I’m sure my senior citizen mother is doing backflips today like the old guy in this video.
The government, out of the kindness of their hearts, and using the bastardized, manipulated and understated CPI, is giving all 64 million retired Americans a 1.7% raise in their Social Security checks in 2015. That amounts to about $22 per month for the average retiree. That’s $5 per week. I bet 64 million cranky old farts are headed out for the early bird special tonight to celebrate.
Think about the ridiculousness of the government telling a senior citizen their cost of living has only gone up 1.7% in the last year. Beef prices are up 20%. I do the grocery shopping and I can say for sure that my entire bill is up 20% over last year. Obamacare has pushed healthcare costs up by double digits in the last three years. Deductibles are twice as high and premiums are up 5% to 15%. Utility bills have been soaring by over 10% in the last year. Seniors are getting 0% on their savings due to the morally bankrupt Federal Reserve. That extra $22 per month will be gone in an instant.
Just when I think the MSM can’t sink any lower, the faux journalist mouthpieces for the oligarchs at Marketwatch put out the most outlandish piece of shit I’ve ever had to read without gagging.
These pitiful excuses for journalists actually had the balls to write an article recommending what seniors should do with this “extra” $20 per month. These blithering idiots actually are willing to perpetuate the lie that this miniscule pittance can be used for something other than keeping these seniors from freezing to death this winter because they can’t pay their heating bill.
Some of the brilliant ideas include:
- Acting like a good muppet and investing it in the market. Brilliant. My mom can buy 1/20 of a share of Amazon per month with her windfall.
- Buying a nice bottle of wine to go with their can of Friskies for dinner.
- Paying down the debt they’ve accumulated over a lifetime. At $20 per month, they should have it paid off by the time they reach the age of 265.
- Paying those utility bills so the big corporation doesn’t turn off their gas in January.
- Hire an illegal alien housekeeper to clean up your cardboard box a couple times per month.
- Treat yourself to a steak once per month as a change of pace from that Kibble and Ramen noodles.
- Live it up and go to the movies once per month. You should go see Idiocracy so you will understand how the writers of this article got their University of Phoenix college degrees in journalism.
You think I’m joking, but these are the actual recommendations made by “journalists” working for Rupert Murdoch’s Marketwatch. There are just some things that push my buttons and make me lose my cool. This is one of them. Senior citizens have been thrown under the bus by Ben Bernanke, Janet Yellen, Obama, and the rest of this corrupt cabal of oligarchs. Let them eat cake has been replace by let them eat cat food.
Ben Bernanke now gets $250,000 for an hour long speech where he takes credit for keeping bankers from experiencing a 2nd Great Depression. Too bad tens of millions of non-bankers are experiencing a 2nd Great Depression. If there is justice in this world, Bennie will swing from a lamppost before this episode in history concludes.
Social Security payments will increase 1.7 percent for retirees in 2015
Social Security payments for 64 million retired American workers will increase 1.7 percent in 2015. That means the typical retiree will get an extra $22 per month, receiving a $1,328 average monthly Social Security payment and $15,936 annually.
Social Security isn’t going anywhere. Not yet, anyway.
Monthly payments for 64 million retired American workers will increase 1.7 percent in 2015, the Social Security Administration announced Wednesday. That means the typical retiree will get an extra $22 per month, receiving a $1,328 average monthly payment and $15,936 annually.
“The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015,” The Social Security Administration said in the announcement. “Increased payments to more than 8 million SSI [Supplemental Security Income] beneficiaries will begin on December 31, 2014. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.”
The increase coincides with the Labor Department’s monthly Consumer Price Index release for September. Thanks largely to falling energy costs, CPI increased just 0.1 percent last month and (you guessed it) 1.7 percent from last year. Food costs, however, jumped 3 percent, meaning the overall increase may be more acutely felt by seniors who don’t commute to work every day (thus getting less relief from the drop in gas prices).
This is the third straight COLA increase for Social Security recipients. This year’s cost of living increase was 1.5 percent; in 2012, it was a comparatively giant 3.2 percent. There were no benefits increases during the two previous years because consumer prices fell during the recession.
The SSA announced other changes as well. Based on wage increases, the maximum amount of earnings subjected to the Social Security taxes will increase to $118,500 from $117,000. The SSA estimates that out of 168 million workers who pay Social Security taxes, around 10 million will pay higher taxes because of the hike in the taxable minimum.
