Have We Reached Peak Entitlements?
- Thread starter Banjo
- Start date
I think we're in for some very tumultuous times in the US and we could see a paradigm shift in our political system as a result.
Clearly, there is natural trend towards increasing wealth redistribution and keeping welfare systems in tact, while keeping taxes relatively low. However mathematics show that we will be forced to either raise taxes aggressively or reduce benefits.
One way or another, this thing will break heavily to one side, IMO. I'm not sure how it will play out, but it will be interesting.
Everyone says they want less government spending and lower taxes, but as soon as you cut a small fraction of the government (17% of workforce in non-essential roles) people freak out. I can honestly say I can't even tell there is a "shut down" and yet people are loosing their minds.
Anytime you actually put names and numbers of programs that you propose cutting, people are against it. So when they say they want lower spending, they don't really mean it.
The tipping point will likely be when we can no longer borrow affordably. That is when the rubber meets the road. Do we raise taxes to extreme levels in order to pay for our spending, or do we reduce spending.
Taxing the rich into oblivion won't work long term, but they will try that first.
Clearly, there is natural trend towards increasing wealth redistribution and keeping welfare systems in tact, while keeping taxes relatively low. However mathematics show that we will be forced to either raise taxes aggressively or reduce benefits.
One way or another, this thing will break heavily to one side, IMO. I'm not sure how it will play out, but it will be interesting.
Everyone says they want less government spending and lower taxes, but as soon as you cut a small fraction of the government (17% of workforce in non-essential roles) people freak out. I can honestly say I can't even tell there is a "shut down" and yet people are loosing their minds.
Anytime you actually put names and numbers of programs that you propose cutting, people are against it. So when they say they want lower spending, they don't really mean it.
The tipping point will likely be when we can no longer borrow affordably. That is when the rubber meets the road. Do we raise taxes to extreme levels in order to pay for our spending, or do we reduce spending.
Taxing the rich into oblivion won't work long term, but they will try that first.
His analysis with regard to Social Security (the pension part only) is incorrect. Social Security has two problems,one minor and the other major. The minor one is that Congress has failed to act , so far, on the actuaries recommendations. The major one is Military spending nearly as great as all other nations combined and medical costs double those of the next most expensive medical care. Current U.S. Productivity is not sufficient to sustain these levels of expenditure. This major problem is the source of virtually all public debt, and that debt creates a major problem for the Social Security Pension Fund.
At the moment, when the Trust begins to redeem its bonds (Balance in the Trust at the end of fiscal 2012 was 2.6 Trillion) the Treasury will have to borrow to redeem them. Unless there is a commensurate increase in U.S. Productivity, the borrowing will likely result in additional inflation causing the Trust bonds to be paid with dollars having less buying power then the dollars borrowed from the Trust. This will erode the buying power of pensioners.
N.B. The trust, as of the end of fiscal 2012, was still in surplus and growing, however within the next few years the Trust will need to begin redeeming bonds.
One might say that the problem for Social Security is that it has made the mistake of loaning to a government who's creditworthiness is in question. The U.S. can't go bankrupt, but will the bonds we bought buy as much when redeemed as the dollars we loaned?
see: http://www.ssa.gov/oact/trsum/
At the moment, when the Trust begins to redeem its bonds (Balance in the Trust at the end of fiscal 2012 was 2.6 Trillion) the Treasury will have to borrow to redeem them. Unless there is a commensurate increase in U.S. Productivity, the borrowing will likely result in additional inflation causing the Trust bonds to be paid with dollars having less buying power then the dollars borrowed from the Trust. This will erode the buying power of pensioners.
N.B. The trust, as of the end of fiscal 2012, was still in surplus and growing, however within the next few years the Trust will need to begin redeeming bonds.
One might say that the problem for Social Security is that it has made the mistake of loaning to a government who's creditworthiness is in question. The U.S. can't go bankrupt, but will the bonds we bought buy as much when redeemed as the dollars we loaned?
see: http://www.ssa.gov/oact/trsum/
In his seminal work, Democracy in America, de Tocqueville suggested that the "American Experiment" would likely end because politicians, realizing that votes are a commodity to be purchased with public funds, would simply spend us into ruin. He was right then and he remains right today. While the economic consequences produced by these scum -- both sides of the aisle -- are terrifying, the political and social consequences of "the bust" will be mind boggling. We are in uncharted waters and when we bust out there will be hell-to-pay in every corner of the earth.
I just don't know when or what form the bust will take. I hope my trading skills will be well enough developed by then to carry the day.
I just don't know when or what form the bust will take. I hope my trading skills will be well enough developed by then to carry the day.
Edmund de Rothschild once said "When the streets of Paris are running in blood, I buy". I have dual citizenship (US and UK -- by descent) and can live, with my wife, in any EEA country. The streets of Vaduz will not run red with blood under almost any circumstances and if that's where my ass is safe that is where it will be.
Markets may close for days or even weeks but even through the turmoil, most of the time, there will be markets that are open. A scalp in gold or silver or a currency might be 40 ticks or the play might be in Swiss governments or I might not scalp. I'm not suggesting that I have the slightest idea if it's rampant inflation or utter depression but I am suggesting that a great trader who is smart enough to watch his counter party risk like a hawk and the physical safety of his family has an edge.
Others will see it differently. I have never owned an ounce of gold in my life, I've written off doom and gloomers all my life but the reality is there are breaking points. We are litterally led by madmen at this point. The opposition to the madmen who have inherited the establishment may be even more insane. These clowns will make every wrong move in a crisis.
You may be where I was a few years ago. I would have written off anyone that spoke as I do. But "the times they are a changin". I simply believe something different than I believed all my life. Time, of course, will tell. My bet is by the next presidential election your opinion will be closer to what mine is today than what I perceive to be yours today.
Markets may close for days or even weeks but even through the turmoil, most of the time, there will be markets that are open. A scalp in gold or silver or a currency might be 40 ticks or the play might be in Swiss governments or I might not scalp. I'm not suggesting that I have the slightest idea if it's rampant inflation or utter depression but I am suggesting that a great trader who is smart enough to watch his counter party risk like a hawk and the physical safety of his family has an edge.
Others will see it differently. I have never owned an ounce of gold in my life, I've written off doom and gloomers all my life but the reality is there are breaking points. We are litterally led by madmen at this point. The opposition to the madmen who have inherited the establishment may be even more insane. These clowns will make every wrong move in a crisis.
You may be where I was a few years ago. I would have written off anyone that spoke as I do. But "the times they are a changin". I simply believe something different than I believed all my life. Time, of course, will tell. My bet is by the next presidential election your opinion will be closer to what mine is today than what I perceive to be yours today.
"Peak entitlements?" Doubt it.
All future elections (prior to the revolution, of course) will be won by the side which promises MORE entitlement than the other.... until we're all broke.
