The global economic crisis of 2007-2008 was the biggest financial disaster since the Wall Street crash of 1929. Is our current economic model fit for purpose?
As long as our current financial system survives, the one controlled by fiat currency and the Federal Reserve, we will have booms and busts. Clearly forecasted by the Austrian School of economics, the creation of currency (I dare not say “money”) by government whim to keep the party (“bubble”) going will cause mistaken investments, misallocation of resources, and ultimately a cascading set of business failures (“recession”). Rinse and repeat.
Ok, so that’s an economics course stuffed down your throat in a paragraph. Other than this resulting in you losing your job, or your business failing, what do you care? Yes, you care about that. Losing income is bad, and we don’t like it. Most of us would rather have stability in our economy. If there are changes, we would choose to call the shots and name the date. We all face challenges during our lives and usually have the time to re-plan, take action, and recover. Some of us even do better.
When we start thinking about realities of life and planning for retirement, we have a lot less time to fix problems. If our retirement funds are invested in Wall Street, then we are particularly subject to the effects of timing. As Dr. Robert P. Murphy has noted, stock market prices correlate dangerously to Federal Reserve policy (money printing). As in the Great Depression, the stagnant 1970s, the dot com crash of the 1990s, and the 2008 disaster, the Fed cannot keep a bubble going forever.
For those who recall the “distant” past of 2008, you know that retirement is not a certainty, at least with the money you thought you had. Those unlucky enough to be at retirement age then had to make hard decisions. Some had to postpone their retirements and keep working. Others had to settle with a permanently lower standard of living. Bad timing.
Do you know where your retirement savings are? If you have an IRA, a 401(k) from your job, or another tax-deferred plan, then you are probably heavily invested in Wall Street.
Everyone who uses securities as savings, is not secure. The current post-election stock market surge makes most Austrian economists cover their ears, waiting for the big popping sound. Your money will continue to ride on the next bet of reality versus the Fed.
Yes, the system may still continue to inflate for another year, maybe five, who knows? Will you be the lucky one, at least when you first retire? How much will you have when you need it? And the day after that?
Without offering any specific financial advice, there are alternative ways to preserve retirement wealth: Gold and fixed/indexed annuities. Not very exciting, but so is sleep.
I just can’t stand to see retirees watching CNBC like a never-ending horror film.