As in other years, this year’s increase comes amid worries about the long-term future of Social Security and Americans’ financial readiness for their retirement years. The Social Security Trust fund is projected to run out by 2033, according to an SSA Trustee report released this year, and the oncoming rush of retiring and aging Baby Boomers are expected to create steep budgetary problems in the coming years. Some 80 percent of Millennials and Gen-Xers don’t expect to receive anything from Social Security after their working years, according to a study released by the TransAmerica Center for Retirement Studies over the summer.
There are concerns in the short term as well. By at least one measure, retirees in 49 of 50 states aren’t replacing enough of their pre-retirement income. Social Security makes up about 38 percent of total income for the elderly, according to the SSA, and 52 percent of married couples and 74 percent of unmarried persons receive over half their income from Social Security.
For 1 in 3 retirees, it is their only income source. Basic costs of living, especially food prices, continue to balloon, and nearly 10 percent of retirees live in poverty, according to the Census Bureau.
Still, there is some cause for optimism. Perhaps because of their doubts, younger workers (at least the ones with access to employee-sponsored accounts) are shaping up to be excellent savers, and not all is lost with Social Security in general. Despite the trust fund depletion and funding shortfalls, the SSA still anticipates being able to pay 75 percent of scheduled benefits between 2033 and 2088.
How The Federal Reserve Is Purposely Attacking Savers
Submitted by Chris Martenson via Peak Prosperity,
There’s something we ‘regular’ citizens wrestle with that the elites never seem to: a sense of moral duty.
For example, following the collapse of the housing bubble, many people struggled with mortgages they could no longer afford to pay, fearing the shame of default. Many believed defaulting was wrong somehow; that it was their moral obligation to pay their mortgages, no matter how dire their personal situation. And of course, the mortgages lenders did their utmost to reinforce this perception.
In a perfect world, we would honor our debts and obligations, every one of us. But the world is an imperfect place ,and moral obligation is something that almost never enters into the decision matrix of our society’s richest. Or the banking industry.
For them, the number one (and two, and three…) rule is that whatever is expedient and makes the most money is the right thing to do.
For the bottom 99%, it’s like playing with a stricter set of rules than your opponent: you’re not allowed to hit below the belt, and they’ve brought a baseball bat into the ring.
Note how this guy had to fight through his middle class conditioning before coming to a sense of peace over his decision to enter into a short sale on his house:
How a short sale taught me rich people’s ethics
Sep 29, 2014
The closest I ever came to acting like a rich person was two years ago when I short-sold my primary residence. I might have been able to keep it but strategic default made life easier. I owed about $400,000 on a house that short-sold for $150K. The bank lost more than a quarter of a million dollars, and I lost at least $80K in down payment and property improvements.
I was taught growing up to “keep my word” and that your handshake “meant something.” Yet businessmen and individual wealthy people make decisions that are far less moral than a short sale. People “incorporate” so they can avoid legal responsibility for individual actions.
It works great. You can stiff creditors, declare bankruptcy, pollute daily and raid pensions to enrich individual executives. If it all goes wrong, like it has so often for Donald Trump, you can keep your mansions and individual fortunes.
I entered the shark-infested waters of high finance with a short sale. It was the worst ethical decision, but the finest, most profitable business moment, of my adult life. It was an informative, even transformative, experience.
(Source)
This poor guy has a very bad case of ‘middle class morality’. It’s a very real phenomenon. All our lives, we are all taught (programmed?) to stay within the true and narrow groove of middle class life, pay our bills, and be on the hook should things go awry.
Not everybody holds that view, however. As he continues in the piece, the author discovers something important along the way:
I always knew business was getting over on me, but I had no idea the extent until I started looking to short-sell. I first learned all I could aboutprivatehome financing. I called up some shady investment groups around town and questioned them at length. I didn’t end up using them, but they were frank, informative and unashamed.
“Who would pay 11 percent on a home loan?” I asked.
“Rich people,” said “Bill” from the legal loan-sharking company. “The rich have terrible credit.”
Rich people = bad credit: Just let that sink in.
Bill told me in roundabout ways that rich people never pay a bill if there is any way around it. If something goes wrong in an investment or a business, they always preserve their own assets first.
Rich people have terrible credit. They know that there’s a system and it has rules. And, for them, these rules can (and should) be optimized for their own benefit. So they do anything and everything that works to their advantage.
