Taxpayer-Funded Capitalism and Your Investments

One of the growing trends in recent years has been the rise of taxpayer-funded capitalism. It’s nothing more than corporate welfare, but it’s couched by its proponents as a necessary response to economic slowdowns. And it could end up being a major threat to your investments and your dreams of retirement.

While most of the focus of the COVID stimulus bills has been on the payments to individuals, $1,200 in the first bill and $600 in the second, those individual payments make up a relatively small proportion of the spending in those bills. The first COVID relief bill saw $2 trillion of spending, and the most recent one saw nearly $1 trillion in additional spending, but most of that money went to various special interests.

Foreign countries, major corporations, and politically connected cronies walked away with hundreds of billions of dollars in government aid. And now that this approach to stimulus has become a template to be followed, there’s no telling how often Congress will resort to it in the coming years. All this extra spending will come at a cost, and it’s taxpayers and investors who will suffer.

Stimulus Payments

No one wants to see small businesses and their employees harmed by lockdowns, and we all recognize the injustice done by forcing businesses into bankruptcy and forcing workers into unemployment. But these stimulus bills do a lot more than just try to rectify the damage done. They give payments to just about everyone, and quite generous payments too.

By the end of January, most people will have been the recipients of about $1,800 in government payments. A family of four will have received nearly $6,000 in payments. So what do people do with this money? A lot of them are spending it, which is what the government wants them to do. But that can have negative consequences.

It’s no coincidence that along with these government handouts have come massive increases in the price of houses and cars. Housing prices nationwide are seeing their largest annual increase in years, driven by demand from city dwellers to move to the suburbs and the country, falling interest rates as a result of the Fed’s zero interest rate monetary policy (ZIRP), and billions of stimulus dollars boosting the coffers of those still employed.

Car prices are similarly elevated, with those able to afford to keep their cars holding on to them, driving supply of used cars down, while demand is increasing from those whose pockets are flush with stimulus cash. These elevated price levels are mirrored elsewhere in the economy, making it clear that we’re seeing an “everything bubble” that is being blown to record high levels.

Corporate Bailouts

It isn’t just individuals getting handouts from the government. Businesses are getting them too, and in massive amounts. Airlines, for instance, will be receiving another $15 billion in federal bailout money from the recent stimulus package, and that’s just the tip of the iceberg. The days of “no more bailouts” in the aftermath of the 2008 bank bailout have long since been forgotten. Now everyone expects the government to step in to make them whole in the event of loss, and the government thus far has been only too willing to accede to these demands.

All of this money comes at a cost however, as it requires the government to issue even more debt on top of the trillion or so it already planned to issue this year. Over the long term, that means higher interest rate expense, and eventually higher taxes as future taxpayers will have to pay the bill that is being run up today.

Debt Monetization

In the short term, the Federal Reserve has engaged in debt monetization, sopping up these huge new issuances of government debt in order to keep debt markets from becoming inundated with huge amounts of new Treasury debt. But that monetization has driven up the money supply, which will boost inflation in the future. The Fed doesn’t see anything wrong with that, as increasing the money supply has been its modus operandi for over a century.

The responses to the dotcom bubble bursting and to the 2008 financial crisis were also monetary easing, but this latest bout of easing is unprecedented both in its size and its speed. And we’re not done yet. Don’t be surprised to see trillions more dollars added to the money supply in the coming year, as the Fed pulls out all the stops to try to rescue the economy.

How Taxpayer-Funded Capitalism Harms You

Taxpayer-funded capitalism is nothing more than corporate welfare. Taxpayers are distracted by a few thousand dollars in payouts they may get from the government – free money! – while behind the curtain way more money is being shoveled to those who can lobby the government most effectively for a bailout. Americans are being bought out for dollars a day, while favored corporations see their losses subsidized.

This behavior continues the policy of bailing out mega-corporations, those considered “too big to fail.” Small businesses may get peanuts through government loan programs, but it’s small potatoes compared to what big business gets. And all of this is costing taxpayers.

Whether the final bill is paid back in the form of higher taxes, a devalued dollar, lower investment returns, or a combination of all three, the effects when the bill comes due can’t be underestimated. “There’s no such thing as a free lunch” has never been truer than it is today. Enjoy the government money if you can, but don’t labor under the illusion that it’s going to help you in the long run. We’re all going to have to pay the bill at some point, and when that time comes, it could be a doozy.

How You Can Protect Yourself

No matter which way you slice it, the economic and financial future of this country looks grim. Mountains of debt are piling on top of mountains of debt, government spending is going through the roof, and taxes are sure to follow. And the stage is being set for the rich to pay for everything. But “rich” doesn’t mean the same thing to everybody, and even solidly middle class Americans who have saved and invested for decades could see their retirement savings targeted to pay for all this increased government spending.

That’s why so many Americans are desperate to find a way to protect their wealth from a coming economic catastrophe. They want to lock in the gains they’ve already made but still put themselves into a position where they could make money, or at least not suffer huge losses, in the event of a major stock market crash. And that’s where gold and silver come into play.

Gold and silver have been trusted by investors for centuries to protect their wealth against inflation, economic turmoil, and financial uncertainty. They play that role today too, and protected many investors during the 2008 financial crisis and beyond. Now that storm clouds are forming over the economy, gold and silver could protect investors in the coming years.

Gold gained nearly 25% in 2020, a phenomenal performance for any asset. And silver nearly doubled that performance, making it one of the best-performing investment assets around. With a high likelihood of further economic weakness in the future, there’s every possibility that gold and silver will continue making great gains in 2021 and beyond.

Investing in gold and silver doesn’t have to be difficult either, and you can even use your existing retirement savings to invest. With a gold IRA or a silver IRA, you can invest in physical gold and silver bars and coins while still enjoying the same tax advantages that your current retirement accounts have. And you can roll over or transfer assets from your existing retirement accounts into a gold IRA or silver IRA without tax consequences.

What are you waiting for? Do you want to wait for trillions more dollars in corporate bailouts before you protect your retirement? Or do you want to protect your investments with gold and silver today so that you can rest easier about the safety of your portfolio? Talk to a Goldco expert today to find out how gold and silver can help protect your retirement dreams.