Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Inflation “Save” Social Security?

Politics / Government Spending Jun 18, 2019 - 05:54 PM GMT

By: MoneyMetals

Politics

Uncle Sam is going broke. That’s not exactly news – at least not to anyone who has been paying attention to the sorry state of federal finances.

Yet to most Americans, the ballooning national debt ($22.3 trillion and counting) isn’t a problem that impacts their daily lives. They won’t directly perceive the cost of another trillion dollars in borrowing in the government’s next fiscal year.


A trillion dollars here, a trillion dollars there.

Few Americans feel motivated to take to the streets to protest Washington’s fiscal irresponsibility.

But armies of outraged Americans will mobilize rapidly to storm Washington the moment Congress considers cuts to benefit programs such as food stamps, Social Security, Medicare, and Medicaid.

Many retirees (and soon to be retirees) have been led to believe their Social Security benefits are secured in a “trust fund” or “lock box” that Congress can’t touch.

In reality, Social Security is a “pay as you go” system, with current benefits funded by the payroll taxes of current workers. As millions of Baby Boomers head into retirement, the benefits owed to retirees will begin far outstripping contributions to the system.

Actuaries Recommend 25% Benefit Cuts

The Social Security Administration’s Board of Trustees recently released its Annual Report. It projects that while Social Security won’t run out of money until 2035, the programs will as soon as next year begin running a deficit – paying out more in benefits than it takes in.

Social Security actuaries say benefits would have to be cut by at least 25% today in order to make the program actuarially solvent into the future. Actuarily necessary, but politically impossible.

“Potential cuts such as curbing inflationary increases for Social Security, hiking payroll taxes, or raising the Medicare retirement age from the current 65 are so politically freighted and toxic that Washington's power players are mostly ignoring the problem,” reports CBS News.

Medicare’s path to insolvency is even closer than Social Security’s. By 2026, Medicare hospital insurance is projected to run out of reserves.

Due to untamed medical cost inflation, a long-term solution is elusive. Even a short-term fix would require drastic benefit cuts and/or tax increases.

Politicians seem to have something else in mind entirely.

Even with existing entitlement programs being unaffordable, many Democrats are calling for the creation of a massive new entitlement – “Medicare for All.”

George Mason University economist Charles Blahous estimates Medicare for All would cost between $54.6 trillion and $60.7 trillion over its first 10 years. He concluded that even a doubling of income taxes would be insufficient to pay for it.

The Monetary Solution to Politically Insoluble Funding Gaps

How do Bernie Sanders and Alexandria Ocasio-Cortez imagine their socialized medicine pipe dream would be funded? Not necessarily through radical tax hikes, which would be met with widespread resistance from the public.

Instead, left-wing Democrats see Medicare for All, the Green New Deal, and other components of their socialist agenda being funded through Modern Monetary Theory (MMT).

Under MMT, the government would essentially just print whatever it needed to cover any funding gaps. The currency supply could be expanded directly, bypassing the bond market and the need for new tax collections.

Socialism combined with MMT would be a recipe for Venezuela-style inflation.

Even if the United States manages to avert these particular threats from the political fringes, the unsustainable inertia of existing entitlement programs may trigger something akin to a bailout from the Federal Reserve.

Congress as it is presently comprised appears incapable to solving the coming entitlement crisis. Lawmakers from both sides of the aisle would welcome a monetary intervention that saved them from having to make politically difficult decisions.

Former Federal Reserve chairman Alan Greenspan has long worried that unreformed entitlement spending and runaway debt would suppress economic growth and trigger an inflationary reaction.

Earlier this year, Greenspan opined to the National Association for Business Economics on chronic U.S. overindebtedness: “Unless you believe in fairies, that is not an economy that can function without inflationary instability.”

A Step Toward an Inflation-Resilient Retirement

Retirees should make prudent plans to ensure they can survive the threat of inflation throughout their golden years. Even if Social Security doesn’t default on any of its obligations, the income stream it provides will still likely fall behind inflation.

Social Security’s latest Cost of Living Adjustment (COLA) is 2.8%. But in recent years the COLA has dropped as low as zero.

Even if COLA rises nominally, the formula that is used to calculate benefit increases won’t necessarily match up with real-world inflation.

It may even be manipulated in the future at the expense of retirees to artificially extend the Social Security system’s solvency. Assuming it's not manipulated already.

Income streams from Social Security, bonds, and annuities could be even more severely devalued by inflation. Too many retirees are depending too heavily on these dollar-denominated IOUs to take them through old age.

Folks can dramatically improve their resilience to inflation by supplementing conventional sources of retirement income with contra-dollar holdings such as physical precious metals.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in