Monday, July 30, 2018

News Note: CNBC - Here's Why Social Security is Falling Behind

CNBC runs this article which describes what is happening to seniors trying to make ends meet mostly on their Social Security benefit. This is already a growing problem and will no doubt only get worse in coming years since the US is projecting massive deficits with no end in sight. Below are a couple of excerpts from the article and then a few added comments. I added the underlines below for emphasis.


"If you've been thinking that your Social Security check doesn't go as far as it used to, you're likely not imagining it.

Since 2000, the buying power of monthly benefits has fallen by 34 percent, according to a recent report from the Senior Citizens League, an advocacy group based in Alexandria, Virginia.

In other words, the collective cost of goods and services common among retirees has risen faster than the cost-of-living adjustment, or COLA, that Social Security recipients get every year.

"People who recently retired might have seen only a [small] decrease in buying power," said Mary Johnson, a policy analyst for the league. "But those retired for a long time are feeling the cumulative effect of this."

. . . . .

"It's not a pretty picture," Johnson said. "It's difficult when costs are increasing so much more quickly than COLAs."

My added comments: While this problem grows slowly over time, there will come a point in time when it reaches a point of critical mass. This is because the median age of the US population continues to climb as the baby boom generation moves more and more into the Social Security system. Attempting to do anything about Social Security until it reaches a crisis point is viewed as political suicide so it is unlikely anything will be done until it has to be done.

Meanwhile, more and more of the US population will find it harder and harder to make ends meet. In the past normalized interest rates made it possible for those in retirement to better supplement Social Security with interest earnings on savings. But the monetary policies of the central banks led by the US Fed after the 2008 financial crisis kept interest rates pushed way too low to help out those who needed it most.

Now, we have a system that is somewhat dependent on very low interest rates to remain stable. Debt levels built up by just about everyone (governments, individuals, companies, etc) when rates were artificially suppressed by monetary policy are so high now that a return to normalized interest rates could certainly be viewed as a very real systemic risk. It seems that after decades of pushing forward these problems instead of actually solving them, both central banks and politicians are finding themselves painted into a smaller and smaller corner as time goes by. The public knows this, but prefers to put it out of mind so long as the crisis has not yet arrived.

The question is how much longer can they stave off the problem before it reaches a true crisis point. The answer has huge implications both politically and and for what we watch for here. If a major crisis does arise, the conditions for major change will arise with it. Whoever is in political power at that time will very likely lose power (politicians in both major political parties know this). It could happen sometime during the Trump Administration or once again be pushed forward beyond that time frame. It will be a problem that built up over decades with virtually everyone sharing some responsiblity for it. But political reality dictates that whoever is in office at the time usually pays the price. And we can expect a lot of finger pointing at the US Fed as well from all sides of the political spectrum.

If and when a crisis does happen, a disgruntled public will likely demand someone "fix" the problem. At that time many people will want to become more informed about what ideas exist to fix things. That is why we documented a variety of proposals for monetary system change from a range of experts here on this page of the blog. As far as I know, nothing like this exists elsewhere on the internet all on one web page. It is available here and free to anyone interested in using it. We will update that page ongoing as we find any new proposals we have not yet covered to add to the list that we think could be viewed as credible by the general public.
Added note: Tomorrow (8-1-18) we take a look at four different ventures around the globe that are working to get people to use gold like money. We have featured two of them already. This article includes a recap of those two plus a look at two others.Later in August we will look at the issue of Russia and China's efforts to bypass the US dollar and we hope to have an interview with KlickEx Founder Robert Bell regarding his thoughts on the future of the global monetary system.

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