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The $100 Trillion Problem: Can America Learn From Chile Before It's Too Late?

Tyler Durden's picture





 

Jose Pinera provides an Entitlement State 101 lecture, in which Chile's former Labor and Social Security Minister demystifies the U.S.'s $100 trillion unfunded benefits problem. Since Pinera is the man who many years ago privatized Chile's entitlement system, America, and the entire Western system, which for the past century has been relying on unfunded liabilities to provide benefits to the population in the hopes that funding day will never come, may do well to listen to what he has to say. His message: the American way of life, more so than anything else, in which reckless spending, living on credit and not saving for the future, is precisely why the US will be bankrupt very soon. Chile swallowed the bitter pill 30 years ago and after a lot of pain, managed to get out of the hole. Will enabler state #1, America, fail where this allegedly "backward" South American country succeeded? 

Some insight from Pinera:

"$100 trillion is the present value of what Americans will have one way or another to pay, unless they default on their obligation to their citizens. And that is the future, and I am extremely worried because you are like passengers in the Titanic. You see the Titanic is going toward the iceberg of aging populations but populations the feel entitled to all these huge benefits that the politicans have promised the people, but they have not funded the benefits for the future. So how are you going to pay them? That is the big issue, the big domestic problem facing America."

And this:

The problem is the entitlement state. The problem is that there is a gigantic disconnect between what the people want the government to pay them in the future, in health, pension, and what the people want to pay in tax. And because the entitlement state is based on promises for the future, you don't have to pay it today, this is growing, because to win elections politicians offer benefits to people that would be paid to people in the future. So this big hole is not only a problem in America, it's exactly the same problem in Greece today, in Southern Europen, in France, in Germany. The west will go bankrupt unless you reform deeply the entitlement state. You are all prisoners of the Bismark unfunded entitlement system...With the aging of population, the extended life, you have been accumulating these huge liabilities that eventually will bankrupt the government. A huge fiscal crisis is coming to the west unless you face it and confront it directly...You either will have to raise taxes big time in America, or you will have to cut benefits. But it is extremely difficult to do that, in a system in which you have people entitled to all this things.

America's failed fiscal policy, its corrupt government, its kleptocratic financiers, its unsustainable deficits have all become the butt of jokes of the former developing world. And here we stand, with the market trading up or down 1%, based on which rumor is leaked on any given day about Greece's upcoming €5 billion auction. In this context why even worry about $100 trillion. That amount, as Feynman would appreciate, is not even digestable in Bernanke (the 21st centuiry equivalent of economic, f/k/a scientific) numbers (just yet). Why indeed, when, as Pinera says, the problem is not contained in some building in downtown Washington, it's in all of us. And those are precisely the problems that, at least so far in America, have never gotten any resolution.

 

h/t Mark

 


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Tue, 02/23/2010 - 22:37 | Link to Comment Nihilarian
Nihilarian's picture

"You will either have to raise taxes in America big time, or you will have to cut benefits."

Raising taxes is no panacea. There's  the law of diminishing marginal returns, or in the case of the Laffer curve, those returns will eventually turn negative. Raise taxes all you want, the problem will only compound.

Edit: ECH, for all you savvy investors.

Tue, 02/23/2010 - 22:41 | Link to Comment MsCreant
MsCreant's picture

If I trusted them with the money, I might, in a parallel universe, be okay with taxes.

Not here, not now. Lobby lap dogs and whores, that's what we have. Sweep that mess outta our house. Get on now. Beat it!

Notice how so many of them are saying they are not going for another term?

Tue, 02/23/2010 - 22:44 | Link to Comment deadhead
deadhead's picture

Notice how so many of them are saying they are not going for another term?

I think this is a very significant factor that has not been discussed very much.

I think it's more than the matter of some pols being fed up themselves i.e. there may be likely the fear factor if the US sees an increase in violence, unrest, etcetera.

 


Tue, 02/23/2010 - 23:32 | Link to Comment Anonymous
Wed, 02/24/2010 - 13:12 | Link to Comment Sweetness
Sweetness's picture

As you say, fear may be a factor.

But how many of these "fed up" pols will become lobbyists, increase their incomes by a factor of 10 or more, and kick back and laugh?

 

Tue, 02/23/2010 - 23:01 | Link to Comment lizzy36
lizzy36's picture

Sweep "that mess out" and then what?  New whores take their place?

A fundamental reset is needed.  One that imagines a longer timeline than this quarter and the next election cycle.  One where people have the courage to demand the truth and our willingly to put in as much time educating themselves about the state of their country as they do about whether brad and angelina are still shtupping one another.

Entitlement without responsibility is the undercurrent of the whole U.S. political/economic system.  Moreover it is the undercurrent of the whole U.S population.

I fear that not until hunger hits, and rolling brown outs occur, will people actually understand exactly what they are entitled too. 

Tyler, to answer the question in the headline:no.

 

Tue, 02/23/2010 - 23:26 | Link to Comment MsCreant
MsCreant's picture

I agree that we are the problem. I think we need to give the constitution a go. We haven't done that yet. So change the system, no. Make lobbying illegal, hey now, there is a start. Meanwhile we will be doing this in a situation very much like the one you describe, I fear.

Wed, 02/24/2010 - 00:49 | Link to Comment Anonymous
Wed, 02/24/2010 - 03:11 | Link to Comment MsCreant
MsCreant's picture

+much! Good points.

Wed, 02/24/2010 - 03:38 | Link to Comment dbulkley
dbulkley's picture

Low turnover in elected office is just another symptom as well - California's term limits have gained them NOTHING.  The rise of corporate power is indeed at the root of the problem: they wield too much money to further their own ends, which is to benefit the shareholders.  They will do this at the expense of the citizenry, the democracy, and the public good.  Corporations DO NOT deserve 1st amendment rights.  Let shareholders vote with their money then, you say? I agree - only let individual shareholders participate in the political process.  If I own Dow Chemical, and I want the EPA to bury a report on carcinogens, let me send money to my senator directly.  The point is I wouldn't do that - because I have a conscience, and corporations do not.

We as a nation should correct this flaw through a constitutional convention.

