by Simon Black: It's
Another Assault on RetirementAccounts
mythology tells the tale of Odysseus, the heroic king of Ithaca
whose 10-year journey home after the Trojan War became one of the
world’s most famous epics.
At one point
in the journey, his ship was heading straight for two deadly hazards –
on one side was Scylla, a six-headed monster disguised as a giant
rock, and on the other side was Charybdis, a sinister whirlpool
born from the sea god Poseidon.
were close enough to pose an inescapable threat to ships passing
through, forcing the captain to choose between the two evils. A
Latin proverb from this story, “incidit in scyllam cupiens
vitare charybdim” (he runs on Scylla, wishing to avoid Charybdis),
is now “between a rock and a hard place” in modern English.
This is exactly
where the entire world finds itself right now. With confidence vanishing,
markets panicking, and entire nations going bankrupt, ultimately
there are no good solutions… and thinking people need to understand
some simple truths about the situation:
credit rating was punished by S&P because US politicians failed
to reach an adequate solution to the country’s massive debt
woes which are nearing 100% of GDP. Investors reacted by buying
the Japanese yen – a country whose sovereign debt rating is
two steps below the US, and at 220% of GDP, over twice as indebted!
Not to mention,
Japan has burned through 4 prime ministers and 8 finance ministers
just in the last four years. This is not exactly a country whose
government has a successful track record of dealing with its problems.
How does this
make any sense? That’s like firing an employee who gets drunk
on the job and replacing him with a gun-toting heroin addict. Yet
faced with a universe of bad choices, investors will pick the one
which appears to be the “least worse.”
is sure to create even more gross misallocations of capital down
2) World governments
have gone on the offensive against S&P, slamming the rating
agency and trying to discredit the firm’s financial calculations
without acknowledging the underlying premise – that America
lacks a credible plan to deal with its crisis.
countries as diverse as France, South Korea, and even Russia have
all shrugged off the downgrade and publicly reiterated their confidence
in the United States.