Here's the article (click here) that makes me want to pull my money out of my IRA and 401K retirement accounts. I will be watching this closely. Here's the money quotes:
"'Global regulators should force banks to hold assets such as government bonds as a buffer after the financial crisis exposed a “shocking” lack of liquidity at some U.K. lenders', Bank of England official Paul Tucker said.
'Regulators should define the ‘liquidity buffer’ to comprise high quality securities that can reliably be traded or exchanged in liquid markets, including in stressed circumstances,' Tucker, the bank’s deputy governor for financial stability, said today in Tokyo. 'In practice, that would mean focusing on government bonds in many economies.'"
Now, this is not some academic or po-dunk legislator with a "good idea". This is the Bank Of England talking. Whatever they say happens in the UK as far as banking is concerned. They are joined at the hip with the Federal Reserve, US Treasury and associated Powers-That-Be that forced through the TARP plan even though voter phone calls and emails were against it 100 to 1. This is not a fantasy.
As you probably know, the way the Argentine government stripped the middle class of their savings in the 2001 currency / financial crisis was to force a huge fraction of all savings into government bonds and then to devalue the currency / value of those bonds. It took a very short time (handful of weeks) from when the money was forcibly transferred until the value of those government bonds were cut by something like 80%.
Now we have the head of the Bank Of England saying that all banks should be put in that position. As with the Argentina situation, the reason given for buying government bonds was because they are the only things that were safe enough.
The same justification will be used, in my scarenario, on pension funds and private retirement accounts. For your own safety, your pension / retirement account will be forced to hold long-term, soon to be worth a lot less, government debt.
Of course, the downside to pulling savings from retirement accounts is the substantial tax penalty both initially on pulling it out and subsequently on any "earnings" that come from subsequent investing. This is what keeps me from pulling the money out right away.
I will be watching this closely. You should be as well if you have significant retirement account savings. When this happens, the stock market will probably tank as forced selling of retirement savings invested in stocks takes place. After that happens there may be a golden chance for some value investing, for those who are prepared. Its all going to depend on getting your retirement savings out before the noose tightens and then timing when to get back into stocks, if this scarenario plays out.
P.S., in the 30s, the government confiscated the citizen's gold. It won't be gold this time, because that isn't where the money is this time. It will be retirement accounts that get confiscated this time.