Trump Threatens Our 401(k)s

One problem with electing an authoritarian strongman certain to expand Big Government is that he will do it at your expense:

We Americans own almost $5 trillion in Treasury bonds, all told. That’s more than twice as much as China, Japan and all the oil exporting countries put together.

And so when Donald Trump monkeys with the U.S. government debt, as he has in two interviews in the past few days, this isn’t just a matter of abstract economics or of sticking it to foreigners.

It’s about threatening to take your personal 401(k) out into the back yard and beat it like, as they say, “a rented mule.”

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According to official data, we collectively own about $2.6 trillion in Treasury bonds directly or through mutual funds. Our pension plans own another $2.2 trillion. And our insurance policies, such as the life insurance contracts that will pay out if we fall under a bus, are backed by another $300 billion in Treasurys.

According to the Investment Company Institute, a mutual fund industry trade group, the average 401(k) plan is about 25% invested in bonds, both through bond funds themselves and through “balanced” funds. (Balanced funds are typically 60% stocks, 40% bonds).

The older you are, the more you are likely to have in bonds. For “safety.”

There will be no safety for anyone with a reckless, inept authoritarian running an increasingly powerful federal government. That’s why it should make your hair stand on end that rather than reduce government spending or at least try to slow its explosive growth as a conservative would, Trump has recently suggested he would instead partially default on the national debt or pay it off by inflating the currency.

A President Trump just winging it in public is going to cause chaos in the Treasury and currency markets.

“Chaos” would be President Trump’s middle name. He would do for the economy exactly what his unpredictability doctrine would do for international relations. Every off-the-cuff utterance would hit markets like a cyclone, blithely destroying fortunes painstakingly amassed.

Last summer, when the presidential race was just getting going, I imagined a President Trump putting the U.S. into Chapter 11 bankruptcy and crushing everyone’s 401(k). But my article was obviously tongue in cheek. It was supposed to be satire.

So was Idiocracy. But next year we could be living in it.

Some investment advice to remember if America goes completely off the rails and allows Trump to take power:

If you want to “Trump-proof” your portfolio you would logically want to own non-U.S. assets such as an international stock fund, foreign currencies, and also precious metals. The Treasury bonds of choice would have to be shorter bonds and inflation-protected bonds, which could offer more protection against a spree of printing money. Actually the safest holding of all would probably be cash.

Anything you have, statists will take away from you — if not by direct confiscation, then by debasing the value of your assets. That is why it is crucial to demand that leaders have principles — specifically, the limited government principles, championed by conservatives, that the country was founded on.

This clown in power won’t have anyone laughing.

On a tip from Torcer. Cross-posted at Moonbattery.

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