I like to post what the experts are saying to media in other parts of the globe where there is less sanitizing occurring. In a SPIEGEL interview, Harvard economist Carmen Reinhart:
“Reinhart: The best way of dealing with a debt overhang is to never get into one. Once you have one, what can you do? You can pray for higher growth, but good luck! Historically it doesn’t happen — you seldom just grow yourself out of debt. You need a combination of austerity, so that you don’t add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation …
SPIEGEL: … with the consequence that people are going to lose their savings?
Reinhart: No doubt, pensions are screwed. Governments have a lot of leverage on what kinds of assets pension funds hold. In France, for example, public pension funds have shifted money from shares (on the stock market) to government bonds. Not because their returns are great, but because it is more expedient for the government. Pension funds, domestic banks and insurance companies are the most captive audiences, because governments can just change the rules of the game.”
My takeaway: Savers and Pensions are screwed, the very point I was making last Sunday night. Everyone who has studied economics knows that there is no painless way out of this financial mess. The key is to not be the last one to respond. Roughly 40% of the baby boomers are in deep trouble for they have virtually no savings to take and their Social Security will be minimal with the new changes that are expected to reduce their payments. Kids, make room for mama and daddy. It’s going to be cozy.
We are all called to obey the “rule of law”. Except for Our Heavenly Father’s Law, governments will continually redefine the law to meet their agendas thus they will be inherently lawless. Politicians sneak in changes to the law to support their upcoming agendas and then hide behind the new law as though they are statesmen. What a sad commentary.