Following in Obama’s MyRA footsteps but with its own twist, the E.U. Commission will produce a study by the end of 2014 “on the feasibility of introducing an EU savings account, open to individuals whose funds could be pooled and invested in small companies.”

But that’s not all…

A Cause of the Financial Crisis…
Is Being Pitched as a Remedy

Now the same E.U. Commission is looking for ways to resuscitate the securitization market, where mortgages and other loans are pooled and sold by banks to raise funds.

Here’s a little refresher: Back in 2007, mortgage-backed bonds defaulted.

Did these guys forget that the securitization market’s breakdown triggered the financial crisis, leading to a worldwide stock market collapse and an economic wasteland for the next couple of years?

Seriously… has pot just been legalized across Europe too? What are these guys smoking?

Have no lessons been learned?

Readers of Money Morning and Real Asset Returns know my plan.

To become your own central bank, invest in hard assets like gold, silver, energy, and real estate, and hold plenty of cash, including physical cash. And even look to own some assets internationally, like a foreign account and even some real estate.

Despite its correction and consolidation, gold has outperformed Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.A) by a margin of two to one since 2005.

A phenomenal showing to be sure.

In case you’re worried that the “safe route” will cause you to forego yield, think again.

In the Real Asset Returns portfolio, we own several hard asset-focused companies paying anywhere from 2% to 7% dividends annually, some of which have been stellar performers.

Our first goal is preserving capital. But if we can tack on some hefty 15% to even 50% capital gains, as we’ve done, they’re certainly welcome.

I’ll keep monitoring global developments that could threaten your hard-earned capital.

Given their own track records, it would be wise to beware of governments looking for ways to “help you manage your money.”

Remember the headline: “EU executive sees personal savings used to plug long-term financing gap.”
A scary thought indeed…