Wed, 02/24/2010 - 07:51 | Link to Comment Abraham Snake
Abraham Snake's picture

I've long had a problem with legal entities like corporations having vast legal upsides similar to a physically living citizen but without important legal downsides such as being subject to imprisonment. For instance, the shareholders of Dow Chemical enjoy huge profits when costly pollution and safety controls are relaxed yet these shareholders are not physically liable for jail time. I don't think we would see another Bhopal disaster if the Dow Chemical shareholders at that time were required to spend as little as one day in jail. Risk to shareholder value is insufficient deterrent in preventing hideous wrongdoing. The current corporate incentive structure rewards wrongdoing. We need shareholder mandatory minimum prison sentences to return corporate entities back into the public good.

Wed, 02/24/2010 - 07:04 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:37 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:22 | Link to Comment Anonymous
Wed, 02/24/2010 - 12:46 | Link to Comment Anonymous
Wed, 02/24/2010 - 06:35 | Link to Comment Mark Beck
Mark Beck's picture

Yes, I have talked about the new "economy" Laffer effects many times on ZH. I feel there is a much more complex, yet measurable, Laffer effect in progress due to debt de-leveraging and unemployment. Basically, hyper sensitivity to tax increases, producing no significant increase in revenue.

Well you cannot fund all of these unfunded future liabilities, so at some point you will have to cut benefits, or just pass along the costs, which amounts to the same thing. If you cannot pay the premiums you are essentually off the Medicare program. For Social Security, they will just cut. But, will call it a program funding flow adjustment, or some other justifyable BS. But, essentually it will be a cut. No choice cut, cut, and cut.

I do not think there is a disconnect between what the people want to pay in tax and what the Government spends. Fiscal and monetary policy must be centralized in order to protect the currency and enact achievable long term goals. What we have now are the worst of both worlds, an out of control executive/legislative Fiscal disaster and a wall street banker controlled FED. The voice of the people is ignored and our trust violated. The arguments voiced are always, well it could be much worse. Utter unmeasurable nonsense. Especially when you are proposing to buy 1.25 Trillion in unbacked MBS securities.

Why would anyone buy long term US Treasury debt? When, in order to pay our commitments, we have no choice but to destory the last remnants of real USD worth. It would be better to hold, anything else. Gold, Silver, own a Farm or a dairy, anything that at least has a chance at maintaining real worth.

We can't go bankrupt as a sovereign nation with a fiat base. I feel that long before we reach a point of dealing effectively with the situation we will see a currency crisis. It will start with an inability to generate positive cash flow by selling debt, and the subsequent escallation of FED QE T buys. This will then produce a general flee from the dollar, probably in cyclic waves of some sort, augmented by increasing capital out flows from dollar denominated assets.

Mark Beck

Wed, 02/24/2010 - 06:36 | Link to Comment Mark Beck
Mark Beck's picture

Yes, I have talked about the new "economy" Laffer effects many times on ZH. I feel there is a much more complex, yet measurable, Laffer effect in progress due to debt de-leveraging and unemployment. Basically, hyper sensitivity to tax increases, producing no significant increase in revenue.

Well you cannot fund all of these unfunded future liabilities, so at some point you will have to cut benefits, or just pass along the costs, which amounts to the same thing. If you cannot pay the premiums you are essentually off the Medicare program. For Social Security, they will just cut. But, will call it a program funding flow adjustment, or some other justifyable BS. But, essentually it will be a cut. No choice cut, cut, and cut.

I do not think there is a disconnect between what the people want to pay in tax and what the Government spends. Fiscal and monetary policy must be centralized in order to protect the currency and enact achievable long term goals. What we have now are the worst of both worlds, an out of control executive/legislative Fiscal disaster and a wall street banker controlled FED. The voice of the people is ignored and our trust violated. The arguments voiced are always, well it could be much worse. Utter unmeasurable nonsense. Especially when you are proposing to buy 1.25 Trillion in unbacked MBS securities.

Why would anyone buy long term US Treasury debt? When, in order to pay our commitments, we have no choice but to destory the last remnants of real USD worth. It would be better to hold, anything else. Gold, Silver, own a Farm or a dairy, anything that at least has a chance at maintaining real worth.

We can't go bankrupt as a sovereign nation with a fiat base. I feel that long before we reach a point of dealing effectively with the situation we will see a currency crisis. It will start with an inability to generate positive cash flow by selling debt, and the subsequent escallation of FED QE T buys. This will then produce a general flee from the dollar, probably in cyclic waves of some sort, augmented by increasing capital out flows from dollar denominated assets.

Mark Beck

Wed, 02/24/2010 - 10:12 | Link to Comment Whizbang
Whizbang's picture

This is a joke, america is not going bankrupt. If you thought the collapse of lehman screwed things up, wait until the u.s. goes down. Half of the worlds money supply is based on us bonds that other countries hold as bank "reserves". Without those, the whole game ends. America will be granted an infinite number of chances to get it's house in order here. The alternative is unthinkable.

Tue, 02/23/2010 - 22:45 | Link to Comment IveBeenHad
IveBeenHad's picture

i dunno the main difference that he is ignoring is 30 yrs ago they were shut out of the credit markets effecting that change in policy. for america the faucet of credit may not be turned off for years if not decades to come.  

Wed, 02/24/2010 - 08:46 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

You have hit the head on the nail! With USD as the reserve currency our pols are able to spend recklessly on entitlements and defense without much fear of inflation (as long as foreigners continue to supply real assets in exchange for paper with green ink that they then lend to the US; the day foreigners demand real assets in exchange, the game is over) or fear of external credit default (can always print to pay debts).

As long as Saudi and the other energy/commodity providers and the transformers such as China play along with USD reserve status, we are OK.

 

Tue, 02/23/2010 - 22:47 | Link to Comment mrhonkytonk1948
mrhonkytonk1948's picture

To answer your headline question:  in a word, "no."

Tue, 02/23/2010 - 22:55 | Link to Comment Anonymous
Tue, 02/23/2010 - 22:49 | Link to Comment illyia
illyia's picture

Watch the exodus of patriotic Americans chanting: "I won't pay it!"