There’s a reason and a logic to that which I can appreciate, but it makes me wonder where the rest of us obtained our deep-seeded beliefs about duty and responsibility towards debts.
Similar to rich people, banks do not have any entangling moral restrictions on their behaviors. That absence allows them to get away with extraordinary misdeeds, none more obvious and damaging than those that the Federal Reserve has perpetrated on the nation, specifically, and the world, more broadly.
To understand why, we first have to discuss something called Financial Repression.
Financial Repression
In my recent interview with Daniel Amerman, to whom I will credit much of the concise thinking and for unearthing the sources that I will weave throughout the remainder of this piece (please read his excellent article on Financial Repression here), the truly immoral intent of the Fed’s policies really sank in.
In response to the Fuzzy Numbers chapter (18) of the Crash Course, reader JBarney pondered the following:
Thanks for putting this update together. I think one of the problems is there are so many moving parts, so many manipulated numbers it is difficult to get a clear picture. The way it is organized here is helpful.
However,I can’t help but wonder about all of the implications of these numbers for the real economy and people’s lives. One of the sections which really hits home was the impact inflation has on all of this. If these are the numbers now, what will it be like when things really start to change?
The answer is that while inflation always steals from savers, it really does its dirty work when the central bank and government conspire to create a condition of pervasive and unavoidable negative real interest rates.
This is the heart of Financial Repression: an environment in which you literally cannot save money without paying a penalty.
The main takeaway of Chapter 18 on Fuzzy Numbers is not that the government fibs a little now and then (okay,all the time) merely because that’s politically expedient, but it does so in service to a larger and more pernicious aim: forcing people to accept an inflation rate that is higher than either their income growth and/or the market’s safe rate of return.
As soon as you are locked into a negative interest rate regime, your capital is losing purchasing power. But simple accounting rules dictate that loss of wealth had to go somewhere. So where did it go? To somebody else.
Negative real interest rates transfer money from every saver to every over-extended borrower. This is especially true with the government (largely because of its special revolving door relationship with the Fed, which both issues the money out of thin air and then buys government debt forcing rates into negative territory).
It’s really that simple. The Fed has openly and actively suppressed rates — not to help the credit markets, as they claim, but to engineer a condition of Financial Repression. Because that’s what the government needs to stealthily take your wealth to pay down the prior debts it accumulated.
Thus ‘negative real rates’ are the essential component of transferring wealth from the many to the few, with the ‘few’ being defined as the government, Wall Street, and others who exploit leverage and liabilities at sufficient scale to be on the right side of that wealth transfer.
This well-known phenomenon is a thoroughly accepted and well-described practice of governments and central banks everywhere. One of the better descriptions of it comes to us courtesy of the BIS in this working paper published in 2011.
From the abstract:
Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts.
A subtle type of debt restructuring takes the form of “financial repression.”
Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.
In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s.
Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt.
Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation.
Inflation need not take market participants entirely by surprise and, in effect,it need not be very high(by historic standards).
For the advanced economies in our sample, real interest rates were negative roughly ½ of the time during 1945-1980. For the United States and the United Kingdom our estimates of the annual liquidation of debt via negative real interest rates amounted on average from 2 to 3 percent of GDP a year.
(Source)
Let me decode that.
Step 1: Governments get into trouble by borrowing too much.
Step 2: Rather than pay this down honestly via cutting spending (unpopular) or by defaulting (even more unpopular), the government conspires with the central bank to slowly liquidate the stack of obligations by forcing negative real interest rates on everyone.
Step2b: Hang on one second…it wouldn’t work if people could dodge the Financial Repression, so a ring fence has to be built out of capital controls and explicit rate caps on and across the whole spectrum of interest-bearing securities.
Step 3: Sit back and wait for everyone with savings to contribute their purchasing power to those who issued the debts, be those public or private entities.
And this is exactly what has happened. All of the talk about the Fed focusing on unemployment or inflation or whatever are red herrings. What the Fed is really trying to do is to create a set of macro conditions that will allow the federal government to slowly crawl out from under a pile of debt and entitlement obligations that it literally can not pay by honest, above board means.
I guess if we were to imagine a “Step 4” in the above process, it would be to wait for the head of the central bank to come out and deliver a speech in which she expresses a grandmotherly concern for the wealth gap that naturally results from all this, but to deflect attention away from this being a direct and understood consequence of the Fed’s intentional goal of financial repression and towards some failure on the part of those who have been targeted to donate to the cause of bailing out the profligate and rewarding the borrowers.
