Thursday, August 6, 2015

America's Growing Financial Dilemma ... We the People Must Begin Talking About the Very Things That Our Politicians Won't Discuss

Our financial situation is really bad.

Individually and collectively, we need a wake up call.

And since we're not likely to hear much, if anything, about all this from the otherwise always open mouths of our political class, let's just tell it like it is among ourselves.

Seven problems that deserve investors' attention tells it like it is, and it's not a pretty sight to see. In fact it's downright ugly.

With that in mind, please consider the following seven ills that absolutely need to be addressed, and the sooner the better:

1 - "The national debt. It's well over $18 trillion, and that's only the current value and growing exponentially. The Congressional Budget Office has calculated the present value of our unfunded obligations — such as commitments to Social Security, Medicare, Medicaid, SNAP, CHIP, government pensions, etc. — total somewhere between $47 trillion and $205 trillion. These are patiently waiting their turn to show up in the national debt.
2 - State debts. States, like the Federal Government, have built in their own laws and commitments for the future which they cannot fund. Never mind that this will be a problem for future elected officials. State and local commitments for pensions are way out of line. . . . States, unlike the federal government can't print money to make the payments.

3 - Funding the interest on debt. The Feds are printing money in order to be able to pay the interest on the national debt and other increases in government spending. There is no Federal Reserve if China or Russia would elect not to roll over their U.S. bonds into more U.S. bonds when they mature....

4 - Personal debt. The average household has over $15,000 in credit card debt and a $150,000 mortgage. Graduating college kids have accumulated over $1 trillion student debts, and even bankruptcy won't erase these. . . . Over a quarter of 401(k)s have loans against them. And the government is encouraging . . . people to spend more, not save. . . .

5 - The national savings rate. Less than half of those working for employers with a 401(k) contribute to the plans — even though they offer free matching funds. We've come from saving 25% of disposable income (gross income less federal income tax) in World War II when taxes already took a big bite down to a more or less steady rate of 9% to 10% for decades until industry started to abandon pensions for its employees. Then . . . by 2005, personal savings virtually disappeared and have now grown to the grand sum of 5% — when personal savings should be about 10% for those who will get pensions or 15% for those without then. . . .

6 - We're not able to support our aged. The birthrate to support a steady population is 2.1 babies per woman. We've been below that now for decades with the result that we're well on our way to have 25% of the population over 60 — and they will vote for continued and increased welfare at the expense of the ever-diminishing supply of workers whose income taxes and FICA support much of this. When Social Security started, there were over 30 workers per Social Security recipient. Now it's down to about three workers. Demographers say we'll soon be down to two workers per beneficiary, the majority of which are living longer, requiring additional Social Security, Medicare, Medicaid, SNAP, etc. Already 52% of those over 55 have no savings. And sometime between 2020 and 2025, there will be more retired people than those working. . . .

7 - So someone get busy writing "Things that should matter." And maybe we'll find some politicians that will think about the future beyond the next election cycle. If we don't, we are going to have most elderly in poverty and the remaining working people paying much higher taxes."

Summing Up 

Facts are facts.

The truth is the truth.

All problems created by We the People are capable of being solved by We the People.

But they won't solve themselves, and politicians won't even address them seriously without a 'nudge' by us commoners.

Political insanity reigns supreme over America's current fiscal debacle, and this must change. 

That's my take.

Thanks. Bob.

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