The fat cats in Washington D.C. are living the high life, and they are doing it at your expense. Over the past decade, there has been one area of the country which has experienced a massive economic boom. Thanks to wildly out of control government spending, the Washington D.C. region is absolutely swimming in cash. In fact, at this point the state of Maryland has the most millionaires per capita in the entire nation and it isn’t even close. If you have never lived there, it is hard to describe what the D.C. area is like. Every weekday morning, hordes of lawyers, lobbyists and government bureaucrats descend upon D.C. from the surrounding suburbs. And at the end of the day, the process goes in reverse. Everyone is just trying to get their piece of the pie, and it is a pie that just keeps on growing as government salaries, government contracts and government giveaways just get larger and larger. Of course our founders never intended for this to happen. They wanted a very small and simple federal government. Sadly, today we have the most bloated central government in the history of the planet and it gets worse with each passing year.
If you were to ask most Americans, they would tell you that the wealthiest Americans probably live in cities such as New York or San Francisco. But thanks to the Obama administration (and before that the Bush and Clinton administrations), the state of Maryland is packed with millionaires. In particular, the Maryland suburbs immediately surrounding D.C. are absolutely overflowing with government fat cats that make a living at our expense. Every weekday morning, huge numbers of them leave their mini-mansions in places such as Potomac and Rockville and drive their luxury vehicles to work in the city. As the Washington Post has detailed, at this point approximately 8 percent of all households in the entire state of Maryland contain millionaires, and the rest of the area is not doing too shabby either…
In Maryland, nearly 8 out of every 100 households in 2014 had assets topping $1 million, giving the state more millionaires per capita than any other in the country, according to a new report from Phoenix Marketing International.
The rest of the Beltway isn’t lacking in millionaires either: The District and Virginia ranked in the top 10 among those with the highest number of millionaire households per capita in 2014. In Virginia, which was No. 6 on the list, 6.76 percent of the state’s 3.17 million households are millionaires. And in the District, which rounds out the top 10, 6.25 percent of its more than 292,000 households are millionaires.
And while not too many of them are millionaires, your average federal workers that toil in D.C. are doing quite well too.
Once upon a time, it was considered to be a “sacrifice” to go into “government service”.
If you can believe it, approximately 17,000 federal employees made more than $200,000 last year.
Overall, compensation for federal employees comes to a grand total of close to half a trillion dollars every 12 months.
In fact, there are tens of thousands of federal employees that make more than the governors of their own states do.
Does that seem right to you?
If you want to live “the American Dream” these days, the Washington area is the place to go. Just check out the following description of the region from the Washington Post…
Washingtonians now enjoy the highest median household income of any metropolitan area in the country, and five of the top 10 jurisdictions in America — Loudoun, Howard and Fairfax counties, and Falls Church and Fairfax City — are here, census data shows.
The signs of that wealth are on display all over, from the string of luxury boutiques such as Gucci and Tory Burch opening at Tysons Galleria to the $15 cocktails served over artisanal ice at the W Hotel in the District to the ever-larger houses rising off River Road in Potomac.
And of course let us not forget the fat cats in Congress.
According to CNN, our Congress critters are now wealthier than every before…
The typical American family is still struggling to recover from the Great Recession, but Congress is getting wealthier every year.
The median net worth of lawmakers was just over $1 million in 2013, or 18 times the wealth of the typical American household, according to new research released Monday by the Center for Responsive Politics.
And while Americans’ median wealth is down 43% since 2007, Congress members’ net worth has jumped 28%.
Not only that, there are nearly 200 members of Congress that are actually multimillionaires…
Nearly 200 are multimillionaires. One hundred are worth more than $5 million; the top-10 deal in nine digits. The annual congressional salary alone—$174,000 a year—qualifies every member as the top 6 percent of earners. None of them are close to experiencing the poverty-reduction programs—affordable housing, food assistance, Medicaid—that they help control. Though some came from poverty, a recent analysis by Nicholas Carnes, in his book White Collar Government: The Hidden Role of Class in Economic Policymaking, found that only 13 out of 783 members of Congress from 1999 to 2008 came from a “blue-collar” upbringing.
But even though almost all of them are quite wealthy, they don’t hesitate to spend massive amounts of taxpayer money on their own personal needs.
For example, according to the Weekly Standard, more than five million dollars was spent on the hair care needs of U.S. Senators alone over one recent 15 year period…
Senate Hair Care Services has cost taxpayers about $5.25 million over 15 years. They foot the bill of more than $40,000 for the shoeshine attendant last fiscal year. Six barbers took in more than $40,000 each, including nearly $80,000 for the head barber.
And in one recent year, an average of $4,005,900 was spent on “personal” and “office” expenses per U.S. Senator.
So the grand total would have been over 400 million dollars for a single year.
That seems excessive, doesn’t it?
And even when they end up leaving Washington, our Congress critters have ensured that they will continue to collect money from U.S. taxpayers for the rest of their lives…
In 2011, 280 former lawmakers who retired under a former government pension system received average annual pensions of $70,620, according to a Congressional Research Service report. They averaged around 20 years of service. At the same time, another 215 retirees (elected in 1984 or later with an average of 15 years of service) received average annual checks of roughly $40,000 a year.
If you can believe it, there are quite a few former lawmakers that are collecting federal pensions for life worth at least $100,000 annually. The list includes Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.
