We Are So Screwed…

I’m not kidding. As a nation, we’re well and truly screwed. Alan has written about this again and again, and it’s possible that people are finally starting to sit up and take notice. Another financial writer has been calling attention to our failing Social Security system. As far back as December, 2009, Gary North was pointing out the 800-pound gorilla in America with his article cleverly entitled, “U.S. Social Security Will Go Bankrupt in 2010“:

“We are floating down the fiscal river of no return. We are moving faster and faster. Some of us can hear the falls ahead. The sound gets louder and louder. But our companions on board say, “Let’s party!” They head for the dining room. After that, they will head for the slot machines.

“Americans respond favorably to these words: “Free” and “all you can eat.” That is what politicians promise.

“Either the falls will get us (deflationary depression) or else an explosion of the overheated engine will (hyperinflation).

“Our companions are still in the dining room or heading toward the slot machines. You and I should begin to move toward the lifeboats.”

Here’s the thing: Currently, we’re funding Social Security by dipping into its trust fund. The only problem is that trust fund shares can only be “sold” to the U.S. Treasury. And how is the Treasury doing lately? Better ask our expert head of the Treasury – Tim “Turbo Tax” Geithner.

So what will eventually happen? As Mr. North predicted, either we’ll have deflation – not enough dollars and goods will become over-valued; or we’ll have hyperinflation – far too many dollars on the loose and the Benjamins will be virtually useless.

But don’t fret yet, because that’s not the bad news. That 800 pound Social Security gorilla suddenly looks like unicorns and rainbows and fuzzy bunnies compared with Medicare. Medicare is in at least five times worse shape than Social Security. And just how do the politicians solve the problem? They don’t. They simply pass the buck by cooking the books, having one broke gov’ment sector loan to another broke gov’ment sector, or they sell what will soon be worthless treasury bonds to other countries like China or Japan.

Not so long ago I was ranting to a friend about this because our country had sold $2 trillion to China and Japan and eight other countries. Well, I just checked… Now we owe $4 trillion to over 30 countries. That didn’t take long. My guess is that they’re waiting for the fire sale.

So what are our unfunded liabilities (which include Social Security, Medicare Part D, and Medicare in general)? According to the United States Federal Reserve, our total unfunded liabilities are over $110 trillion (or $110,000,000,000,000). Ah, for the good old days when I first started writing about this and the number was well under $100,000,000,000,000).

Numbers of this magnitude can be difficult to grasp. I watched Fox News the other day, and even their “financial experts” couldn’t get the numbers right. They screwed them up not once, but twice. One expert tried to explain that a trillion is a million billion. It is not. A trillion is a thousand billion.

  • One million is 1 x 106, or 1 followed by six zeroes. (Or 1,000 thousand…)
  • One billion is 1 x 109, or 1 followed by nine zeroes. (Or 1,000 million..)
  • One trillion is 1 x 1012, or 1 followed by 12 zeroes. (Or 1,000 billion…)

To put these number in some perspective:  Our own Milky Way galaxy holds about 400 billion stars or 400,000,000,000 which is 0.4 trillion, or just four-tenths of one trillion. If each star in our entire galaxy was one dollar, we’d need to create another 274 Milky Way galaxies just to cover our unfunded obligations.

To intellectually understand something is one thing. To absorb the impact and repercussions is entirely another.

I’m thinking we all should have goose bumps right about now.


7 Responses to We Are So Screwed…

  1. Josie says:

    Well done, Stoutcat. You tell it like it is and also
    make it understandable!! Not many folks can do that,
    i.e. the newspapers, but then they don’t really want to,
    do they? I hope some people begin to understand those
    numbers with your help.

  2. Fish says:

    There is no “Trust Fund.” All Social Security receipts go into the general fund.

  3. Cheech says:

    But seriously, folks…

    Let’s take this one step further: So what happens when the US goes under? It seems like most other nations are as vulnerable as we are. What if they all go under? Japan? China? If NOBODY has a currency that is of value anywhere, does society simply implode? Or is there any possibility of some sort of global economic/monetary conference where countries can come up with some sort of mutual resolution to avoid worldwide chaos? I feel like I’m in a bad James Bond movie here. Can this all be traced back to governments have simply spent more money than their citizens had?

