Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 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