Of course the biggest windfalls of all are for our ex-presidents. Most Americans would be shocked to learn that the U.S. government is spending approximately 3.6 million dollars a year to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton.
So does this make you angry?
Or are you okay with these fat cats living the high life at our expense?
Please feel free to add to the discussion by posting a comment below…
When it comes to taking a chainsaw to the future of America, nobody seems more eager than Barack Obama. Despite the fact that the U.S. national debt is on pace to approximately double during his eight years in the White House, he has just proposed a budget that would take government spending to crazy new heights. When Barack Obama took the oath of office, the U.S. national debt was 10.6 trillion dollars. Today, it has surpassed the 18 trillion dollar mark. And even though we are being told that “deficits are going down”, the truth is that the U.S. national debt increased by more than a trillion dollars in fiscal 2014. But that isn’t good enough for Obama. He says that we need to come out of this period of “mindless austerity” and steal money from our children and our grandchildren even faster. In addition, Obama wants to raise taxes again. His budget calls for 2 trillion dollars in tax increases over the next decade. He always touts these tax increases as “tax hikes on the rich”, but somehow they almost always seem to end up hitting the middle class too. But whether or not Congress ever adopts Obama’s new budget is not really the issue. The reality of the matter is that the “tax and spend Democrats” and the “tax and spend Republicans” are both responsible for getting us into this mess. Future generations of Americans are already facing the largest mountain of debt in the history of the planet, and both parties want to make this mountain of debt even higher. The only disagreement is about how fast it should happen. It is a national disgrace, but most Americans have come to accept this as “normal”. If our children and our grandchildren get the opportunity, they will curse us for what we have done to them.
All debt destroys.
All debt enslaves.
And when you are talking about an 18 trillion dollar debt, you are talking about an amount of money that is almost unimaginable.
If our national debt was reduced to a stack of one dollar bills, it would circle our planet at the equator 45 times.
How could we have done such a thing?
Thomas Jefferson once said that “the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” He correctly understood that government debt is stealing. We are financially raping our children, our grandchildren and all future generations of Americans. It is an incredibly wicked thing to do.
But instead of men like Thomas Jefferson running our country, we have men like Barack Obama running it.
And to Barack Obama, running up a trillion dollars of debt a year is “mindless austerity”…
“I want to work with Congress to replace mindless austerity with smart investments that strengthen America,” Obama said in a speech at the Department of Homeland Security. “I’m not going to accept a budget that locks in sequestration going forward. It would be bad for our security, and bad for our growth.”
Yes, if we steal money from future generations it will artificially inflate our current standard of living and make our economy look temporarily better than it should be.
But it is morally wrong to do this, and our current crop of politicians have no intentions of ever bringing the debt party to an end.
Even with the ridiculously optimistic economic assumptions that are used in Obama’s new budget, the federal budget is never projected to balance within the next decade. Instead, Obama’s budget projects that the national debt will rise from 18.1 trillion dollars right now to 26.2 trillion dollars in 2025.
Of course it would greatly help if the federal government actually spent our money wisely. But instead, the feds often waste our hard-earned tax dollars in some of the most bizarre ways imaginable. The following is just one example…
The U.S. federal government has prompted controversy after spending over $33,000 on a study to find out whether same-sex couples live closer to tobacco shops than heterosexuals.
The large sum was spent on a study by the National Institutes of Health entitled, ‘Relationship Between Tobacco Retailer Density and Sexual Minority Couples.’
Thanks to this kind of insane spending, our debt is completely and totally out of control.
While Barack Obama has been in the White House, the U.S. national debt has increased by $84,266 per full-time private sector worker. Anyone that believes that this kind of debt accumulation is sustainable is absolutely delusional.
The only reason why our house of cards has not completely collapsed already is because the rest of the world has been willing to lend us gigantic piles of money at artificially low interest rates.
In December, the average rate of interest on the government’s marketable debt was 2.013 percent. But in the past, interest rates have been much higher than that. For example, in January 2000 the average rate of interest on the government’s marketable debt was 6.620 percent. If we returned to that level today, we would be paying well over a trillion dollars a year just in interest on the national debt.
And the issue isn’t just the more than one trillion dollars in new debt that we are accumulating every 12 months.
As I have discussed previously, the U.S. government has more than seven trillion dollars of debt that must be “rolled over” each year. In other words, the federal government must issue more than seven trillion dollars of new debt just to pay off old debts that are coming due.
If something were to happen which would cause the rest of the planet to either be unwilling or unable to lend us trillions of dollars at ridiculously low interest rates all of a sudden, the game would be over.
We were handed the keys to the greatest and most prosperous economy in the history of the planet, and our greed has totally wrecked it.
We were wealthy beyond imagination, but that was never good enough for us. We always had to have more.
And now we are hurtling toward financial oblivion, and we have a man in the White House that wants us to go into debt even faster.
The idea that the Obama administration has the budget deficit under control is a complete and total lie. According to the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014. But this number is just for public consumption and it relies on accounting tricks which massively understate how much debt is actually being accumulated. If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt to the penny. On September 30th, 2013 the U.S. national debt was sitting at $16,738,183,526,697.32. As I write this, the U.S. national debt is sitting at $17,742,108,970,073.37. That means that the U.S. national debt has actually grown by more than a trillion dollars in less than 12 months. We continue to wildly run up debt as if there is no tomorrow, and by doing so we are destroying the future of this nation.