    Interesting conundrum: I believe it was Margaret Thatcher who wrote, “The problem with Socialism is that, sooner or later, you run out of other people’s money.” It looks like that applies to capitalist countries (US, England)as well as Communist (China is about to hit their own bubble in real estate foreclosures). Should we all just sit around and get high waiting for the end or is there something that can be done?

    Isn’t most of our out-of-control debt based on future obligations (medicare, medicade, welfare) and can’t those programs be scaled back or eliminated in the interest of NOT LOSING THE COUNTRY ALTOGETHER? I realize a lot of innocent people would be hurt, but isn’t that better than losing the entire country, isn’t it?

    Jeeze and I thought I was bad balancing MY checkbook!

    • Stoutcat says:

      Cheech: Yes, the vast majority of our out-of-control debt is the outstanding obligations on Social Security (huge) and Medicare (huge6). And I agree, we need to consider the elimination of Social Security and the vast scaling back of Medicare.

      My husband and I have been paying Social Security all our adult working lives (30+ years) and we are resigned to not seeing a penny of what we’ve paid into that vast Ponzi scheme. So I’m willing to suggest that we completely do away with it for anyone under the age of 40. For those age 40-55, some scaled back program. From 56 to retirement age, some slightly less scaled back program. Anyone already receiving SS, scale back some, as well.

      Anyone under the age of 40 can now use what would have been put into SS to pay off a mortgage, contribute to a 401(k) or IRA, or whatever.

      Same thing for Medicare.

      It’s not a complete solution, but it might be enough of a stop-gap to buy time to figure out what else to do.

      But really, I think the bottom line is this, as hard as it may be to believe: discontinue both SS and Medicare. End of story.

      • Gerry Ashley says:

        Uh-oh… I don’t think that will work, either, Stoutcat.

        Example: I’m over 60 and have paid into “So-So” Security for over 40 years. Under your proposed system, I would receive a scaled back amount. That would be fine if it helps save the country, but if we allow people under the age of 40 to drop out of the program and use their money on a mortgage or 401(k), where will the money come from that pays me the scaled-back amount?

        There needs to be a continued source of funding for anyone who is collecting. If people stop paying into the system, there’s nothing left to fund those of us collecting even a scaled-back amount as I see it.

        As far as I’m concerned, the American public has been raped repeatedly by our government who has gone in and helped themselves to OUR money that was supposed to be set aside for our security in our retirement.

        Medicare and Medicaid is totally different. NOBODY has paid dime one into those programs. That funding comes from our tax dollars. I hate to say it, but if we eliminate Medicare, Medicaid and Welfare, we might just be able to buy enough time to find some other solution.

        The problem with that is that the American public is so “entitlement oriented.” Welfare, to many, has become a career… a way of life. It’s time we cut the cord of political correctness to those who are physically able to work. If they aren’t willing to do that, then to hell with them.

        What kind of work? Well, Obama keeps talking about rebuilding our infrastructure, a lot of people could be moved from welfare to a government run project that would help rebuild the infrastructure which is going to need a whole lot of common laborers. Instead of continuing to pay welfare families to stay home and watch TV while ALSO paying workers to rebuild the infrastructure, why not take welfare workers and have THEM do some of the grunt work? Is that asking too much? Of course the ones who medically cannot work would have to provide proof of such.

        Bottom line: Sorry folks, the free ride train is over. We’re at a point where we just can’t afford the “luxury” of allowing lazy slobs to take advantage of the system so they don’t have to actually work.

        We’ve gotten to the point where we should have been at WILLINGLY: Every man and woman has to contribute to society or else they don’t deserve to be a part of it. It may sound cold and cruel, but gee. Welcome to the real world, folks. Our salad days are behind us. We’ll be lucky to have lettuce at the rate we’re going.

  4. Birdseed anarchist says:

    I just wonder what the spark will be that starts the financial panic? It has to happen, this ever increasing debt load can’t go on forever.

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