Oh, wait. That did just happen. Here it is, Step 4, courtesy of Janet Yellen last week:
Why Fed Chair JanetYellenis “greatly” concerned about growing inequality
Federal Reserve Chair Janet Yellen on Friday expressed deep concern over widening economic inequality in the country and called for tackling issues such as early childhood education and encouraging entrepreneurship to help narrow the gap.
[Comment:Oh boy…must contain my emotions…did she really just deflect the consequences of the Fed’s policy of financial repression towards ‘early childhood education? Yep. That’s like a burglar saying that we need to invest in better metallurgical processes as the means of preventing doors from being kicked in so easily.]
In a speech at the Federal Reserve Bank of Boston, Yellen said steady growth in inequality over the past several decades represents the most sustained rise since the19thcentury.Living standards for most Americans have been “stagnant,” while those at the very top have enjoyed significant wealth and income gains, she said.
[Comment: Glad the Fed finally noticed that those at the very top have been making out like bandits! This was something I said explicitly would happen as a consequence of future Fed printing back in 2008 in the Crash Course, before the printing even started. How is it that I knew that this would happen back in 2008 and the Fed is just now noticing this observationally? Is my research department better than theirs? In fact this is a very well known and easy to understand process. That the Fed is feigning ignorance speaks volumes about how ignorant they believe we all are. This is a sure sign that we are trapped in a dysfunctional relationship with an abusive partner.]
“I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history,among them the high value Americans have traditionally placed on equality of opportunity,” Yellen said in prepared remarks.
[Comment: Once we accept that the Fed is openly and specifically creating the wealth gap as a matter of active and ongoing policy, which it is, then it’s actually more appropriate to ask if the Federal Reserve is compatible with values rooted in our nation’s history. The answer, obviously, is “no.”]
The problem of inequality is an unusual topic for the leader of the Fed, if only because the central bank’s ability to address the issue is limited.
[Comment: Stop right there Washington Post! You’ve just inserted an assertion that might as well have come straight from a PR press release from the Fed. I, for one, refuse that claim and reject it completely right here and on grounds that hardly have to be substantiated, but I will just for fun. When the Fed buys ‘assets’ (really debt instruments) from major financial firms using freshly printed money they are,by definition, buying those assets at steadily increasing prices which means that those who hold the largest amounts of these assets get the richest. When the Fed secondarily targets the stock market as something to ‘go up’ and the top 5% own 82% of all stocks, then the Fed’s role is anything but ‘limited.’ It is direct and proportional and they are 100% responsible for any and all gains that accrue to the top via the ‘miracle’ of asset inflation. Period. End of story. See also any of the innumerable charts plotting the S&P 500’s rise along with the growth in the Fed balance sheet for further confirmation. Sorry Washington post, assertion denied!!]
Yellen listed four factors that can influence economic opportunity: investing in education for young children, making college more affordable, encouraging entrepreneurship and building inheritance.
[Comment:OMG. She just blamed the victims and did it in a very let them eat cake kind of way. How aggravating(!). According to Yellen, if people are finding themselves getting poorer what they need to do is stop scrimping on their kids, become an entrepreneur and then somehow go back in time and have rich parents. This statement of hers calls for pitchforks and torches. Literally. Without a shred of decency, she has shifted all blame from the Fed to the victims. How corrupt or morally adrift does someone have to be to blame their victims? In a criminal case this would be used as evidence of sociopathic if not psychopathic behavior and used by a prosecutor to call for a maximum sentence to prevent a dangerous individual from running loose in society. And rightly so. Such individuals are poor prospects for rehabilitation.]
Yellen did not address in her prepared text whether the Fed has contributed to inequality.
[Comment:No surprise there. Ted Bundy never acknowledged the harm he caused either.]
(Source)
At this point, based on Yellen’s testimony, I think it’s time to say what everybody is already thinking: the Fed Chairwoman is literally displaying psychopathic tendencies by blaming her victims. I’m serious: if the Fed were an individual, we’d have no problem identifying its behaviors in psychologically pathological terms.
I understand that some, or perhaps many, will excuse this last point by saying that the Fed cannot possibly state the truth because doing so would create loss of confidence or public anger. But I submit that the so-called “white lie” defense is utter nonsense.