The chart that I have posted below shows the exponential growth of the U.S. national debt over the past several decades. Anyone that would characterize this as “under control” is lying to you…
This is the greatest government debt bubble in the history of the world, but very few people seem to have any desire to do anything about this anymore. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy.
Perhaps that it is because we have never really experienced any serious consequences for going into so much debt yet.
But when it comes to running up debt, a day of reckoning always comes eventually.
Just ask Greece.
And the absolutely insane spending policies of this administration and this Congress are hastening the day when our day of reckoning will arrive.
Consider the following facts…
-The U.S. national debt has increased by more than 7 trillion dollars since Barack Obama has been in the White House. By the time Obama’s second term is over, we will have accumulated about as much new debt under his leadership than we did under all of the other U.S. presidents in all of U.S. history combined.
-The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first established in 1913.
-If the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.
-Right now, the United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
-In August, the average rate of interest on the government’s marketable debt was 2.028 percent. In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent. If we got back to that level today, we would be paying well over a trillion dollars a year just in interest on the national debt.
-At this point the U.S. government has accumulated more than 200 trillion dollars of unfunded liabilities that will need to be paid in future years. In other words, we have made more than 200 trillion dollars worth of promises that we do not have money for yet.
Thomas Jefferson once said that “the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
What we are doing to future generations is absolutely unconscionable. We are stealing trillions upon trillions of dollars from our children and our grandchildren, and we are willingly consigning them to a lifetime of debt slavery.
I have said this before, but it bears repeating. If future generations get the chance, they will look back and curse us for what we have done to them.
And shame on anyone that would dare to suggest that we should continue to run up more debt that future generations will be expected to repay.
But government debt is far from the only massive debt bubble that we are dealing with as a country.
40 years ago, the total amount of debt in our nation (all government debt plus all business debt plus all individual debt) was sitting at a grand total of about 2.3 trillion dollars.
Today, that total has grown to 59.4 trillion dollars.
As the chart posted below shows, our total debt bubble is now more than 25 times larger than it was just 40 years ago…
If you were to take all forms of debt in our country and divide it up equally to each person, the average family of four would owe approximately $735,000.
This is not anywhere close to being sustainable, but most Americans don’t seem to care. They just continue to recklessly run up even more debt.
However, there are signs that we are starting to hit a wall with all of this debt.
For example, an astounding 35 percent of all Americans have debts that are so overdue that they have been referred to collection agencies.
Our nation has become an ocean of red ink from sea to shining sea, and the only way to keep the bubble from bursting is for the total amount of debt to continue to grow much faster than the overall economy is growing.
Obviously this cannot happen indefinitely, and when this house of cards comes crashing down it is going to be absolutely horrific. For much more on all of this please see my previous article entitled “The United States Of Debt: Total Debt In America Hits A New Record High Of Nearly 60 Trillion Dollars“.
The big question is how long our “bubble economy” can keep going before it finally collapses.
It has gotten to the point where even some of the biggest banks in the world are admitting that what we have been doing is completely and totally unsustainable. Just consider the following excerpt from a recent article by Joshua Krause…
Recently, strategists for Deutsche Bank released a startling study in regards to government debt. They decided to investigate whether or not the bond market is currently in a bubble. What they found was, unlike previous eras, the past 20 years has seen no lag between economic booms and busts:
It has long been our view that over the last couple of decades the global economy has rolled from bubble to bubble with excesses never fully being allowed to unravel. Instead aggressive policy responses have encouraged them to roll into new bubbles.
This has arguably kept the modern financial system as we know it a going concern. Clearly there have always been bubbles formed through history but has there been a period like the last 20 years where the bursting of one bubble has consistently led directly to the formation of the next?
Essentially, our current system has been dying a very slow death. It’s running out of steam.
Sadly, most Americans have no idea that we are living in a giant debt-fueled bubble that has a limited lifespan.
Most Americans just assume that since the politicians tell them that everything is going to be okay that they don’t need to be concerned about any of this.
But every single day our debts get even larger and our long-term financial problems get even worse.
Someday this bubble is going to burst and then all hell will break loose.
It is just a matter of time.
What would you say if I told you that Americans are nearly 60 TRILLION dollars in debt? Well, it is true. When you total up all forms of debt including government debt, business debt, mortgage debt and consumer debt, we are 59.4 trillion dollars in debt. That is an amount of money so large that it is difficult to describe it with words. For example, if you were alive when Jesus Christ was born and you had spent 80 million dollars every single day since then, you still would not have spent 59.4 trillion dollars by now. And most of this debt has been accumulated in recent decades. If you go back 40 years ago, total debt in America was sitting at about 2.2 trillion dollars. Somehow over the past four decades we have allowed the total amount of debt in the United States to get approximately 27 times larger. This is utter insanity, and anyone that thinks this is sustainable is completely deluded. We are living in the greatest debt bubble of all time, and there is no way that this is going to end well. Just check out the chart…
When the last recession hit, total debt in America actually started going down for a short period of time.
But then the Federal Reserve and our politicians in Washington worked feverishly to reinflate the bubble and they assured everyone that everything was going to be just fine. So Americans once again resorted to their free spending ways, and now total debt in the United States is rising at almost the same trajectory as before and has hit a new all-time record high.
