LIKE SPAIN, THE FED & TREASURY WILL PULL OUT NUCLEAR OPTION & RAID PRIVATE PENSION FUNDS
JANUARY 9, 2013
The greatest issue facing us in the short pull is the very real potential of our Federal government having a failed bond auction. They may have to buy up large amounts of existing Federal debt when rates are climbing. If the Federal deficit spending continues upward at $1.7 to $2.0 trillion a year, we chance losing another rating notch or two. The equity markets and pension funds, both national and foreign, are mandated to accept only AAA bonds. They will not only be unable to buy our debt they may ultimately be forced to divest as the near-junk bond status of our debt violates their investment charter.
If this happens the Fed and Treasury are very likely to pull out the nuclear option. They will raid our private pension funds, just like Spain. They may even take foreign pensions invested in domestic funds. That’s also on the table.