A greater harm is done by lying than by telling the truth. You can get away with small lies for a while, but they never actually go away, they just sit there corrosively undermining the very foundation of trust upon which civilized society rests. Large lies just do more damage over a shorter period of time, and that’s exactly where we are today. This explains much in terms of people’s general sense of unease despite an apparently reasonable economy and awesome living standards (by any historical measure).
Here’s what truth would sound like if I were to re-write Yellen’s speech:
My fellow Americans. Decades of poor fiscal restraint and accommodative monetary polices have brought us to an uncomfortable juncture.
My intention today is not to cast blame – there will be plenty of time for that later – but to take stock of where we are so that we can all decide on the best course forward, openly and honestly, as should be the case in a democracy.
There are no easy choices at this point, only a rather poor range of options spanning from somewhat unpleasant to potentially catastrophic.
The heart of the matter is simply this: the US government has built up an extraordinary amount of public debt, and an even larger pile of unfunded liabilities.
There’s simply no way for those to all be paid back under current terms. And given recent trajectories in play with respect to economic growth and deficit spending patterns, those debts and liabilities are only growing larger with time.
Quite simply our choices are these:
Pay down the debt by taking in more revenue than expenses. This is also known as austerity and given the size of the debts and other obligations, several decades of severe belt tightening would be required. This program would be extremely painful for nearly everybody and would require massive tax hikes coupled to major spending cuts.
Default on the debts and obligations. This simply means not paying people, investors, institutions and countries what we have promised to pay. Down this path lies the potential for massive destruction of our financial and political systems, so we have chosen to not entertain this path any further than to mention it exists.
Do nothing and wait for a fiscal and monetary accident to happen. This is a guaranteed disaster that could result in the sudden and permanent decline of opportunity in this country that would be so painful we cannot even predict the possible outcomes.
Engineer conditions where negative real rates of interest slowly allow the government’s obligations to fall relative to inflation. Over the span of decades this is the least painful route and our country has been down this path before.
We’ve selected path #4 as the least bad option. Since 2009 our policies have been geared towards #4 and we see no alternative besides staying on that path for as long as necessary. The alternative is the literal bankruptcy of our nation and we cannot and will not allow that to happen. Not on our watch.
While path #4 is the least objectionable of them all, it comes with its own share of unfortunate consequences and injustices. At its heart, negative real interest rates are an effective tax on savers and those whose incomes fail to keep pace with the inflation we are creating as an overt act of policy. This generalized and widespread loss of purchasing power takes a little bit from everyone, rather than a lot from a few systemically important institutions such as your federal government, which spreads the pain widely, and therefore causes the least disruptions to our daily lives.
Path #4 has a name: Financial Repression. This policy combines negative real interest rates with various forms of capital controls and tax policy to assure that nobody can evade it.
Obviously this is not fair, nor is it in alignment with our national narrative of prudence and hard work being rewarded because, truth be told, it rewards the profligate and those who produce nothing of real value but can play the game of high finance well. Yet here we are without any better options before us, and so we reluctantly chose Financial Repression.
One other distasteful ‘feature’ of the program of financial repression we’ve been putting you all through is that the rich get richer. Until or unless there is a massive change to the taxation and wealth re-distribution programs of the federal government, the Federal Reserve’s program of Financial Repression will continue to deliver an ever-larger gap between the wealthy and everyone else.
Such is the nature of the compounding function combined with the inequity of who gets first access to the newly created funds we make available in order to drive the interest rate curve into negative territory.
Are there any risks to this program? Well, the largest of them really needs to be discussed. Financial Repression has worked in the past, but it has only worked because we experienced both inflation and economic growth in equal measures.
Today, for reasons that we are still studying, neither the wage growth necessary to incite the sort of inflation we need nor economic growth have arrived as we thought they would.
If economic growth does not return, then the entire program of financial repression could well fail, and fail spectacularly. Everything depends on a return of economic growth sufficient to service the vast increases in debts that will result from the program.
But if that growth does not materialize? If the world is now stuck in a ‘New Mediocre’ of low growth then one risk is the possibility of a crisis that will be rooted in a permanent loss of confidence in debts of all forms, but government debt specifically. Down that road lie currency crises, and a wide variety of related financial upheavals the final result of which is what most will experience as a massive destruction of wealth.
We are working hard to assure that these risks are well contained, but you should be aware that they exist
After all, this is all of our futures that we are experimenting with and we do not have a playbook that we can follow here in 2014. We are in wholly uncharted territory. The exact arrangement of conditions we see across the global landscape is brand new.