We see a similar thing when we look at a chart for consumer debt in America…
For a while after the recession it was trendy to cut up your credit cards and get out of debt.
But that fad wore off rather quickly, didn’t it?
It is almost as if 2008 never happened. We are making the same mistakes with debt that we did before.
As I noted recently, total consumer credit in the U.S. has risen by 22 percent over the past three years alone, and at this point 56 percent of all Americans have a subprime credit rating.
And have you noticed that a lot of people are not afraid to extend themselves in order to buy shiny new vehicles these days?
During the first quarter 0f this year, the size of the average vehicle loan soared to a new all-time record high of $27,612.
Five years ago, that number was just $24,174.
And as I noted in one recent article, the size of the average monthly car payment in this country is now up to $474.
That is practically a mortgage payment.
Speaking of mortgage payments, even though home sales have been falling and the rate of homeownership in the United States is the lowest that it has been in 19 years, a very large percentage of those who own homes are still overextended.
In fact, one recent survey discovered that a whopping 52 percent of Americans cannot even afford the house that they are living in right now.
At the same time, an increasing number of Americans are acting as if the last financial crisis never happened and are treating their homes like piggy banks. Home equity loans are soaring again, and when the next great crisis strikes a lot of those people are going to end up getting into a lot of financial trouble.
There has been much written about what is wrong with the housing industry, but the truth is that home prices are still way too high and young adults cannot afford to purchase homes because they are already loaded down by huge amounts of debt even before they get to the point where they are ready to buy.
In fact, a newly released survey found that 47 percent of millennials are spending at least half of their paychecks on paying off debt…
Four in 10 millennials say they are “overwhelmed” by their debt — nearly double the number of baby boomers who feel that way, according to a Wells Fargo survey of more than 1,600 millennials between 22 and 33 years old, and 1,500 baby boomers between 49 and 59 years old.
To try to get out from underneath it, 47% said they spend at least half of their monthly paychecks on paying off their debts.
When I read that I was absolutely astounded.
Of course the biggest debt that many young adults are facing is student loan debt. According to the Federal Reserve, there is now more than 1.2 trillion dollars of student loan debt in this country, and about 124 billion dollars of that total is more than 90 days delinquent.
What we have done to our young people is shameful. We have encouraged them to sign up for a lifetime of debt slavery before they even understand what life is all about. The following is an excerpt from my previous article entitled “Is College A Waste Of Time And Money?“…
In America today, approximately two-thirds of all college students graduate with student loan debt, and the average debt level has been steadily rising. In fact, one study found that “70 percent of the class of 2013 is graduating with college-related debt – averaging $35,200 – including federal, state and private loans, as well as debt owed to family and accumulated through credit cards.”
That would be bad enough if most of these students were getting decent jobs that enabled them to service that debt.
But unfortunately, that is often not the case. It has been estimated that about half of all recent college graduates are working jobs that do not even require a college degree.
Considering what you just read, is it a surprise that half of all college graduates in America are still financially dependent on their parents when they are two years out of college?
According to the U.S. Census Bureau, only 36 percent of all Americans under the age of 35 own a home at this point. That is the lowest level that has ever been recorded.
And we are passing on to our young people the largest single debt in all of human history. Weighing in at 17.5 trillion dollars, the U.S. national debt is a colossal behemoth. And almost all of that debt has been accumulated over the past 40 years. In fact, 40 years ago the U.S. national debt was less than half a trillion dollars.
But this is just the beginning. As the Baby Boomer “demographic tsunami” washes through our economy, we are going to be facing a wave of red ink unlike anything we have ever contemplated before.
Meanwhile, the rest of the planet is drowning in debt as well.
As I wrote about the other day, the total amount of debt in the world has risen to a new all-time record high of $223,300,000,000,000.
Our “leaders” keep acting as if these debt levels can keep growing much faster than the overall level of economic growth indefinitely.
But anyone with even a shred of common sense knows that you can’t spend more money that you bring in forever.
At some point, a day of reckoning arrives.
2008 should have been a major wake up call that resulted in massive changes. But instead, our leaders just patched up the old system and reinflated the old bubbles so that they are now even larger than they were before.
They assure us that they know exactly what they are doing and that everything will be just fine.
Unfortunately, they are dead wrong.
The numbers that you are about to see are likely to shock you. They prove that the global financial Ponzi scheme is far more extensive than most people would ever dare to imagine. As you will see below, the total amount of debt in the world is now more than three times greater than global GDP. In other words, you could take every single good and service produced on the entire planet this year, next year and the year after that and it still would not be enough to pay off all the debt. But even that number pales in comparison to the exposure that big global banks have to derivatives contracts. It is hard to put into words how reckless they have been. At the low end of the estimates, the total exposure that global banks have to derivatives contracts is 710 trillion dollars. That is an amount of money that is almost unimaginable. And the reality of the matter is that there is really not all that much actual “money” in circulation today. In fact, as you will read about below, there is only a little bit more than a trillion dollars of U.S. currency that you can actually hold in your hands in existence. If we all went out and tried to close our bank accounts and investment portfolios all at once, that would create a major league crisis. The truth is that our financial system is little more than a giant pyramid scheme that is based on debt and paper promises. It is literally a miracle that it has survived for so long without collapsing already.
