Submitted by Hedgeless Horseman
A Former Marine's Outlook On Inflation, Life Expectancy, And Future Returns
The details of the federal employees' pension system are not something that interests me, nor do I understand exactly how the US Treasury is borrowing money from it, and with little or no mention of it in the press. Thanks to Zero Hedge, at least I do understand why the US government is forced to borrow money from its own employees, as both the monetary and political reasons have been covered on this site extensively.
Recently, I have been thinking about a former marine I know that recently "retired" from the federal government after a couple of decades as an US postal inspector. During his entire career in government service, he carried a weapon, and spent most of his time conducting narcotics investigations. He has photos of himself beside giant mountains of cash and drugs that he had seized on raids.
Several months ago, before he retired, he shared a little bit about his financial situation; specifically that he has several hundred thousand dollars in a federal retirement account invested in U.S. treasuries. He said it was essentially all that he and his wife had saved, and that he knew it was not going to be enough for him to truly retire, especially because they still have kids to put through college. However, he said that if he went to Afghanistan for one year as a security contractor, then he could make enough money so that he would not have to work doing landscaping for the rest of his life, which is what he saw as his second option.
Being a bit of an instigator, I asked this ex-marine/postal worker what his assumptions were regarding inflation, his life expectancy, and future returns. He stared at me silently for an uncomfortably long time. Please understand me when I say that this is not the type of man anyone would ever really want to piss off. Think more R. Lee "Gunny" Ermey and less Cliff Claven. I then realized that I should be more careful what I say, or risk being the messenger that is shot delivering bad news.
His response, when it finally came, surprised me. He said, "I don't trust the government." He then went on to explain that although he and his buddies were just a bunch of government hacks that had put in their time, they did risk their lives on a regular basis. For that, the primary reward they were all promised, and did expect, was a federal pension. We talked a little about the idea of his pension being denominated in US dollars, and the history of the US dollar's purchasing power, but it was an uncomfortable conversation for both of us, so we moved on to other topics.
A couple of months later I learned from the man's family that he had in fact deployed to Afghanistan. I do not know what he is doing there, but I expect it is dangerous. What I wonder is this. Does this man know that the government is paying him (albeit indirectly through Xe or the like) combat pay by borrowing from his own retirement...the very same retirement fund with a NPV sufficiently small to cause this man to leave his own kids to fight other men's' kids half way around the world? Does he realize that because it enables the Federal Reserve's QE and ZIRP policies, the government is responsible for the inflation and low treasury yields that will likely make it so that even with a year's worth of combat pay this man will very likely still end up mowing bankers' lawns for the rest of his life? If he does not know this, now, I most certainly do not want to be the one to tell him.
He said, "I don't trust the government."