This is a recipe for the "R" word.

And, I do not mean recession.

Tue, 02/23/2010 - 23:13 | Link to Comment geopol
geopol's picture

HOOOOOOOOO That's scary................

Tue, 02/23/2010 - 22:57 | Link to Comment Anonymous
Tue, 02/23/2010 - 22:59 | Link to Comment Anonymous
Wed, 02/24/2010 - 08:49 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

Good insight!

Tue, 02/23/2010 - 23:01 | Link to Comment Budd Fox
Budd Fox's picture

Just a detail: when this man privatized Chile pension system, he did it on the poits of Pinochet bayonets.

He did NOT asked for consensus.

Before America does it, they will have to instate their Pinochet....suspend Civil rights and declare Martial Law.

On the points of the bayonets you can reform what you want, no one is going to dare to ask you anything.

Tue, 02/23/2010 - 23:17 | Link to Comment Dirtt
Dirtt's picture

We do have elections in November.  America is not Chile (that used to be a good thing) so there is a chance it can be done peacefully.

Otherwise thankfully the Chileans make good wine.  Maybe they will make room for one or two Americans who value a work ethic worth importing.

Wed, 02/24/2010 - 12:50 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:06 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:09 | Link to Comment Anonymous
Wed, 02/24/2010 - 00:24 | Link to Comment faustian bargain
faustian bargain's picture

lol, good one.

Tue, 02/23/2010 - 23:11 | Link to Comment Tipo anónimo
Tipo anónimo's picture

Having lived in one of Chile's backwards neighbors, I can tell you that people down there don't mess with Chile.  They have their stuff together - they are behind one of hte greatest land barriers in the world with modern armaments, so unless they make someone with nukes upset, they should continue to be a regionally important force.

 

No comment on Pinochet's civil rights record, but he knew how to make a 1st class economy!

 

http://tinyurl.com/ychau5a - wiki on Piñera

http://en.wikipedia.org/wiki/Augusto_Pinochet

Tue, 02/23/2010 - 23:19 | Link to Comment Budd Fox
Budd Fox's picture

No questions on the outcome....I just said that to get there, you must be willing to pay the price.

And the price of this reform was Pinochet, the thousands of desaparecidos,and all the annexes.It may be a price well worth to pay...retrospectively, depends to what part of the population you belong...

The point remain you do NOT achieve those results with debate in a democracy and balancing reforms.

You need a social equivalent of a Minsky moment...be it a coup of the militaryy or a Revolution of the people...your choice.

Wed, 02/24/2010 - 00:18 | Link to Comment Tipo anónimo
Tipo anónimo's picture

I think there was a debate.  It just ended Pinochet 1, communist baastuds 0 :)  I never here anyone here, or there, arguing that the disappeared were NOT part of the hard left being financed by the Soviet bloc.

 

Bolivia had a similar experience with Banzer.  The native people weren't happy with the speed of the results that he offered after being 'elected' president, and yet you'll find very few of them that argue that any aspect of their lives, families, or personal economy are better off now after the turmoil of Pres. Evo Morales' rise to power.

Wed, 02/24/2010 - 10:37 | Link to Comment Anonymous
Wed, 02/24/2010 - 07:24 | Link to Comment Anonymous
Wed, 02/24/2010 - 22:54 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:14 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:22 | Link to Comment Budd Fox
Budd Fox's picture

Well said.

Wed, 02/24/2010 - 10:11 | Link to Comment Missing_Link
Missing_Link's picture

That´s right, in 1980, under the umbrella of -in that time- all mighty Pinochet regime (call it dictatorship, tirany, etc., your choice) that redefined the rol of the state in every aspect, not only in that of social security. Those conditions are impossible to reproduce in Europe much less in US.

Don't be so sure  ...  People said dictatorship was impossible in Germany in the 1930s, too.  When things get bad enough, people reach for desperate solutions.

Tue, 02/23/2010 - 23:16 | Link to Comment Jerome Lester H...
Jerome Lester Horwitz's picture

"The problem is the entitlement state. The problem is that there is a gigantic disconnect between what the people want the government to pay them in the future, in health, pension, and what the people want to pay in tax."

The problem is our forebearers forced upon us to be born into an entitlement state. I never asked for this! Social Security was forced upon me at birth. I never agreed to that. It was decided for me. How bizarre is it that you can be beholden to an agreement that was made for you when you were a baby and there is no way to opt out.

I have worked since I was sixteen and would gladly forego all that I am entitled to from Social Security if I could opt out and not pay any more in to it.

The problem as I see it is the forced servitude known as Social Security masquerading as an entitlement program that I involuntarily became involved in. I don't want the government to pay anything for my health and Social Security can in no way be viewed as a pension by anyone with a brain! I want the government to leave me alone so I can provide for these things on my own!

Wed, 02/24/2010 - 13:52 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:21 | Link to Comment Going Down
Tue, 02/23/2010 - 23:34 | Link to Comment wake the roach
wake the roach's picture

Although Pinera's obviously correct about how this ends, I will not buy the popular, taxpayer wants "something for nothing" lie...

Given a choice between high taxes and recieving entitlements or saving for ones own retirement/rainy days, most people would choose the latter... So why don't people save? Oh, because they spend more on useless stuff right?

Well funny thing is that people spend less on clothing, food, whitegoods etc. etc. than they did in eg. 1970. They spend more on insurance premiums, realestate, tax's and add the second household income earner into the equation, more on transport, childcare etc etc all the while real incomes have fallen... 

All this has been accepted by a population in the knowledge  that their taxes are being skillfully invested and set aside to fund their retirements (entitlements is such a dirty word for something you payed for), and that they are slaving to pay a mortgage because the home will only increase in value, right? "seen it on 60 minutes"...

Now I accept that ignorance is not an excuse but these lies have been pushed upon the middle class majority... People the politicians and their elite overlords know all to well, live paycheck to payckeck and so, are generally financial and economic illiterates...

Its like your older sibling giving you that big handful of shiny change in return for a worthless paper $20 note as a child... The workers have been swindled by people they trusted with their entire future...