When Americans think about the financial crisis that we are facing, the largest number that they usually can think of is the size of the U.S. national debt. And at over 17 trillion dollars, it truly is massive. But it is actually the 2nd-smallest number on the list below. The following are 12 numbers about the global financial Ponzi scheme that should be burned into your brain…
–$1,280,000,000,000 – Most people are really surprised when they hear this number. Right now, there is only 1.28 trillion dollars worth of U.S. currency floating around out there.
–$17,555,165,805,212.27 – This is the size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
–$32,000,000,000,000 – This is the total amount of money that the global elite have stashed in offshore banks (that we know about).
–$48,611,684,000,000 – This is the total exposure that Goldman Sachs has to derivatives contracts.
–$59,398,590,000,000 – This is the total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system. 40 years ago, this number was just a little bit above 2 trillion dollars.
–$70,088,625,000,000 – This is the total exposure that JPMorgan Chase has to derivatives contracts.
–$71,830,000,000,000 – This is the approximate size of the GDP of the entire world.
–$75,000,000,000,000 – This is approximately the total exposure that German banking giant Deutsche Bank has to derivatives contracts.
–$100,000,000,000,000 – This is the total amount of government debt in the entire world. This amount has grown by $30 trillion just since mid-2007.
–$223,300,000,000,000 – This is the approximate size of the total amount of debt in the entire world.
–$236,637,271,000,000 – According to the U.S. government, this is the total exposure that the top 25 banks in the United States have to derivatives contracts. But those banks only have total assets of about 9.4 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 25 to 1.
–$710,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives contracts generally fall within this range. At the high end of the range, the ratio of derivatives exposure to global GDP is about 21 to 1.
Most people tend to assume that the “authorities” have fixed whatever caused the financial world to almost end back in 2008, but that is not the case at all.
In fact, the total amount of government debt around the globe has grown by about 40 percent since then, and the “too big to fail banks” have collectively gotten 37 percent larger since then.
Our “authorities” didn’t fix anything. All they did was reinflate the bubble and kick the can down the road for a little while.
I don’t know how anyone can take an honest look at the numbers and not come to the conclusion that this is completely and totally unsustainable.
How much debt can the global financial system take before it utterly collapses?
How recklessly can the big banks behave before the house of cards that they have constructed implodes underneath them?
For the moment, everything seems fine. Stock markets around the world have been setting record highs and credit is flowing like wine.
But at some point a day of reckoning is coming, and when it arrives it is going to be the most painful financial crisis the world has ever seen.
If you plan on getting ready before it strikes, now is the time to do so.
Today, more than 10,000 Baby Boomers will retire. This is going to happen day after day, month after month, year after year until 2030. It is the greatest demographic tsunami in the history of the United States, and we are woefully unprepared for it. We have made financial promises to the Baby Boomers worth tens of trillions of dollars that we simply are not going to be able to keep. Even if we didn’t have all of the other massive economic problems that we are currently dealing with, this retirement crisis would be enough to destroy our economy all by itself. During the first half of this century, the number of senior citizens in the United States is being projected to more than double. As a nation, we are already drowning in debt. So where in the world are we going to get the money to take care of all of these elderly people?
The Baby Boomer generation is so massive that it has fundamentally changed America with each stage that it has gone through. When the Baby Boomers were young, sales of diapers and toys absolutely skyrocketed. When they became young adults, they pioneered social changes that permanently altered our society. Much of the time, these changes were for the worse.
According to the New York Post, overall household spending peaks when we reach the age of 46. And guess what year the peak of the Baby Boom generation reached that age?…
People tend, for instance, to buy houses at about the same age — age 31 or so. Around age 53 is when people tend to buy their luxury cars — after the kids have finished college, before old age sets in. Demographics can even tell us when your household spending on potato chips is likely to peak — when the head of it is about 42.
Ultimately the size of the US economy is simply the total of what we’re all spending. Overall household spending hits a high when we’re about 46. So the peak of the Baby Boom (1961) plus 46 suggests that a high point in the US economy should be about 2007, with a long, slow decline to follow for years to come.
And according to that same article, the Congressional Budget Office is also projecting that an aging population will lead to diminished economic growth in the years ahead…
Lost in the discussion of this week’s Congressional Budget Office report (which said 2.5 million fewer Americans would be working because of Obamacare) was its prediction that aging will be a major drag on growth: “Beyond 2017,” said the report, “CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades [due in large part to] slower growth in the labor force because of the aging of the population.”
So we have a problem. Our population is rapidly aging, and an immense amount of economic resources is going to be required to care for them all.
Unfortunately, this is happening at a time when our economy is steadily declining.
The following are some of the hard numbers about the demographic tsunami which is now beginning to overtake us…
1. Right now, there are somewhere around 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
2. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
3. One poll discovered that 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.
4. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000″.
5. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.
6. A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.
7. Back in 1991, half of all American workers planned to retire before they reached the age of 65. Today, that number has declined to 23 percent.
8. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.
9. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
10. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States. Back in 2001, they only accounted for 12 percent of all bankruptcies.
11. Today, only 10 percent of private companies in the U.S. provide guaranteed lifelong pensions for their employees.
12. According to Northwestern University Professor John Rauh, the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.
13. Right now, the American people spend approximately 2.8 trillion dollars on health care, and it is being projected that due to our aging population health care spending will rise to an astounding 4.5 trillion dollars in 2019.