We’re sorry to have to be in the position of engineering Financial Repression, but we felt there were no other options before us and we hope that you agree that a slight yearly discomfort to almost everyone is preferable to a major disruption to our way of life, our political system, and the possibility of worse things.
Is this fair? No. Was it avoidable? Yes. Is there anything we can be doing differently today? Not that we are aware of. The choices are between bad, worse and utterly terrible. We’re choosing the bad path, and we hope you’ll agree that this is the best we can do at this point.
But you deserve the truth because it’s already completely obvious and available for anybody with access to a computer. Since we are all in this together and we’re all being asked to sacrifice in some way, it’s much better that we all agree on the treatment plan.
It’s not a perfect plan, far from it. But considering the alternatives, this is the best one on the table.
If you want to make it more fair, more equitable, and with an eye towards building to a future in which we can all share some hope, you’ll need to turn to your policy makers and ask them to work from the fiscal side to correct what they can. Without a profound realignment of priorities, we’ll just get more of the same and, truth be told, eventually more of the same turns into a fiscal and monetary disaster about which nothing can be done except absorb the pain and loss that it will bring.
Conclusion
Context is everything. The growing gap between the very wealthy and everyone else is a consequence of Fed policy.
Whether you decide to be shocked, angry, or scared by Janet Yellen’s recent speech is up to you. Personally, I’m pissed off at being lectured to that falling further behind the super wealthy is my fault for not investing enough in my kids, not being entrepreneurial enough, and not having wealthy parents.
That level of ‘blame the victim’ is psychopathic, utterly appalling, and I reject it on every level. Worse, the level of trust destruction that happens with such a tone-deaf speech stains our entire national leadership. It is the modern version of Let them eat cake.
Once an institution, be it royalty of old or the Fed today, gets so far off the rails that they cannot locate their own role in the misery they see around them, it’s a sign of a huge problem for that society.
Ms. Yellen should not be allowed by anyone to get away with such a patently and provably false set of arguments. She should have been soundly booed off the stage and the President should be asking for her resignation immediately.
But we’re so far down the rabbit hole that almost nobody blinked an eye at the speech, and thought it perfectly normal.
For you personally, you need to be aware that the debts, deficits and liabilities across the entire OECD world are continuing to grow at a far faster pace than GDP, and far faster than oil production and discoveries of low-cost oil reservoirs (those schooled in net energy understand this to be the real issue), and that the most likely outcome, someday, will be an extraordinary financial accident.
It will be called something else — a period of wealth destruction — but for those who can see it coming, it will actually be period of massive wealth transfer.
And we’ll keep up our efforts on how to see clearly amidst the intentional obfuscation, to help those aware to the situation avoid ending up on the wrong side of that transfer.
[/rant]
Admin – the 64 million retirees x 52 weeks x $22 = $73 billion dollars.
Or to put it another way, each and every one of the private sector employees now needs to cough up an extra $625 per person per year, forever, or until the pyramid scheme collapses, whichever comes first.
Obviously, your point about the benefit to individuals being minimal is correct. But one day, sooner or later, retirees are going to look back on current times like it was heaven on earth.
We talk about how the debt levels cannot be sustained forever – what cannot be paid, will not be paid. When that happens, retirees relying on SS will end up with zero – nothing whatsoever. Hanging Ben from a lamp post will not change that.
SS was always doomed to be a failure, as is Medicare. No matter what – it was always going to cost more than they could rake in. Folks have believed they would be secure with regard to old age income as a result of the magic pudding SS. They were mistaken.
No governments are run well – not in the US, and not anywhere else. The welfare state was a horrible idea, and will fail. Governments are addicted to debt and promises they cannot keep. All governments.
When SS fails, retirees will be saying. “Gee, Norma, I remember when we could afford cat food four nights a week!”
Retirees – current or future – living on/relying on SS/Medicare/government pensions of any kind have made a terrible mistake, and a severe penalty for that mistake will be paid. The penalties currently being felt will be minor indeed in comparison to what is coming.
Martenson above is calling what is happening “Financial Repression”. It is as good a term as any.
I have long said that the way that the government will try to overcome its debts is via inflation. They will attempt – in a controlled manner – to devalue the debt via inflation. If they can generate say 10% inflation per year, they will in effect be reducing debt by 10% per year. If the national debt is 200 trillion, they are effectively reducing it by 20 trillion per year, netted out by the minuscule offering of increases to SS, pensions, etc. of 2% per year or whatever.