When Joe 6-pack (stack) realises this, there will be hell to pay. But not for the politicians of course, when the time is right they will direct the public rage towards, illegal latinos,  sneaky asians, greedy jews, same old shit...

Wed, 02/24/2010 - 00:00 | Link to Comment jdrose1985
jdrose1985's picture

When Joe 6-pack (stack) realises this, there will be hell to pay. But not for the politicians of course, when the time is right they will direct the public rage towards, illegal latinos,  sneaky asians, greedy jews, same old shit...

 

+1

So true. No one is better at pulling the race card than...Hollywood

 

With the exception of the first family, of course.

 

 

Wed, 02/24/2010 - 00:35 | Link to Comment Unscarred
Unscarred's picture

I agree with how your comment ends, but wholeheartedly disagree with your statement about the taxpayer wanting something for nothing being a lie.

As (real) food costs have continued to fall over the past several decades, the amount of conspicuous consumption has grown by figures far exceeding any break even point.

I'm friends with numerous doctors at the trauma units of several hospitals, all of whom tell me regular stories of patients with BlackBerrys and iPhones, Gucci handbags, $40K cars, and NO HEALTH INSURANCE.  These aren't people who can't afford insurance.  These are people who have no interest in being responsible.

In addition, notice that household debt to GDP has doubled from 1985 to today.  It's not a coincidence that Nike, A&F, Gap, and other ancillary retailers have experience exponential growth over that same period.  (Not everyone can afford $120 sneakers, but stores can't keep them in stock for very long.)

As Malthus taught us, any given society will take on the characteristics of its fastest growing segment.  The fastest growing segment of the American population is definitely not the upper class, nor the upper-middle or even middle class.

Of course, the real victim in all of this (as a percentage of household earnings) is the middle class family who actually does things 'right'- they pay their bills, live within their means, and save for a rainy day.  But no one can overlook that while the 'haves' rape the system, the 'have nots' are leeching every last drop of blood that they can, while they can.

But I agree with you 100 percent- the finger pointing at the end will be no different than what we've seen throughout history.

Wed, 02/24/2010 - 02:35 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:01 | Link to Comment Commander Cody
Commander Cody's picture

So, how does it feel to be a serf to the overlords?  Not so good, huh?  I agree.

Starve the beast is the way to kill it.  Only the sheeple will continue to believe the lie until its too late.  Sad.  Statist fail.

Wed, 02/24/2010 - 10:06 | Link to Comment Abraham Snake
Abraham Snake's picture

To say that the US economy, the richest economy in the world today, perhaps the richest economy that the world has ever seen, cannot afford modest social security programs is a red herring. What the US cannot afford is:

1) An absurdly gargantuan military budget.
2) Ill justified and costly foreign military invasions.
3) An exploding debt based billionaire class, untaxed.
4) Fraud and accounting tricks wrecking honest business.
5) A inefficient to broken health care system.
6) Imploding public education budgets.

When I go to the discount grocery store and observe the elderly carefully choosing a few inexpensive items only to checkout for less than $10, I never think, "Those old people on their Social Security. Damn them. They should get used to eating dog food. They should just die because then we could afford to invade stubborn Iran. Damn those old people and their entitlements." In fact, I usually think the opposite.

Tue, 02/23/2010 - 23:36 | Link to Comment Anonymous
Tue, 02/23/2010 - 23:47 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:07 | Link to Comment Postal
Postal's picture

That was my line. :P

America doesn't listen to (or learn from) others. We aren't going to learn anything from our own past, let alone Chile's. Hell, we haven't learned anything from the present.

Tue, 02/23/2010 - 23:58 | Link to Comment Unscarred
Unscarred's picture

The problem we're discussing ends in fiscal ruin, but it starts in our culture.  Until we begin holding others accountable for their actions and decisions will we ever have a chance to pull out of this shit storm.  And for my money, I think that it all starts with health care reform.

Compare and contrast the measures offered by both sides of the isle to those of Toby Cosgrove, CEO of the Cleveland Clinic (perhaps the last dignified institution left here in Cleveland).  The fact that the MSM continues to squelch his commentary regarding health care reform is a fucking embarrassment for all of America.  God forbid that a renowned doctor at one of the world's premiere hospitals would tell anyone to drop the cancer stick, eat a salad, and get up off their fat ass for a brief while.

Until we're (collectively) ready to improve ourselves (individually), we might as stop bitching, turn on American Idol, order a pizza, and embrace our failed state for what it is- the squandering of the great idea man has ever birthed.

Wed, 02/24/2010 - 10:42 | Link to Comment Anonymous
Wed, 02/24/2010 - 11:37 | Link to Comment Postal
Postal's picture

Hold others accountable? How? You can't do anything in modern society without giving up your rights. Want to buy a house, obtain insurance, get a job, buy a car, use a cell phone, obtain cable service? Give up your rights to sue for damages. The corporate titans have made abdication of responsibility a condition of business.

Wed, 02/24/2010 - 00:13 | Link to Comment Anonymous
Wed, 02/24/2010 - 00:19 | Link to Comment CONners
CONners's picture

"...it's in all of us."

I vote against every incumbent, but then another American takes his place.

Wed, 02/24/2010 - 00:59 | Link to Comment perchprism
perchprism's picture

 

"It is Time to Buy Farmland and Gold, Says Dr. Doom (Marc Faber):

 

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7035913.ece

Wed, 02/24/2010 - 03:10 | Link to Comment Tic tock
Tic tock's picture

It's strange to hear Americans' thinking of themselves as an 'entitlement state'. Abroad we wouldn't normally think of  what you go through as being particularly entitled; maybe I'm missing a few important details.. sure you have services, like police and fire, but you pay for them. You pay for Big Government, in theory at least, since taxes don't seem to match with expenditures to any significant degree. I mean, you have to work to make a half-decent living- otherwise you're stuck with a shopping trolley. And the government is pretty strict about enforcing its property laws, in fact you have a crazy system of laws that are quite cruelly implemented, it's always a vicious fight between owners and victims. And the government tells you how to do every simple thing...which turns out to be owned by the Banks anyway. Anyway, the cost of things is pretty high, except food, and you have to pay for everything - so, where's the entitlement? -did you mean as in spending too much... see low interests rates and inflation, lack of financial teaching in national cirriculum (??) and rational short-term behaviour. ---this is like blaming the sinners for creating Hell. Anyone who trades the financial markets knows full-well, the major banks own everything, set the prices, spin trillions out of the air, without a sense of greater purpose. There are no rules left, only power. Governments were filled with the weak-minded, now they will roll over and the conflict will be between the people and those who remain Bankers. ..crap, I've gone off again... well, the thing is, at this point, we, the people and even the wee bankers (and let's face it, if the bankers were strong men you would have little need to exert power over others simply because you want some money), ought to first be clearly focused on where the law should be changed and which people should be where as changes are wrought.         