14. Incredibly, the United States spends more on health care than China, Japan, Germany, France, the U.K., Italy, Canada, Brazil, Spain and Australia combined.
15. If the U.S. health care system was a country, it would be the 6th largest economy on the entire planet.
16. When Medicare was first established, we were told that it would cost about $12 billion a year by the time 1990 rolled around. Instead, the federal government ended up spending $110 billion on the program in 1990, and the federal government spent approximately $600 billion on the program in 2013.
17. It is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
18. At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for every single household in the United States.
19. In 1945, there were 42 workers for every retiree receiving Social Security benefits. Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
20. Right now, there are approximately 63 million Americans collecting Social Security benefits. By 2035, that number is projected to soar to an astounding 91 million.
21. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
22. The U.S. government is facing a total of 222 trillion dollars in unfunded liabilities during the years ahead. Social Security and Medicare make up the bulk of that.
So where are we going to get the money?
That is a very good question.
The generations following the Baby Boomers are going to have to try to figure out a way to navigate this crisis. The bright future that they were supposed to have has been destroyed by our foolishness and our reckless accumulation of debt.
But do they actually deserve a “bright future”? Perhaps they deserve to spend their years slaving away to support previous generations during their golden years. Young people today tend to be extremely greedy, self-centered and lacking in compassion. They start blogs with titles such as “Selfies With Homeless People“. Here is one example from that blog…
Of course not all young people are like that. Some are shining examples of what young Americans should be.
Unfortunately, those that are on the right path are a relatively small minority.
In the end, it is our choices that define us, and ultimately America may get exactly what it deserves.
The Federal Reserve is creating hundreds of billions of dollars out of thin air and using that money to buy U.S. government debt and mortgage-backed securities and take them out of circulation. Since the middle of 2008, these purchases have caused the Fed’s balance sheet to balloon from under a trillion dollars to nearly four trillion dollars. This represents the greatest central bank intervention in the history of the planet, and Janet Yellen says that she does not anticipate that it will end any time soon because “the recovery is still fragile”. Of course, as I showed the other day, the truth is that quantitative easing has done essentially nothing for the average person on the street. But what QE has done is that it has sent stocks soaring to record highs. Unfortunately, this stock market bubble is completely and totally divorced from economic reality, and when the easy money is taken away the bubble will collapse. Just look at what happened a few months ago when Ben Bernanke suggested that the Fed may begin to “taper” the amount of quantitative easing that it was doing. The mere suggestion that the flow of easy money would start to slow down a little bit was enough to send the market into deep convulsions. This is why the Federal Reserve cannot stop monetizing debt. The moment the Fed stops, it could throw our financial markets into a crisis even worse than what we saw back in 2008.
The problems that plagued our financial system back in 2008 have never been fixed. They have just been papered over temporarily by trillions of easy dollars from the Federal Reserve. All of this easy money is keeping stocks artificially high and interest rates artificially low.
Right now, the Federal Reserve is buying approximately 85 billion dollars worth of U.S. government debt and mortgage-backed securities each month. We are told that the portion going to buy U.S. government debt each month is approximately 45 billion dollars, but who knows what the Fed is actually doing behind the scenes. In any event, by creating money out of thin air and using it to remove U.S. Treasury securities out of circulation, the Federal Reserve is essentially monetizing U.S. government debt at a staggering rate.
But Federal Reserve officials continue to repeatedly deny that what they are doing is monetizing debt. For instance, Federal Reserve Bank of Atlanta President Dennis Lockhart strongly denied this back in April: “I object to the view that the Fed is monetizing the debt”.
How in the world can Fed officials possibly deny that they are monetizing the debt?
Well, because the Fed is promising that it is going to eventually sell back all of the securities that it is currently buying.
Since the Fed does not plan to keep all of this government debt on its balance sheet indefinitely, that means that they are not actually monetizing it according to their twisted logic.
Try not to laugh.
And of course that will never, ever happen. There is no possible way that the Fed will ever be able to stop recklessly creating money and then turn around and sell off 3 trillion dollars worth of government debt and mortgage-backed securities that it has accumulated since 2008. Just look at the chart posted below. Does this look like something that the Federal Reserve will ever be able to “unwind”?…
Remember, just the suggestion that the Fed would begin to slow down the pace of this buying spree a little bit was enough to send the financial markets into panic mode a few months ago.
If the Fed does decide to permanently stop quantitative easing at some point, stocks will drop dramatically and interest rates will skyrocket because there will be a lot less demand for U.S. Treasuries. In fact, interest rates have already risen substantially over the past few months even though quantitative easing is still running.
Right now, the Fed is supplying a tremendous amount of the demand for U.S. debt securities in the marketplace. According to Zero Hedge, Drew Brick of RBS recently made the following statement about the staggering amount of government debt that is currently being monetized by the Fed…
“On a rolling six-month average, in fact, the Fed is now responsible for monetizing a record 70% of all net supply measured in 10y equivalents. This represents a reliance on the Fed that is greater than ever before in history!“
Overall, the Federal Reserve now holds 32.47 percent of all 10 year equivalents, and that percentage is rising by about 0.3 percent each week.
