It’s time to look back on the most important stories of the year, the ones that changed your world and will change your finances in the years to come
This is my favorite time of year. Besides family dinners and holiday worship, it’s a time to look back on 401kRollover and the stories that shaped our lives in 2015. Looking at the most popular stories helps to put together a picture of where things are heading and a roadmap of how to meet our financial goals.
Unfortunately, the picture we found looking back at the five most read stories was not a pleasant one.
While the economy has not roared ahead since the financial meltdown, there have been signs of improvement since 2008. The Federal Reserve was ending its historic period of monetary manipulation and unemployment had come down to more normal levels. This year brought several events that seem to cue a new crisis on the horizon, one where massive government spending and debt comes to the forefront.
It’s been nearly eight years since the financial crisis and $29 trillion in bank bail-outs funded by tax payers. A new crisis is brewing and it could be ten times worse, bringing the dollar to its knees and changing the way we think about banking.
I’ve worked in finance and can tell you that nothing has changed since the financial crisis. Complicated derivative investments are still used to leverage up a bank’s capital and the next recession will catch the industry off-guard, yet again. The difference is that new regulations have given bankers the authority to cover their losses by raiding deposits. It’s called a bank bail-in and if you’ve got money in a savings account, you need to read this article.
After Detroit became the largest municipal bankruptcy in U.S. history, filing to wipe out its $20 billion in commitments, I have been watching the municipal market really closely. Puerto Rico is on the verge of bankruptcy and Houston’s pension fund is underfunded by more than $5.3 billion.
The story is the same across America and it is going to affect you in ways you may not yet know.
- State and local governments will first try to increase your taxes to cover underfunded pensions and other pork spending. Houston has doubled property tax rates over the last 15 years and still hasn’t been able to plug its budget gap.
- Budgets for public services will be cut even as taxes increase. Spending on roads and utilities will shrink to nothing and quality of life could suffer.
- Finally, local governments will just walk away from their debt and other commitments in nationwide bankruptcies. Banks, insurance companies and most pension funds invest their money in seemingly-safe municipal debt so the bankruptcies will resonate through the rest of the economy and could wipe out trillions in investments.
Just as the government is forcing people to sign up for mandatory health insurance, companies are merging and reducing options available. Shareholders of Anthem and Cigna recently approved the formation of the nation’s largest health insurance company and regulators look to approve the deal within months.
The merger will cut costs for the two companies but will also decrease competition in the health insurance industry. Less competition means companies can more easily increase prices and people will be forced to pay because of mandatory coverage.
Budget gaps aren’t only hitting local communities but the Department of Veteran’s Affairs is also scrambling to cut benefits to the men and women that have fought for our freedoms. Chronic mismanagement led to a $2.5 billion shortfall in the 2015 budget and it’s beginning to look like the situation won’t improve in 2016.
In fact, the Obama administration is looking to make things worse for veterans and their families. The administration has proposed cutting veteran pensions by 20%, forcing military families out of Tricare Health insurance and into private plans and a wide range of other cuts to benefits and pay.
Among all this financial trouble at home, China is making its move to undermine the U.S. dollar as the world’s reserve currency. The world’s second-largest economy has pushed through the creation of its own “World Bank” that will give it overwhelming authority on the world’s financial stage.
The problem with this is that once the Chinese Yuan replaces the greenback as the major holding currency for central banks, a 30-year time bomb will explode. Our national debt is now the same size as the economy and there is nothing that can stop the coming fiscal meltdown. When the dollar is no longer supported by central bank reserve holdings, the value of the greenback will crash and inflation will surge.
The country is in bad financial shape as we enter a new year and there may be nothing that can stop or even postpone the next collapse. Personal protection through self-directed retirement accounts and investments in safe-haven assets like gold may be the only way to ensure your own financial security.