40,000 men and women everyday, Like Romeo and Juliet
40,000 men and women everyday, Redefine happiness
Another 40,000 coming everyday, We can be like they are
Come on baby, don't fear the reaper
In this case we are not talking about death but entitlement spending and Social Security in particular. I believe that SS and Medicare spending will be the eventual downfall of the US dollar and potentially the United States as a political entity in its current form. That sounds like a provocative statement but lets look at the facts.
In 2008 the first of 78 million Baby Boomers turned 62 and became eligible to draw down benefits.When I say another 10,000 coming everyday this is what I am talking about. Everyday for the next 25-30 years 10,000 Americans will begin to draw benefits from Social Security and Medicare. Mandatory spending on entitlements, such as SS and Medicare, is already consuming two thirds of federal spending.
One of the big problems with SS is that it is a pay as you go system. Money comes into the system and is paid out to current recipients. This worked well when the program was in its in infancy i.e. in 1940 there were 159 workers supporting each retiree. However, in 2013 there were only 2.8 workers supporting each worker and this ratio only gets worse as time goes on. Back in 1999 when we still had some real journalists the problem was outlined in the Washington Post.
In 1935, after bank failures and a stock market crash had wiped out the savings of millions of Americans, the country turned to Washington to guarantee the nation's elderly a decent income.
The solution was Social Security.
More than six decades later, with the gigantic Baby Boom generation approaching retirement age, Social Security faces a funding crisis. By about 2012 more money will be going out to Social Security recipients than will be coming in from workers' payroll taxes. The system's trust fund can cover the difference for a while, but by about 2032 the trust fund will be empty and the program will no longer be able to meet all its obligations.
Many politicians assert and most people believe that there is a "social security trust fund" that will not run out until the 2030's. This is a huge fiction which will cost many people in the future. There is no trust fund, lock box, or individual accounts for each taxpayer. Remember these two jerkoffs talking about SS and Medicare lock boxes fifteen years ago:
The fact is that incoming SS and Medicare taxes go into the general fund of the federal government and have been spent by politicians. Here is an older article by Dr. Bill Wattenburg that outlines the problem. He writes:
- Benefit cuts including no COLA increases (been there done that)
- Means testing
- Higher taxes
- More debt (We are nearing $20 trillion already)
- Combination of all of the above
Will this happen next week or even in ten years, probably not? Because things are certain does not mean they are imminent. Countries seem to go bankrupt slowly and no one pays attention until a tipping point is reached and then events happen all at once. This gives people the time to plan and to make sure they are not a victim. This is why I like a certain holding of gold bullion as a store of wealth and as insurance against politicians and government stupidity. Quite a few advisers suggest 5-10% of ones wealth be stored in gold as a wealth preservation tool. I would say that due to all the issues that the US faces it would be prudent to go as high as 20%. I am not alone in saying this as even famous hedge fund managers like Kyle Bass and Ray Dalio agree.
"If you don't understand and own gold you don't know history" pretty much sums it up.