If the Federal Reserve does not keep doing this, the financial markets are going to crash because they are being propped up artificially by all of this funny money.
But if the Federal Reserve keeps doing this, it is going to become increasingly obvious to the rest of the world that the Fed is simply monetizing debt and is starting to behave like the Weimar Republic.
The remainder of the planet is watching what the Federal Reserve is doing very carefully, and they are starting to ask themselves some very hard questions.
Why should they continue to use our dollars to trade with one another when the Fed is wildly creating money out of thin air and rapidly devaluing the existing dollars that they are holding?
And why should they continue to lend us trillions of dollars at ultra-low interest rates that are way below the real rate of inflation when the U.S. government is already drowning in debt and the money that will be used to pay those debts back will be steadily losing value with each passing day?
The Federal Reserve is in very dangerous territory. If the Fed wants the current system to continue, it is going to have to stop this reckless money printing at some point or else the rest of the world will eventually decide to stop participating in it.
If the Fed wants to go ahead and make quantitative easing a permanent part of our system, then eventually it will need to go all the way and start monetizing all of our debt.
Right now, the Fed is stuck in the middle of a “no man’s land” where it is monetizing a significant amount of U.S. government debt but it is trying to sell everyone else on the idea that it is not really monetizing debt. This is a state of affairs that cannot go on indefinitely.
At some point, the Fed is going to have to make a decision. And for now the Fed seems to be married to the idea that eventually things will get back to “normal” and they will stop monetizing debt.
Even Janet Yellen is admitting that quantitative easing “cannot continue forever”.
However, she also said on Thursday that it is important not to end quantitative easing too rapidly, “especially when the recovery is still fragile“.
Well, at this point quantitative easing has been going on in one form or another for about five years now.
Will it ever end?
And when it does, how bad will the financial crash be?
Meanwhile, with each passing day the faith that the rest of the world has in our dollar and in our financial system continues to erode.
If the Fed continues to behave this recklessly, it is inevitable that the rest of the globe will begin to move even more rapidly away from the U.S. dollar and will become much more hesitant to lend us money.
Ultimately, the Federal Reserve is faced with only bad choices. The status quo is not sustainable, ending quantitative easing will cause the financial markets to crash, and going “all the way” with quantitative easing will just turn us into the Weimar Republic.
But anyone with half a brain should have been able to see that this debt-based financial system that the Federal Reserve is at the heart of was going to end tragically anyway. The 100 year anniversary of the Federal Reserve is coming up, and the truth is that it should have been abolished long ago.
The consequences of decades of very foolish decisions are catching up with us, and this is all going to end very, very badly.
I hope that you are getting ready.
The number one American export is U.S. dollars. It is paper currency that is backed up by absolutely nothing, but the rest of the world has been using it to trade with one another and so there is tremendous global demand for our dollars. The linchpin of this system is the petrodollar. For decades, if you have wanted to buy oil virtually anywhere in the world you have had to do so with U.S. dollars. But if one of the biggest oil exporters on the planet, such as Saudi Arabia, decided to start accepting other currencies as payment for oil, the petrodollar monopoly would disintegrate very rapidly. For years, everyone assumed that nothing like that would happen any time soon, but now Saudi officials are warning of a “major shift” in relations with the United States. In fact, the Saudis are so upset at the Obama administration that “all options” are reportedly “on the table”. If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.
The biggest reason why having good relations with Saudi Arabia is so important to the United States is because the petrodollar monopoly will not work without them. For decades, Washington D.C. has gone to extraordinary lengths to keep the Saudis happy. But now the Saudis are becoming increasingly frustrated that the U.S. military is not being used to fight their wars for them. The following is from a recent Daily Mail report…
Upset at President Barack Obama’s policies on Iran and Syria, members of Saudi Arabia’s ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.
Saudi Arabia’s intelligence chief is vowing that the kingdom will make a ‘major shift’ in relations with the United States to protest perceived American inaction over Syria’s civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.
Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.
Saudi Arabia desperately wants the U.S. military to intervene in the Syrian civil war on the side of the “rebels”. This has not happened yet, and the Saudis are very upset about that.
Of course the Saudis could always go and fight their own war, but that is not the way that the Saudis do things.
So since the Saudis are not getting their way, they are threatening to punish the U.S. for their inaction. According to Reuters, the Saudis are saying that “all options are on the table now”…
Saudi Arabia, the world’s biggest oil exporter, ploughs much of its earnings back into U.S. assets. Most of the Saudi central bank’s net foreign assets of $690 billion are thought to be denominated in dollars, much of them in U.S. Treasury bonds.
“All options are on the table now, and for sure there will be some impact,” the Saudi source said.
Sadly, most Americans have absolutely no idea how important all of this is. If the Saudis break the petrodollar monopoly, it would severely damage the U.S. economy. For those that do not fully understand the importance of the petrodollar, the following is a good summary of how the petrodollar works from an article by Christopher Doran…
In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.
This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.
This arrangement works out very well for the United States because we can wildly print money and run up gigantic amounts of debt and the rest of the world gobbles it all up.
In 2012, the United States ran a trade deficit of about $540,000,000,000 with the rest of the planet. In other words, about half a trillion more dollars left the country than came into the country. These dollars represent the number one “product” that the U.S. exports. We make dollars and exchange them for the things that we need. Major exporting countries (such as Saudi Arabia) take many of those dollars and “invest” them in our debt at ultra-low interest rates. It is this system that makes our massively inflated standard of living possible.
