For decades the US government has run on two principles. The first was to treat Social Security and Medicare tax payments as “general funds” and spend it immediately. There is no “Social Security Trust Fund” it’s just a shoebox filled with paper.
The second principle was to borrow from whomever they could find who was dumb enough to loan us money. By the trillions. About nineteen trillion to be exact.
We are about to run headlong into a wall at full speed.
Only the results will be a tad more dire. Oh heck, they’ll be a lot more dire.
Social Security is now, and forever will be, insolvent. They’re paying out more to retirees than they are taking in taxes. And it’s soon to be a whole lot more.
The second problem is that it seems that people don’t want to loan us money anymore .
Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.
Sales by China, Russia, Brazil and Taiwan are the latest sign of an emerging markets slowdown that is threatening to spill over into the U.S. economy. Previously, all four were large purchasers of U.S. debt.
Guess what happens if other countries stop lending us money? There are two options. The first is that the Federal Reserve picks up the slack. They’re already pumping a trillion dollars a year into the stock and mortgage markets and have been since Barack Obama became President. So what’s another few trillion.
The problem is that the Fed just prints money. They put more in circulation. Which makes the money in your bank account worth less. It’s called inflation. And when they do lots of it, it’s called hyper-inflation and this is what it looks like.
He’s shopping for a loaf of bread.
If the Fed doesn’t print more money then the Congress has to spend less. A lot less. As in, forget the US military. Forget your Social Security check, and by the way, Congress can change the amount of your check any time they want to. They just need a compelling reason. Forget your ObamaCare subsidy and forget Medicaid.
Get the idea? Oh, and cutting foreign aid won’t even put a little dent in the problem so don’t go there. It certainly will get slashed, but the paragraph just above for where the real money is spent.
We are living in “interesting times.”
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