In this video, I discuss the coming Social Security and Medicare funding crisis, and how I think that it will be resolved.
If you add up Federal spending on Social Security, Medicare/Medicaid, defense, and Federal debt interest expense, it already exceeds revenue from tax receipts.
It is my belief that none of these programs can or will be cut. The U.S. will maintain its military spending levels due to lobbying from the defense industry, as well as the U.S. need to protect global trade routes and the economic infrastructure that props up the U.S. Dollar as a world reserve currency. We will not default (at least nominally) on our debt's principal or interest payments.
By 2021, outflows from Social Security will exceed inflows, necessitating dipping into the Social Security trust fund. That fund will be completely depleted by 2035 at current rates.
There are many reasons for the Social Security impending crisis, which include:
1) Lower fertility rates and higher life expectancies than were originally factored into the program, resulting in an aging work force.
2) The impending retirement of the Baby Boomer generation.
3) More unemployment and lower payroll taxes due to the COVID crisis and the lockdowns.
4) The Social Security trust fund has been earning less interest income, as Treasury yields have fallen over the past 20 years.
It is too politically risky for Congress to cut or alter retirement benefits, so it will become necessary for the Federal Reserve to print a massive new amount of U.S. dollars to monetize the Federal debt that will be necessary to keep these programs going.
I then discuss how newly created U.S. dollars make their way from the Federal Reserve through the primary dealers (big banks) to the U.S. Treasury, and thence to Congress and the Social Security Administration.
In this environment of central bank inflationary monetary policy and debt sterilization, assets like gold and Bitcoin should out-perform.
Not investment advice! Consult a financial adviser.
U.S. debt clock:
U.S. Entitlement programs:
What is Medicare:
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Social Security 2020 annual report:
The U.S. aging population:
U.S. defense spending:
Treasury holdings of Federal Reserve:
Matthew Kratter is the author of the Amazon best-seller "A Beginner's Guide to the Stock Market":
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