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.