Friday, August 3, 2012

America 2050. What Will We Build? Part 2.


I am an historian, not a psychic. America in 2050 is just a nice round date. I believe that our destiny lies reliably in the past. If you want to know where we're going, we have to look at where we (and Western Europe) have been.

Baby Boomers - The Big Elephant in the Room

80 million Baby Boomers are starting to retire. Born between 1945- to the mid-1960's, they are a major part of our consuming economy. They have invested in stocks, started businesses, were famous for outrageous work ethnics, and paid taxes - a lot of taxes.

The problem now is they're retiring and expecting all the dollars that America has promised them for Social Security, Medicare, and other programs. Born in 1961, I receive my Social Security statement every few years. I always read them, but they're never quite real to me. I just can't imagine ever getting back any of the money they've taken from me for this program per se.

Of course, any money I might collect in the future isn't really my money coming back to me. Social Social Security, starting taxation in 1937, has been called one enormous pyramid-scheme, taking money from many and giving it back to a few. Today, about 16 people pay SS taxes for the benefits for 1 retired person. By the time the last Baby Boomer retires, the projected ration will be 2 people paying to support 1 retired Baby Boomer! All government BS aside, that means that SS taxes will have to either to increase by many times, benefits will be reduced or put off to further advanced ages, or money will be paid to retirees that will be so inflated as to be virtually worthless. Keep in mind that retirees are promised a certain amount of dollars per month, not what those dollars will actually buy! Therein lies the government's hole card.

The most likely result will in the future will be more of the same, to an extent. Benefits will be delayed and taxes will slowly rise. However, will future generations sacrifice 80-90% of their paychecks to support Baby Boomers?  If they're voters, I think not. The short fall will come from more money printing until the dollar becomes virtually worthless. Current deficit projections that include financial commitments the US Govt. has made to Baby Boomers and others reveal an astronomical figure of $100 Trillion dollars! That works out to $300,000 owed by each of the 325 million Americans today!

A Baby Boomer will get his $2500 monthly check, and buy one or two days worth of food with it. It's the only solution. The government keeps it word, and the younger taxpayers don't throw them out of office for impoverishing them. Every pyramid scheme has it's balloon popping moment. Bernie Madoff had the Great Recession starting in 2008, and America will have the Baby Boomers to burst the bubble of lying promises that our government has made.

I believe the America of 2050 will have fewer benefits or social programs available. Clearly our debt cannot continue to climb forever. Sooner or later a default, or more likely dollar creation will push us into Hyperinflation as it famously did for Weimar Germany, Austria, Hungary, Argentina, Iceland, and numerous other countries. People will work until death or sickness overcomes them, they will move in with their children, and the standard of living will be more meager than today.

The America of 2050 will undoubtedly still have a tiny amount of very wealthy living high in their guarded castles. But the destruction of the dollar, and the other social programs propping up a middle and the lower classes, will have been severely curtailed - taking the stabilizing influence of middle class working stiffs with it.

Rick


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