International Man: The government is now offering “Trump Accounts” for children, with a $1,000 federal contribution for eligible kids born from 2025 through 2028.
Why do you think the government wants this money held in an IRA-style structure instead of simply giving families direct ownership and control?
Doug Casey: My understanding is that once the money goes into the Trump account, it can’t be withdrawn at all until January 1 of the year the child turns 18. Then it’s treated like a regular IRA. With exceptions for education or the purchase of a first house. 60 years hence, it’s supposed to be tax-free. But 60 years is a long time, especially when it comes to government programs. We don’t even know if the US will exist in its present form 60 years from now. Forget about the dollar; it definitely won’t exist in its present form.
In any event, it appears that six million kids have been signed up so far. About 1.4 million newborns will get the $1,000 grant from the government.
A lot of money is going into the program from employers, who can tax-deduct up to $2,500 per year for the kids of their employees. Michael Dell has given about $6 billion to be dispensed over the next two years for up to 25 million kids.
One selling point of the program is that it might give poor kids a leg up. But will their poor parents know enough, or care enough, to even open an account for them?
International Man: The accounts are designed to invest in low-cost US stock index funds. Is this another way to herd future generations into propping up Wall Street, overvalued stocks, and the US dollar system?
Doug Casey: Well, saving in any way is good. But the problem is that $1,000 government grants to qualified kids don’t represent saved production.
The $1,000 is fiat, inflated credit, created out of thin air. That’s always destructive—no exceptions. And the money, whether it’s real saved production or funny money, is not being directed toward financing new businesses. It’s buying stocks in the after-market. That may help kids who have Trump Accounts, but the money is just being added to the massive casino that Wall Street has become. Wall Street certainly likes the idea, since it will direct more money into the stock market and into funds that pay management fees and commissions.
Bear in mind that, by absolutely every parameter, the stock market is far above past historic peaks—including 1929 and 2000. And if stocks crash, it’s going to discourage people from adding to their kids’ accounts. The public, perversely, only likes to buy after the market has established a “good track record”, which is to say when it’s high. They won’t want to know stocks even exist at the very times they should be buying in the years to come.
I’m sure Trump wishes all the kids well. But I suspect that Trump, egomaniacal narcissist that he is, has instituted these accounts mainly to put his name on yet another aspect of the government.
International Man: What are the hidden risks here? For example, in the future, the government could change the rules, taxes, withdrawal restrictions, approved investments, or reporting requirements.
Should parents view these accounts as truly belonging to their children—or as conditional benefits granted at the discretion of the government?
Doug Casey: It bears repeating that the government itself is terminally bankrupt. It’s not just its $40 trillion of acknowledged debt, but potential liabilities from the insurance programs they’re backing and, of course, Medicaid, Medicare, and Social Security. The Government is actually in the red, something like $150 trillion, and counting. Trying to figure out exactly how the situation will evolve over the next 60 years is impossible– except to say that if the current trend continues, it will be a total catastrophe.
Will the dollar still be here in its present form? As I said before, the US itself may not even be here in its present form, since we’re on the cusp of something that will resemble a civil war.
And as far as changes that could be made in the program, look at Social Security. It was a Ponzi scheme from the beginning, of course. But at least the after-tax dollars that went in came out as tax-free dollars. Until 1984, when the law changed to prolong the corrupt scheme’s life. Now they’re taxed more or less like any other form of income.
The future for Trump Accounts is questionable. Remember that the prime directive of every institution is self-preservation. The government will take any measures it deems necessary, including merging all kinds of pension plans into Social Security, in order to stave off bankruptcy. Several governments, including that of Argentina, have done this in recent years. Parents should view these accounts as conditional benefits that exist at the discretion of the government.
On top of this, it’s clear that a wave of socialist sentiment is sweeping over the US today. When you combine that with the bankruptcy of the government itself, it means that absolutely everything is conditional. Nothing is certain in any sector of the economy.
International Man: The Trump Accounts pitch assumes these kids will benefit from decades of compounding in the stock market. But doesn’t that leave out the most important variable—the destruction of the dollar’s purchasing power?
Doug Casey: Let’s assume that we compound $1,000 at 6% for 59 years, tax-free. It yields $29,000. But what will $29,000 be worth 59 years from now? I’d say not much. Of course, that money will be in the stock market, which should grow. But most people are unaware that it took the stock market until 1954 to return to the levels of 1929 after the crash. 25 years just to get even in nominal terms.
So what should you do with IRA money that you must hold for basically your whole life? In the past I would’ve said to buy gold coins. But gold is a static asset that doesn’t compound. At present prices, it’s at fair value, but it’s not particularly cheap.
This is the problem with a State capitalist economy running on fiat currency. Nothing is truly stable or reliable. Everyone is necessarily turned into a speculator just in order to survive. It’s why I’ve been saying that we’re entering into a depression, which is a period of time when most people’s standard of living drops significantly.
On top of that, when the government prints up the money and gives it to you, it’s easy to fabricate a reason why it’s really their money. When they reclaim it, they’ll say it’s for the good of the country. The average citizen is so indoctrinated that he won’t see it as a theft by a predator.
International Man: We’re seeing governments around the world become increasingly interested in their citizens’ retirement savings. Are the Trump Accounts part of that trend? Where is this headed? What can be done about it?
Doug Casey: It’s a worldwide trend for the government to take responsibility for all aspects of life. Most of the world expects a benevolent state to safeguard their health, wealth, safety, and happiness. This never used to be the case.
Many people expect the State to provide them with housing. And there’s a meme floating around regarding a guaranteed annual income. Many expect they won’t have to do anything, living off that alone. The government taking responsibility for your savings—which began with Social Security—will end very badly. And I don’t think anything can be done to reverse the trend.
I expect this will end in a meltdown. Many financial accounts denominated in fiat dollars will disappear, be confiscated, dry up, or blow away. The prospect reminds me of the famous elevator scene in Dirty Harry, where Clint Eastwood describes some of the things that can happen to a miscreant in the big city.
The stated intention of Trump Accounts, helping kids build an asset and get some money out of the tax system, is good. But the road to perdition is paved with good intentions. It’s not going to reverse the accelerating decline of Western civilization.
Editor’s Note: Once a government becomes desperate enough, retirement accounts, capital controls, and other forms of wealth confiscation can quickly move from unthinkable to official policy.
The loss of the US dollar’s reserve-currency status could be the event that pushes the government across that line—and by then, many of the steps available to protect yourself today may no longer be possible.
That is why the time to prepare is before the crisis becomes obvious.
We’ve prepared a free special report explaining what could happen next, the warning signs to watch, and the practical steps you can take to protect your wealth and financial freedom.
Click here to see it now.
Read the full article here