The US's 'Financial Tsunami'

http://www.financialsense.com/Market/allison/2007/1015.html

By the year 2030, it is estimated that 84 million people will be drawing Social Security, up from 50 million today. Medicare recipients will skyrocket from 44 million to 79 million. In a mere 23 years, this will leave 2 workers contributing payroll taxes for each retiree. In 1945, there were 42 workers contributing for each retiree. Of course, when Social Security was born in 1935, the assumption was that most people would die before they could start collecting at age 65.

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The conservative number now tossed around is $50 trillion in unfunded future liabilities. This is probably significantly understated, as inflation expectations are understated. The Concord Coalition has forecast cash deficits of $72 trillion for Medicare and Social Security by 2080.

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http://www.cbsnews.com/stories/2007/03/01/60minutes/main2528226.shtml

You’re probably expecting to hear from someone who disagrees with the comptroller general’s numbers, projections, and analysis. But hardly anyone does. He is accompanied on the wake-up tour by economists from the conservative Heritage Foundation, the left-leaning Brookings Institution, and the non-partisan Concord Coalition. The only dissenters seem to be a small minority of economists who believe either that the U.S. can grow its way out of the problem, or that Walker is over-stating it.

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Federal Reserve Chairman Ben Bernanke validated much of Walker's take on the situation at congressional hearings this year, and so did ranking Republicans and Democrats on the Senate Budget Committee. Senator Kent Conrad of North Dakota is the chairman.

Sen. Conrad thinks David Walker is "providing an enormous public service."

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http://www.ft.com/cms/s/0/80fa0a2c-49ef-11dc-9ffe-0000779fd2ac.html?nclick_check=1

The US government is on a “burning platform” of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.
A youtube video

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Basicaly the US social security system (state pension) like ours works that you pay in money to the fund and that money is almost immediately paid back out to who ever is claiming retirement benefits. It is not invested on your behalf for a later day. Money in money out. Demographics means that the money out is about to get phenominaly bigger than the money in. In the US you also become eligible for free health care at retirement. IE you get NHS cover at that point. This will grow to massively exceed the millitary budget. Hell it will swamp the entire revenues the US earns in tax.
This interesting aside on the US health care system....

He is not suggesting that the nation do away with Medicare or prescription drug benefits. He does believe the current health care system is way too expensive, and overrated.

"On cost we're number one in the world. We spend 50 percent more of our economy on health care than any nation on earth," he says.

"We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation," Walker points out.

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Im taking a wild stab that the UK is in a similar boat in terms of the uncovered costs associated with retirements and long life expectancies over the next 30 years.

This whole problem is not even looking at repaying the staggering borrowing binge the US has gone on to fund its Keynsian growth since 2000. For alleged followers of Friedman and Hayek they have acted more like millitaristic believers in the gospel of Keynes and Galbraith.

The current federal debt stands at about $9 trillion

To be exact, the total liabilities of the U.S. Government hit $9,005,648,561,262.70, according to the Bureau of the Public Debt at the Treasury Department.

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http://www.cbsnews.com/stories/2007/09/06/notebook/main3238787.shtml

Last year, the interest on the debt exceeded $405 billion dollars. This year’s interest payments will be even greater.

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Thats the interest not the repayments. In a few years the actual repayments will start to jump massively, they will start getting towards $700 billion out of a federal budget of less than $2000 billion (that figure does not cover whatever the interest payments would be for that year. That has to go on top of repaying the $700 billion borrowed).

When the US's top accountant if dishing out this kind of doomer porn, in the words of the Mogambo Guru "we're all freeking doomed!!!!"

I should also add that many people are now openly talking that the Fed has abandonded monyterism as its guiding principle. You wont hear helicopter Ben (Berniker the head of the fed) or Easie Eddie (Greenspan) admit it in public. Nor for that matter the staid Bank of England governors. But the US does not seem to be peruing a policy of controling inlfation via control of money supply. Rate cuts in the UK and especialy in the US are on the back of rapidly spiking energy and food prices. They are not calculated in core inflation figures which most agree are slightly massaged. Some figures I have seen bandied around are of current unofficial US inflation running at 12%. Given that the cost of oil and gas has more than doubled in 5 years and corn and wheat come close to doubling in just over 1 year, you can see why not having energy and food is hiding the real cost increases. Every rate cut drops the dollar, every drop in the dollar is infationary. Inflation is seen as a way out of this financial mess. Make the dollar worth less (or worthless) and it makes your debts shrink in real terms.

Maybe they're just waiting for the North American Union. Whatever it takes to heard the cattle. It's their country not the people's.

dilute micro said:

Maybe they're just waiting for the North American Union. Whatever it takes to heard the cattle. It's their country not the people's.

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Yeah. Ditch the dollar, bring on the Amero. The RealID act incorporates a hologram of the whole north of the continent on cards. Nice.