The Truth About Social Security: Part Two

What to expect Washington to do, and what you should do about Social Security’s bankruptcy!

In Part One of The Truth About Social Security we shared the latest news from the program’s Trustees: the retirement fund will be out of money by 2033.

Government accounting is funny.  The retirement fund is already out of money, but they don’t have to face reality the same way a private business does.  Nevertheless, it will have to face the accounting reality by 2033 that it is broke.  In the meantime, we are not government, so we should face the reality today that the net present value of the unfunded liabilities of the US government, including Social Security, Medicare, and Medicaid is $100,000,000,000,000.

That is ONE HUNDRED TRILLION DOLLARS!

That is the amount of money that Washington would need to be set aside today to fully fund future obligations for programs like Social Security, Medicare, and other entitlements.

But of course there is no one hundred trillion dollars that can be set aside.  To the contrary, the visible government debt is $37 trillion.  

So what will the government do about this?  And what can you do?

These programs are bankrupt.  The government will have to default on them.  That means it will break its promise to pay you.  

We are not suggesting that Washington will default overtly on Social Security payments.  We believe that they will be paid in “nominal” terms as long as possible… but not in “real” terms.  In other words, recipients will likely get their checks bearing the same face value they might expect, but in terms of purchasing power, they will be inadequate.  That is at least the most likely near-term expedient to expect from Washington.

That is something like a slow-motion default.  Printing press money is used to meet expectations of payments, but the printing press money has progressively less and less value.  

There simply aren’t a lot of other options.  The government could simply repudiate its obligations all at once.  But that is a game-over move.  It would bring the government’s remaining credibility and all of its activities, including tax collection, to a sudden, screeching halt.  It is far more likely that the pain of default will be spread out over time.

 The chart on the right illustrates the decline in the purchasing power of the dollar (in green) since the US creation of the Federal Reserve System.   There will have to be much more of that in the years immediately ahead.  

That is why we urge our friends and clients to prepare for their future, their retirement, and old age with gold and silver, long-term tools of wealth preservation par excellence. 

It is often said that the United States has never defaulted on its debt.  But that is not true. For those that would like to learn something about the US government’s past debt defaults, we refer you to this article by Ryan McMaken of the Mises Institute.  It is called “Yes, the US Government Has Defaulted Before.”

In the meantime the best that you can do is to be aware that Social Security is not dependable.  To protect you own retirement and older years, accumulate more gold and silver coins now.  To learn more about the role of gold and silver in wealth protection, speak with a Republic Monetary Exchange precious metals professional now.