It is a very slow process, however, and there are a great many risks. Keeping inflation at a manageable level is one such – they may target 10%, but see it escalate to 20%, 30%, 1 million %, if they make a mistake. Wiemar Republic, anyone?
Hard assets will be key in such times. Debt may in fact not be too bad, so long as incomes rise well (which ain’t happening, boys and girls). Previous high levels of inflation have at times been in lockstep with high wage growth. Eureka! for those who bought a house at $100k, had %20 percent inflation, had high wage growth, etc. Yes, they got screwed on mortgage rates, but those that hung on, did very well indeed, thank you very much.
It will be an interesting ride.
‘Extraordinary Popular Delusions and the Madness of Crowds’
(Page 15)
“With a weakness most culpable, he lent his aid in inundating the country with paper money, which based upon no solid foundation, was sure to fall, sooner or later. The extraordinary present fortune dazzled his eyes, and prevented him from seeing the evil day that would burst over his head, when once, from any cause or the other, the alarm was sounded.”
lloph Re: Admin – the 64 million retirees x 52 weeks x $22 = $73 billion dollars. It’s really $22.00 / mo not weeks or $16.9 billion = $145.00 per person / yr which they with some luck be able to afford.
Admin- thanks for both, especially Martenson’s:
“That the Fed is feigning ignorance speaks volumes about how ignorant they believe we all are. This is a sure sign that we are trapped in a dysfunctional relationship with an abusive partner.”
Freshly insightful. Lending support to your final thought above. Mr Martenson also references torches and pitchforks, Lamposts, Torches, and Pitchforks, after the next event. I wonder if there will be videos.
MIA – thanks for the correction. At my age, weeks and months start to blend together. But I hate that when that happens.
The rest of my doom scenario stands, tho! Still won’t be able to support all the debts accrued.
And it’s all legal .Damn it would be nice to own a bank.
I was blown away by another factoid in the article. There are 250 million working age Americans and only 10 million make more than the SS limit of $118,500.
Thoreau seems to be correct. Most people are living lives of quiet desperation.
I must have misunderstood this part-
“I owed about $400,000 on a house that short-sold for $150K.”
If someone buys something for more than that thing is worth- it’s “value” in terms of monetary exchange- then what does that say about their understanding of economic principles? What can I learn from someone who clearly isn’t just uninformed, but borderline insane? I made a deal for some cattle yesterday. The person selling them did not have enough hay put up to get them through the Winter. They were also getting up there in age and saw that caring for a herd through another New England Winter would not “be worth it” to them for whatever they would get out of it come next Spring- i.e. calves, meat for the freezer. We came to an agreement on the price based on the current market value, what it meant to sell them to a neighbor vs. a slaughterhouse, transportation costs, the fact that the calves would be born rather than killed in utero, promise of some steaks, etc.
We agreed on a price, shook hands, done deal.
Worst case scenario, we eat them. Best case scenario they profit us. It’s basic math. If the farmer had asked for a price that was not justified by any of those considerations and was in fact 3 times more than the value, we would have shared a chuckle and gone about our day.
Delusional behavior has become mainstream lately. We had friends who bought a house in LA a few years back for a price that was, IIRC 5X the cost of rent for the exact same housing. I tried to talk them out of it but they insisted that the house “was worth it and would make them a profit when they sold it” which never happened because the same thing that happened to the guy above happened to them. They lost all of their equity, all of their labor, all of their improvement costs, their credit and wound up in a rental house down the street paying a fraction of what they were paying previously on a mortgage.
I understand going to a restaurant you haven’t been to before and risking the cost of an expensive meal on a gamble, but not close to a half million dollars. Doesn’t anyone do due diligence anymore? Can’t they see that just because a price tag is written on it that it doesn’t mean that they are compelled to purchase it?
Well Grandma either needs to:
–cut her monthly expenses
–take more toxic pharmaceuticals and/or eat more toxic food to cut her life span
–get off her lazy ass and get a job
–find a “sugar momma” to take care of her. (Men don’t live as long and older women inherit.)
We need what grandma should be getting to fund our neocon shenanigans around the world.
Clearly voters agree or they would vote differently . . . Janet at the Fed is not in the business of supporting her elders.
🙂