[HangnJudge]

More than a decade ago I wrote a paper called "Investable Capital" which, unfortunately, I no longer have available for republication. What's worse is that some of the data set has been lost - at least I think it has. I expected that the negative FICA draw would begin in 2015, and that this would make a major shift in all market valuations. We're five yeas ahead of that time, largely due to the bubble-blowing. The original paper saw the Internet Bubble (because it was nascent at the time) but did not predict what Bush and Greedspan would do to try to arrest the effect of it popping.

We talk about ratings agencies downgrading the US Debt - they should have done it a decade ago. Why? Because we continually call the debt-to-GDP ratio as $12.57 trillion to ~$14 trillion "right", or 89.8%, while ignoring the claimed amounts of the Social Security and Medicare promises. But unless you're going to tell Granny that she's not going to get her check (or her health care), along with the 80 million boomers (all of who will instantly vote out anyone who tries to tamper with those programs, whether the money exists or not!) those "promises" are real.

So what's the real debt-to-GDP ratio of the federal government? About 500%, if one assumes the forward liabilities are on the low end of CBO and private estimates, or $60 trillion. This makes the total "debt" $72 trillion dollars and the ratio 514%!

No nation has ever managed to pull that off past the point of recognition of these costs. The reason is simple - interest costs. Compute the damage that, say, 5% interest imposes on $72 trillion and you blanch immediately (that's $3.6 trillion by the way, or more than our entire federal budget!) We get away with not paying that by sleight-of-hand, effectively playing "Option ARM" and adding to the principal. But all Option ARMs have a recast point. We're just not sure where this one is.

Once the "recognition point" happens the decline in all asset classes becomes both relentless and instantaneous. The power of self-delusion is powerful, but it cannot overcome the math - not in the long term.

[fhayek]

yikes

[Zeddicus]

Ok. So yeah, this is going to end well.

[evad]

"the retirement program is projected to pay out more in benefits than it collects in taxes -"

Wow..that's early. Originally that date was projected into 2014 or 2015.

Bush's Fault!!!

[caver]

I’m retiring early. I’m tired of supporting all the low life leeches in this country.

[Caipirabob]

Bottom line, you're getting deathcare and you'll like it...

[zeugma]

Been watching this for quite some time myself. Yup. It’s gonna get messy. Unfortunately, those responsible in politics and the press who continue to cover for this ponzi scheme probably won’t get what they truly deserve.

[ravingnutter]

Heck, that is a miniscule problem compared to what is coming:

Class Warfare's Next Target: 401(k) Savings

The Treasury Is Soliciting Your Feedback Regarding The Proposed Annuitization Of 401(k)

I don't think lynch mobs use Judges ; )

[Ruy Dias de Bivar]

But the Government promised us the SS would NEVER go broke! Here is a statement from 1964!

http://www.ssa.gov/history/ssa/usa1964-2.html

Self-Supporting

The program is designed so that contributions plus interest on the investments of the social security trust funds will be sufficient to meet all of the costs of benefits and administration, now and into the indefinite future—without any subsidy from the general funds of the Government. Both the Congress and the Executive Branch, regardless of political party in power, have scrupulously provided in advance for full financing of all liberalizations in the program.

***
And where the money you pay in goes...

http://www.socialsecurity.gov/OACT/ProgData/fundFAQ.html#n4

And an old song to go with it...

THE OLD AGE PENSION CHECK
Roy Acuff & His Smoky Mountain Boys - 1939

When our old age pension check comes to our door,
We won’t have to dread the poor house anymore.
Though we’re old and thin and gray,
Good times will be back to stay,
When our old age pension check comes to our door.
When her old age pension check comes to her door,
Dear old grandma won’t be lonesome any more.
She’ll be waiting at the gate,
Every night she’ll have a date,
When her old age pension check comes to her door.

Grow a flowing long white beard and use a cane,
‘Cause you’re in your second childhood, don’t complain.
Life will just begin at sixty,
We’ll all feel very frisky,
When our old age pension check comes to our door.

Powder and paint will be abolished on that day,
And hoop skirts will then be brought back into play.
Painted cheeks will be the rage,
And old maids will tell their age,
When their old age pension check comes to their door.

All the drug stores will go bankrupt on that day,
For cosmetics, they will all be put away.
I’ll put a flapper on the shelf,
Get a grandma for myself,
When her old age pension check comes to her door.

There’s a man that turned this country upside-down
With his old age pension rumor going ‘round.
If you want in on the fun,
Send your dime to Washington,
And that old age pension man will be around.