Wed, 02/24/2010 - 06:15 | Link to Comment Gunther
Gunther's picture

Factual correction:

Under Bismarck the German social security was funded fully.
After two lost wars it went to pay-as-you-go under the American puppet Adenauer.
After the re-unification with the GDR social security funds were abused to subsidize the former GDR. That was balanced with taxes but throw in creative accounting and  budget constraints and it is clear that the system comes to the breaking point.

Taking Chile as an example borders on insanity. In 2007 I traveled Chile extensively and outside the capital people were barely getting by. Most stuff that people had seemed to be from the time before Pinochet and if something broke it did not get fixed. I visited a family where the boiler was broken for over a year and the spare part was available in town for one dollar. I was able to fix the boiler with the tools they had there. It turned out the broken part had to be replaced from time to time and they knew wha was broken but they had no money to do so or were afraid of getting cheated by the plumber.
To me Chile felt like an illustration of a depression in a wider sense; economically and on a personal level I did not see people taking initiative.

Wed, 02/24/2010 - 03:40 | Link to Comment dot_bust
dot_bust's picture

Unfortunately, the last economic depression ended in World War II. I fear that the current depression will end in much the same way.

Wed, 02/24/2010 - 04:37 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:31 | Link to Comment Anonymous
Thu, 02/25/2010 - 03:20 | Link to Comment Anonymous
Wed, 02/24/2010 - 04:15 | Link to Comment CombustibleAssets
CombustibleAssets's picture

Well, we're clear on what needs to be done but I don't think we want to learn how to do it from Chile.

Wed, 02/24/2010 - 10:46 | Link to Comment Anonymous
Wed, 02/24/2010 - 06:41 | Link to Comment Anonymous
Thu, 02/25/2010 - 13:02 | Link to Comment Observer
Observer's picture

Anonymous 24/2 at 0406 has hit the nail on it's head. Small countries by population can simply shrink their entitlements as they always attach themselves to the dominant bigger powers of the day. That is not an option for the US. All they can do is to whittle away at the entitlements as fast as possible and hope they accomplish the task or ar atleast close to accomplishing it before the credit markets start to squeeze.The large emerging nations like China, Brazil and India have the opportunity to avoid the path of entitlements right at the start as we are the crossroads now. Entitlements are seductive just as a honey trap is. Both lead to imprisonment of one kind or the other. People have to work for prosperity and security. It can't be 'provided'. Somebody(us) has to pay for it. There is no way around it. Of course support for those that are unable to help themselves doesn't fall in this category. If we are to have fiat currency it has to be in the form of sovereign credit supervised by the people through their elected representatives as jmc8888 has explained in detail

Wed, 02/24/2010 - 08:21 | Link to Comment zhandax
zhandax's picture

I started to cite the recent 'news' that at least Chile had fired one of their monetary authorities for screwing up, which is more than any other western nation has done.  Then I find the original story from the Santiago Times where it is revealed that after this error was reported in public, the central bank ignored the reports and subsequently fired the engraver.  Apparently reports from the BBC and Times of India that the Mint Director was fired are just eyeball candy.  <how CNBC can u get?>

Wed, 02/24/2010 - 08:55 | Link to Comment Anonymous
Wed, 02/24/2010 - 09:15 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Doing all the wrong things is ingrained behavior for the power-elites who are amply insulated from the consequences and have any number of escape options should things get collectively hot on all fronts.  Don't look for solutions from those that created the problems.  I don't think there's enough energy in the universe to defuse all these problems in a less than cataclysmic way.

Wed, 02/24/2010 - 09:25 | Link to Comment Anonymous
Wed, 02/24/2010 - 09:52 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:45 | Link to Comment Anonymous
Wed, 02/24/2010 - 20:57 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:05 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:09 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:58 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:39 | Link to Comment RSDallas
RSDallas's picture

I'm not sure about this statement:  "The problem is that there is a gigantic disconnect between what the people want the government to pay them in the future, in health, pension, and what the people want to pay in tax."

Are we sure this is what "the people" wanted and asked for,or was it what the politicians discovered that would buy them votes.  I'm 47 and have never, never, never expected the government to "GIVE" me anything and I think the majority of Americans feel the same way.

Wake up America.  Please send this writing to your National representative, talk to your friends about it, talk to your kids about it (especially if they are in college).  We, "the people" have to force our politicians to address this issue NOW and FORCE change.  Better than that pick up the phone and call your representative and talk to them.

Wed, 02/24/2010 - 10:45 | Link to Comment Anonymous
Wed, 02/24/2010 - 10:52 | Link to Comment Anonymous
Wed, 02/24/2010 - 11:06 | Link to Comment SaulA
SaulA's picture

Face it people. We won and we own you.  Quit your whining and move to Chile.

Wed, 02/24/2010 - 11:32 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

George Carlin on the OWNERS: http://www.youtube.com/watch?v=8Cz4vcQKWfA

Wed, 02/24/2010 - 12:04 | Link to Comment JW n FL
JW n FL's picture

No one wants to pay Taxes... everyone wants free shit!

 

If we owe... http://www.youtube.com/watch?v=at3MNu8BRwQ $100 Trillion...

 

We should have a sliding scale Tax system.. Flat tax plus... but because we who are educated... believe we should pay the same as those $35k earners...