When this system ends, the era of cheap imports and super low interest rates will be over and the “adjustment” to our standard of living will be excruciatingly painful.
And without a doubt, the day is rapidly approaching when the petrodollar monopoly will end.
Today, Russia is the number one exporter of oil in the world.
China is now the number one importer of oil in the world, and at this point they are actually importing more oil from Saudi Arabia than the United States is.
So why should Russia, China and virtually everyone else continue to be forced to use U.S. dollars to trade oil?
That is a very good question.
In fact, China has been making a whole lot of noise recently about the fact that it is time to start becoming less dependent on the U.S. dollar. The following comes from a recent CNBC article authored by Michael Pento…
Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a “de-Americanized” world.
China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary through the state-run Xinhua news agency stating that, “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.”
For much more on all of this, please see my previous article entitled “9 Signs That China Is Making A Move Against The U.S. Dollar“.
But you very rarely hear anything about this on the evening news, and most Americans do not understand these things at all. The fact that the U.S. produces the de facto reserve currency of the planet is an absolutely massive advantage for us. According to John Mauldin, this advantage allows us to consume far more wealth than we actually produce…
What that means in practical terms is that the United States can purchase more with its currency than it produces and sells. In theory those accounts should balance. But the world’s reserve currency, for all intent and purposes, becomes a product. The world needs dollars in order to conduct its trade. Today, if someone in Peru wants to buy something from Thailand, they first convert their local currency into US dollars and then purchase the product with those dollars. Those dollars eventually wind up at the Central Bank of Thailand, which includes them in its reserve balance. When someone in Thailand wants to purchase an imported product, their bank accesses those dollars, which may go anywhere in the world that will take the US dollar, which is to say pretty much anywhere.
And as Mauldin went on to explain in that same article, a significant amount of the money that we ship out to the rest of the globe ends up getting reinvested in U.S. government debt…
That privilege allows US citizens to purchase goods and services at prices somewhat lower than those people in the rest of the world must pay. We can produce electronic fiat dollars, and the rest of the world accepts them because they need them to in order to trade with each other. And they do so because they trust the dollar more than they do any other currency that is readily available. You can take those dollars and come to the United States and purchase all manner of goods, including real estate and stocks. Just this week a Chinese company spent $600 million to buy a building in New York City. Such transactions happen all the time.
And there is one other item those dollars are used to pay for: US Treasury bonds. We buy oil and all manner of goods with our electronic dollars, and those dollars typically end up on the reserve balance sheets of other central banks, which buy our government bonds. It’s hard to quantify the exact amount, but these transactions significantly lower the cost of borrowing for the US government. On a $16 trillion debt, every basis point (1/10 of 1%) means a saving of $16 billion annually. So 5 basis points would be $80 billion a year. There are credible estimates that the savings are well in excess of $100 billion a year. Thus, as the debt grows, the savings also grow! That also means the total debt compounds at a lower rate.
Unfortunately, this system only works if the rest of the planet has faith in it, and right now the United States is systematically destroying the faith that the rest of the world has in our financial system.
One way that this is being done is by our reckless accumulation of debt. The U.S. national debt is now 37 times larger than it was 40 years ago, and we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in U.S. history combined. The rest of the world is watching this and they are beginning to wonder if we are going to be able to pay them back the money that we owe them.
Quantitative easing is another factor that is severely damaging worldwide faith in the U.S. financial system. The rest of the globe is watching as the Federal Reserve wildly prints up money and monetizes our debt. They are beginning to wonder why they should continue to loan us gobs of money at super low interest rates when we are beginning to resemble the Weimar Republic.
The long-term damage that we are doing to the “U.S. brand” far, far outweighs any short-term benefits of quantitative easing.
And as Richard Koo has brilliantly demonstrated, quantitative easing is going to cause long-term interest rates to eventually rise much higher than they normally should have.
What all of this means is that the U.S. government and the Federal Reserve are systematically destroying the financial system that has enabled us to enjoy such a high standard of living for the past several decades.
Yes, the U.S. economy is not doing well at the moment, but we haven’t seen anything yet. When the monopoly of the petrodollar is broken, it is going to be absolutely devastating.
And as I wrote about the other day, when the next great economic crisis strikes it is going to pull back the curtain and reveal the rot and decay that have been eating away at the social fabric of America for a very long time.
Just check out what happened in Detroit recently. The new police chief was almost carjacked while he was sitting in a clearly marked police vehicle…
Just four months on the job, Detroit’s new police chief got an early taste of the city’s hardscrabble streets.
While in his patrol car at an intersection on Jefferson two weeks ago, Police Chief James Craig was nearly carjacked, police spokeswoman Kelly Miner confirmed today.
Craig said he was in a marked police car with mounted lights when a man quickly tried to approach the side of his car. Craig, who became police chief in June, retold the story Monday during a program designed to crack down on carjackings.
Isn’t that crazy?
These days, the criminals are not even afraid to go after the police while they are sitting in their own vehicles.
And this is just the beginning. Things are going to get much, much worse than this.
So let us hope that this period of relative stability that we are enjoying right now will last for as long as possible.
The times ahead are going to be extremely challenging, and I hope that you are getting ready for them.