OBAMA'S MyRA SCHEME

The only new topics covered in Obama's 2014 State of the Union address were a new savings bond called the MyRA and his plan to use executive orders to circumvent Congress if they don't do what he says. The rest of the speech was basically a carbon copy of George W. Bush's 2007 State of the Union address that focused on "opportunity." Bush's speechwriter Marc Thiessen has even accused the Obama administration of plagiarism for copying much of Bush's address and they do appear to be similar. Anyways MyRAs might be a good idea to get people to start investing if it wasn't for what the money would be purchasing ... treasury bonds.

Treasury bonds are sold by governments to raise money and contrary to Obama, who claims our economy is better off than when he came into office, it is not. Let me explain.

If I asked you if you would be better off if you owed $10,000 or if you owed $17,000 dollars what would you say? Less is better would be the usual answer (let's not get into economic analysis of the use of money here). The United States had about 10 trillion in "official" debt when Obama came to power and it now has 17 trillion in "official" debt. So I ask you, are we better off or worse off with all that additional debt? The last 5 years have been funded by debt which, one way or another, must be liquidated in the future. We must either pay it back or default on its repayment. Your MyRA money will be going to buy that debt in the form of treasuries.

So what is a MyRA? Obama said he would, by executive order, direct the Treasury to create savings accounts for individuals that are not currently covered under savings plans. According to Obama, MyRAs would have a good return and be guaranteed by the full faith and credit of the federal government (that means the federal government can print money to pay them off if need be but if you print money it is called counterfeiting). 

MyRAs will be able to be opened for as little as $25 instead of the $1,000 that is usually required for and IRA. Employers will not have to make contributions to MyRAs and the government will manage the paperwork and "invest" the money. Once your MyRA's balance reaches $15,000, you will have to roll it over into a privately managed IRA.

The convenience of the plan for the government is that the government is looking for someone to buy its debt since the FED is cutting back its purchases of government treasury obligations. I am of the opinion that this program is a self-serving plan to keep interest rates down while the FED cuts back its purchases of treasuries. I believe the steady supply of new buyers of treasuries with these new MyRAs will just be picking up the US debt ponzi scheme where the FED left off. 

Buyer Beware.