 

If you make under $100k... there would be some type of bracketed step down of tax responsibility... and over $100k... that’s right those of us that own more than one home... those of us with more than 2 cars... those of us with multiples of children...

 

The problem is we want… those who cannot care for themselves to be held responsible for their actions… That sounds great, makes us feel great but does not pan out in the end… due to a true lack of substance.

 

We, the responsible will end up suffering for not baring the weight sooner… will it break under the strain added on your watch? Do you allow for the false sense of security that you pretend is real to really never fail?

 

Pay up people… it’s about that time… But it will never happen, responsibility is only good when we are talking about someone else’s, not our own.

 

Wed, 02/24/2010 - 12:58 | Link to Comment Anonymous
Wed, 02/24/2010 - 15:58 | Link to Comment Anonymous
Wed, 02/24/2010 - 13:02 | Link to Comment Anonymous
Wed, 02/24/2010 - 13:46 | Link to Comment Anonymous
Wed, 02/24/2010 - 14:32 | Link to Comment Anonymous
Wed, 02/24/2010 - 15:00 | Link to Comment Anonymous
Wed, 02/24/2010 - 15:19 | Link to Comment Anonymous
Wed, 02/24/2010 - 23:22 | Link to Comment jmc8888
jmc8888's picture

The problem isn't FDR policies.  One problem is everyone thinks FDR policies = JMK policies. 

Regulation isn't the problem, who is regulating and their lack of talent is. 

Term limits aren't the answer, term limits allow the hardball lobbyists to constantly play their game with rookies. (watch cronyism get WORSE)

The problem is we stopped paying for what we needed to have a functional economy 40 years ago.  We went with paper and more monetarism instead of building what we needed.

Now the debt is everywhere. It wasn't allowed to clear during this period in any meaningful way.  Mergers/Bailouts kept legacy costs high.  That 100 trillion in unfunded liabilities, how much of that is debt cost in everything? 90 percent? More than 90 percent?

The system has broken, everything is unsustainable within it, it's just a matter of time until it hits everyone. So of course we're going to have 100 trillion dollar numbers to look at in unfunded liabilities.  The cost of everything is only going to go up.  (and has been for approximately 40 and 100 years, given the start and the escalation of the monetarism, for which 2008 is merely the 3rd escalation of monetarism)

It's embedded in everything we buy in ever increasing percentages and total dollars.  That's the price of the monetarism game we play. If we decide we can't make payroll high enough to pay for it, well there's voodoo economics again for you to all see it's bunk (reaganomics).

Of course people also forget to mention on a 150 year time frame what happens when you suck out what makes the fund compound in years 50-90 or thereabouts.  100-200 billion dollars of yesterday's dollars sucked out year after year for decades to hide our budget deficits surely did a number on Social Security.   So we wonder why the numbers seem so high. But we got the Reagan tax cuts.  Hope you saved those.

We need not go this route of allowing everything to crush us. We hold the bankers by the balls, not the other way around.  But we somehow THINK that this fraudulent debt is real, and that we have to pay it. We don't. We can't.  We won't. If we default on the fraudulent debt, bye bye goes the noose around our neck, and pity it hurts those most involved in its creation.

People say regulation is bad.  I say having regulators paid and bought for by imperialists is what's bad.

People don't fear gov't, they fear bad imperalist gov't. Bad gov't is what we've seen, and what we call it.  Some say it's that gov't can only do bad.  Nope, idiots who don't think when voting or demanding more from their congressman allow the ones influenced by monetarists to steadily tip the scales away from the American public over the years and decades.  So if you want to blame bad gov't, first realize it's an imperialist gov't and that America was never supposed to be that.  So all this 80-90 percent 'we hate congress' numbers shows us that the American people hate IMPERIALIST GOV'T.  What part of the imperialist policies do you deject? Start thinking on those terms...is it bad governance, or imperialist governance that you are really seeing and hate.  You'll find as people learn more and more, it's not gov't that's bad, it's how it's being used in imperialist ways that's giving you that impression, and that more than anything else, you want THAT stopped.  Maybe it's only in the sub-conscious of the average American, but I fully know that when they figure it out, you won't want to be a banker nor monetarist.

You want the imperialists to run wild go ahead and deregulate more than has already happened, be prepared for them to steal everything not nailed down, if they haven't already through imperialist control of our gov't.

People blame long standing senators, I blame an uninformed public that cares not what they're public officials do until it bites them in the butt. That won't change because you have term limits.  When you have good governance, by question asking, intelligent people - you will want them to stay as long as possible. Term limits, mark my words, only makes matters worse.  Change your senator, if they suck, don't change the rules to say all sentaors for all time suck and thus you need limits to prevent you from making a mistake. No it still won't change the fact you can still vote in a dumbass 100 percent of the time if that sections voters want to act stupidly.  Term limits won't stop this. 

Going back to pre-FDR is asnine. TPTB would LOVE for that to happen.

They want austerity through crushing debt for more profits.  So if you allow either austerity or allowing crushing debt to be realized and paid for, you are only playing into their hands. 

The key is fraudulent debt destruction.  Another is switching systems so once that happens, they don't gin the debt back up in predictable, or slightly more exotic ways. 

Once the debt destruction happens you find soverigns aren't broke.  You'll find they can meet the needs of their people much bigger and better for less in both actual dollars and relative terms because the debt won't be there every step in the supply chain of everything. 

Or we could let their fraudulent debt force us into austerity, which will not change the debt stranglehold over us, all for the luxury of pretending to supply something (wealth), that gov'ts can do itself.  We don't need to back all gov't expenditures with monetary debt, like we do now. 

We don't need to bailout the squid and their vast sums of fraudulent debt and equate it's utility as being par as actually creating something of value that gov't debts currently (but don't have to be) comprised of. Debts for paper nothings does not equal the value for debt for something like a space program, or national mag-lev train system, or investments into nuclear power plants.  These which can be funded by credit utterence, instead of monetarist debt, is instead lumped in with all the derivatives and fraudulent debt, and treated as equal.  Again though, this debt doesn't even NEED to be debt held or directly affecting ANY bank or insurer.  But talk to the monetarists, and they'll tell you shutting these things down and accepting austerity is the only way to save their fraudulent debt, and there is no other way about it.  WRONG.

Of course things like infrastructure, education, sciences, space program, etc are but almost nothing of our national debt, or expenditures, and what we do spend is grossly inflated with purchases from its debt laden suppliers. So even if we wanted to blame the above programs for they're constant spending ways, they aren't what indebted us, but along with needful social spending will be the first to be axed and labeled as unnecessary.

Now anything we borrow against is put through the monetarists eye as useful (see debt repayment) or non-useful (anything else besides defense and wars and higher level of unfundedness through tax cuts). So space programs gets cut, and more money for Xe, Fannie, Freddie and squid. Healthcare gets a commission that must cut costs using bunk statistical models and studies, so we can provide more QE without it exploding rates at the cost of grandma or grandson.

The sad thing is we're cutting back what we need, and paying greater amounts to the FRAUD! (and people are falling into their mindf**k finger pointing as well)

People bitch and complain, you aren't entitled to anything.  You're right, but as a human being with a mind and a conscience we can fit what is right into the equation when dealing with 80 million barrels of oil a day, a magical printing press, billions of bright *yet clouded and distracted* minds, and enough raw materials to build what we need until we can find replacement as long as we don't fritter all of those resources away playing the monetarist games. 

 

If we wish to be above the level of an animal, we must provide basic needs for our people if the private sector is unable (debt) or unwilling (also) to do it.  But it's easy for the monetarists to paint the picture of how entitlements are the core of our problems. 

No, they are a reflection, a symptom of a systemic monetary breakdown, long in the tooth, but finally coming to fruition. But entitlement in its purest form hold the negative connotation it does due to entitlement being married with the concept of WANTS and FRIVOLOTY, and thus since we're talking about NEEDS, not WANTS, entitlement is entirely the wrong word. But TPTB are counting on you confusing that.  BET ON IT.

  Because it puts the frame of reference into describing what's going on as a WANT, and not a NEED.  A better word, which I'm sure is out there, (if not create one), is warranted when we are talking about NEEDS being met.  Food, shelter, clothes, education, opportunity, healthcare, are but our basic needs, and if you understand Maslow, you understand that before anything else, people will do what they need to procure those items, before engaging into higher levels of thought.

So when 'entitlists' (those that rail about entitlements) come complaining about the cost of humanity, just realize that their head has been twisted into thinking neccessities are frivolous, and that those that don't have don't deserve. 

The problem is the monetary system we do business under. It's making everything unaffordable, and it's scaring people into thinking that we somehow can't survive on this planet, without sacrificing human decency, and treat some people like cattle. That's just bullschmidt.  It's because there is no profit in it, nothing else, and why would a bunch of monetarists do anything there is no profit in? Especially our generation of crooks.  Instead they will play their broken game, and blaming you for your problems.  Might they forget the following???

We never solved the 70's crisis.  We just took on debt.  But of course the 70's crisis was created by the implementation of the monetarist policies into free trade, globalization, floating exchange rates, etc. Of course by 87 it came to a head, but that great Greenspan found the big solution to all of our problems...derivatives. Now came 2008 and the derivatives popped off because fantasy met reality in fraudulent paper makers met fraudulent debt creators and both sides smiled and nodded until it blew up.  Thus the moral hazard presented by the introduction of derivatives to save the system in 87 only became apparent in 2008 to most.  There's no new exotic, 2nd derivative to bail us out.  That game has been used up.

Now we're in a phase where everything is crumbling.  2008 was already past the point of no return. 

The fraudulent debt has now made price discovery virtually impossible, I would say impossible, because the only way to find it is to BLOW THE ENTIRE SYSTEM UP.  Which will eventually happen, tomorrow, a year from now, 5 years from now. With that comes so much destruction, civilization becomes near impossible. That's not scare tactics, it's logistical reality.

The only way out is to cancel the fraudulent debt, and start doing the things we need to do create an environment where businessess can make money...err credit dollars.   That is by fully implementing LaRouche's 4 power plan, switching to a national credit system (instead of monetary), single payer healthcare under HILL BURTON STANDARD....a standard obama knows nothing about....HBPA of 2007 so we don't have millions homeless with millions of empty houses and the banks with leverage saying see we need trillions...in the meantime everyone can pay inflated prices while we lie on our books.....to actual investment into our inadequate infrastructure, education, the sciences, and space program. 

Also until the only thing that will really solve our energy problem Fusion is developed (meaining - researched and funded by gov't not exxon nor al gore, we need nuclear power and water desalinization [powered by nuclear...no not on site] and not rely on fossil fuels, wind, solar, etc.) we need nuclear power plants. 

We need higher energy flux densities, not same or lower ones.  Putting all our money and bright minds into 'green energy' or cleaner fossil fuels is like putting all our scientists into trolley research and development instead of cars and planes in 1900-1930 timeframe. 

 

We are literally going backwards instead of forwards, while the time is running out.  We will hit peak oil, long before actual peak oil.  Because the easy stuff is going away, to get to the hard stuff - we haven't researched it, and that will take many decades. 

 

Meanwhile even that has a finite amount, but if you think all the universe's oil was here on earth, I've got some beachfront property to sell you here in AZ. 

 

Eiether way there are supply constraints and further exploitation that can be done...if we research what's needed to do it.  But of course we need these not to power everything, but to be the stop gap for plastics, and the like until other solutions are found beyond that of oil for plastics.  Only when you really put your head around the problem will you understand what we need to do and why the current 'solutions' will only lead to greater folly.

Our resource problems aren't now, they're only starting now.  We must decide if we want to play the monetarist game which is to play until all resources are gone, because that's how you maximize profits....or are you going to demand that we develop things like Fusion, and Fusion Arcs capable of providing the base elemental building blocks for whatever we need.

I did see something on bloom energy today, will have to look at that.  But again, how many more scientific discoveries and entire industries be created (like perhaps bloom energy) as long as NASA is shuttered by Obama and the monetarists because they deem it unnecessary. 

 

Nope it's because if these things were developed, the entire monetary system would collapse.  So no one can be truly free, because it will constrain the money masters from their control.  Otherwise you tell me how monetarists game won't try to develop fusion or other things until it's far too late.  There is no profit in it until it is so.  But that is one dangerous game too far, yet one we are playing.

But what do I know, I won't even believe thet main stream media anymore that the guy who has basically gotten everything right, called the bs with the wars, the healthcare, the economic system, the 2008 crash, the list goes on and on.......180 degree difference than the main stream media which has gotten everything wrong, is crazy, LaRouche, while what the mainstream media is presenting us is sane, credible, and legitimate. 

It just shows you how far down the rabbit hole we've gone when the perceived crazy, LaRouche, is actually the sanest.  But then again, TPTB told you LaRouche was crazy when you believed them more, and before the reality of what he foresaw occured. Even now in many circles the name brings with it instant discreditment, of pretty much the only guy that saw the enitre puzzle (not one piece) and has been screaming about it for decades...yes decades.

 

But his solutions are bad and crazy too.  He's talking about wiping out the fraudulent debts? Cancelling the bailouts? No....he's crazy.

 

He's crazy because he doesn't want idiots ruining our already piss-poor HMO healthcare system even worse with gov't sponsored deathcare? And it's real? And they base their 'savings' off denial of care based on bunk AIG type statistical models? Yep

He's crazy because he thinks that subprime was the first crack showing in a broken system, rather than believing that home prices have stabilized. 

 

It's just amazing to me how many people still tout the company line of 'welfare mom's and social security' and the other guys in Greece who has a golden toilet roll filled with a roll of Bernanke C notes to wipe their butt all these years and thus such lavish spending must be stopped and austerity must be forced onto the people for doing this for so long. 

 

No, that's the bankers doing a good job of confusing you to point a finger at your fellow co-patriot (even if he's in another country...he's under the same fiat debt based monetary system).  By pointing to what he/she has, they can make you jealous, and thus there's infighting instead of focusing on the real enemy across the battle field whose job is to kill you. 

 

It's 100 trillion for these unfunded liabilities because that's what the MONETARY market bares.  Not because, we're overspending.  We didn't overspend.  We were outright defrauded to the point where regular spending, crashed the system.  Whatever they reduce in social security and other programs will be gleefully stolen away.  Not remedying the situation, but perpetuating it. 

So are you going to let these unfunded liabilities hit 100 trillion in their system and then pay for it through the printing process? Will you balk and say screw your fellow man you don't deserve squat? Or will you realize you are being played the fool, as it's only 100 trillion because they deem it so, and it's only in debt because you gave them that power. 

 

You will ask for austerity, instead of resolution of the scam...but under this system it's a reality, and one the markets must play on.  

 

As such ZH is right to present this case, as in today's economic world the fantasy is reality.  But we can make it a fantasy again quite easily.  Don't you know all money that isn't flowing into TPTB breaks the system?  Your money must go soon, and it'll be the other poor slob's fault you don't have any. They'll tell you that.  You'll eat it up.  The criminals walk away scott free and laugh as two debt slaves fight it out. 

 

Don't think like that.  You must not think like that.  Don't let them win. Tell the monetarists that indeed they have no clothes, and I ain't spinning up a pair of scivvys for you so go eff off.  The magical printing press is only used when needed, and scivvys for monetarists ain't a need. 

 

Bernanke we want our magical printing press back so that we can actually move forward....schools, roads, hospitals, mag-lev, health care, nuclear power, fusion, science, space program, water desalinization, etc, etc.

 

We need the magical printing press for these things and the like only.  You'd be surprised how little inflation would occur if we only used the magical printing press where it was needed, instead of inflating debt. 

 

Even then debt paid to gov't which doesn't need it, won't be placed in a systemic risk if it is defaulted upon.  Besides there would still be private banks giving loans for anything not really needed or that may fall through the cracks as gov't isn't perfect. 

Only things needed, and we can have the debate ad infinetum about what...after all what does a democracy do? It debates and implements solutions the people need.  If we all order pink unicorns delivered by FedEx overnight, then we might say, 'too far'.  But being sane minded people, we won't really go so far as to order pink elephants. 

 

But the monetarists sure have you thinking we'd pay for everything under the sun with it.  No, that's what THEY do, and it's for things with no benefit.

Just remember, that debate is healthy, and one that can never be concluded, because the debate over what a society needs is different from era to era.  You don't give that ability up and say now no one can make a mistake in congress again about it, yes, we've had the federal reserve screw it up and not be directly accountable for it for almost 100 years.  But congress hasn't.  True, congress hasn't, and we're worse off than ever aren't we, so the alternative of rich bankers worldwide doing what they do in their own interests isn't better than congress making decisions and being held accountable by the people? Who knew? 

Now let me sign on to another way we can screw ourselves by limiting ourselves....term limits...instead of actually confronting the problem with money interests, monetarism, and voter complacency/idiocy.  Term limits will solve those three problems.....nope.  Let's fight about unfunded liabilities being 100 trillion and who deserves what instead of why basic needs would cost 100 trillion.   Let's just keep believing those who say everything is fine, nothing wrong here and just believe and it'll happen.  

If you want a better way of life, quit taking the advice of those that continually screw you and lie to you.  This guy from chile seems to think their pain was worth it, and that somehow it equates to our systemically risky situation.  Theirs wasn't, our's and the whole world's is.  Plus once they get paid off through austerity, they have that much more to steal again from TPTB.  So in essence, this guy wanting us to pay off the debt, is really just an idiot who didn't realize that as soon as the balance sheet got better through austerity, the monetarists sunk their claws back in again, and again, and again.  No problem with that model there.  Except he somehow thinks Chile's excursion through it's messes during this extend and pretend 40 year window actually matters or is indicative of sound financial thought.  I wholeheartedly disagree.

 

Good luck :)

Wed, 02/24/2010 - 23:45 | Link to Comment Anonymous
Fri, 02/26/2010 - 16:30 | Link to Comment Anonymous
Sat, 04/17/2010 - 10:10 | Link to Comment Tom123456
Tom123456's picture

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