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"Skunked": Bill Gross On How "The U.S. Will Likely Default On Its Debt"
In a letter focusing on what has been well known to Zero Hedge readers for about two years now, Bill Gross' latest investment outlook does the usual attack of Beltway stupidity (as if Congress is in any way competent of making math-related decisions - they do what Wall Street - that's you Bill! - tell them to do, and you know it), emphasizing the impossible math of total US entitlement liabilities (on a net present value basis), which Gross estimates at $75 trillion. That Gross conclusion is predetermined from the onset is not surprising: "Unless entitlements are substantially reformed, I
am confident that this country will default on its debt; not in
conventional ways, but by picking the pocket of savers via a combination
of less observable, yet historically verifiable policies – inflation,
currency devaluation and low to negative real interest rates." Then again, that America is bankrupt is not really news to anyone. Neither is it news, that Gross, as we first reported, no longer has any US bonds to dispose of. What will be news is the inflection point at which Gross starts purchasing Treasuries once again. And after all with $220 billion in AUM in the Total Return Fund, what else will he do: hold on to cash? Buy Netflix? Then the only question will be how Gross spins the inevitable capitulation of the re-hypocrisy trade, validating that he, in a narrow sense, and PIMCO in a broad one, is perhaps the biggest cog in the very system that Bill spends so many hours writing letters about and complaining against. But yes, even that won't be all that surprising to us. After all, in this bizarro world absolutely everything is now priced in.
Skunked
- Medicare, Medicaid and Social Security now account for 44% of total federal spending and are steadily rising.
- Previous Congresses (and Administrations) have relied on the
assumption that we can grow our way out of this onerous debt burden. - Unless entitlements are substantially reformed, the U.S. will likely
default on its debt; not in conventional ways, but via inflation,
currency devaluation and low to negative real interest rates.
That adorable skunk, Pepé Le Pew, is one of my wife Sue’s favorite
cartoon characters. There’s something affable, even romantic about him
as he seeks to woo his female companions with a French accent and
promises of a skunk bungalow and bedrooms full of little Pepés in future
years. It’s easy to love a skunk – but only on the silver screen, and
if in real life – at a considerable distance. I think of Congress that
way. Every two or six years, they dress up in full makeup, pretending to
be the change, vowing to correct what hasn’t been corrected, promising
discipline as opposed to profligate overspending and undertaxation, and
striving to balance the budget when all others have failed. Oooh Pepé –
Mon Chéri! But don’t believe them – hold your nose instead! Oh, I kid
the Congress. Perhaps they don’t have black and white stripes with bushy
tails. Perhaps there’s just a stink bomb that the Congressional
sergeant-at-arms sets off every time they convene and the gavel falls to
signify the beginning of the “people’s business.” Perhaps. But, in all
cases, citizens of America – hold your noses. You ain’t smelled nothin’
yet.
I speak, of course, to the budget deficit and Washington’s inability
to recognize the intractable: 75% of the budget is non-discretionary and
entitlement based. Without attacking entitlements – Medicare, Medicaid
and Social Security – we are smelling $1 trillion deficits as far as the
nose can sniff. Once dominated by defense spending, these three
categories now account for 44% of total Federal spending and are
steadily rising. As Chart 1 points out, after defense and interest
payments on the national debt are excluded, remaining discretionary
expenses for education, infrastructure, agriculture and housing
constitute at most 25% of the 2011 fiscal year federal spending budget
of $4 trillion. You could eliminate it all and still wind up with a
deficit of nearly $700 billion! So come on you stinkers; enough of the
Pepé Le Pew romance and promises. Entitlement spending is where the
money is and you need to reform it.
Even then, the situation is almost beyond repair. Check out
the Treasury’s and Health and Human Services’ own data for the net
present value of entitlement liabilities shown in Chart 2.
The above four multi-trillion-dollar liability balls are staggering
in their implications. Remember first of all that the nearly $65
trillion of entitlement liabilities shown above are not some estimate of
future spending. They are the discounted net present value of current
spending should it continue at the projected demographic rate
(importantly – it is much higher than the annual CPI + 1% used as a
discounter because demand for healthcare rises much faster than
inflation.) And while some Honorable Congressional Le Pews would counter
that Medicaid is appropriated annually and therefore requires no
discounted reserve, those words would surely count as “sweet nothings,”
believable only to those whom they romance every several years at the
polls. The incredible reality is that the $9.1 trillion federal debt
that constitutes the next-to-tiniest ball in our chart is nothing
compared to unfunded Medicaid and Medicare. It is like comparing Pluto
to Saturn and Jupiter. The former (the $9.1 trillion current Treasury
debt) does not even merit planetary status in our solar system of
discounted future liabilities. It’s really just a large asteroid.
Look at it another way and our dire situation becomes equally
revealing. Suppose that the $65 trillion of entitlement liabilities were
fully funded in a “lockbox,” much like Social Security is falsely
imagined to be. Just suppose. And say the cost of that funding (Treasury
debt) was the same CPI + 1% that was used to produce the above
discounted present value in the first place. Actually, that’s not a bad
guesstimate for the average yield of all Treasury debt. If so, then the
interest expense on the $75 trillion total debt would equal $2.6 trillion,
quite close to the current level of entitlement spending for Social
Security, Medicare and Medicaid. What do we pay now in interest? About $250 billion.
Our annual “lockbox” tab would rise by $2.35 trillion and our deficit
would be close to 15% of GDP! The simple conclusion would be this:
Unless you want to drastically reduce entitlement spending or heaven
forbid raise taxes, then Pepé, you’ve got a stinker of a problem.
Previous Congresses (and Administrations) have relied on the
assumption that we can grow our way out of this onerous debt burden.
Perhaps we could, if it was only $9.1 trillion, as shown in Chart 2.
That would be 65% of GDP and well within reasonable ranges for sovereign
debt burdens. But that is not the reality. As others, such as Pete
Peterson of the Blackstone Group and Mary Meeker, have shown much better
and for far longer than I, the true but unrecorded debt of the U.S.
Treasury is not $9.1 trillion or even $11-12 trillion when Agency and
Student Loan liabilities are thrown in, but $65 trillion more! This
country appears to have an off-balance-sheet, unrecorded debt burden of
close to 500% of GDP! We are out-Greeking the Greeks, dear reader.
If so, and if the USA were a corporation, then it would probably have
a negative net worth of $35-40 trillion once our “assets” were properly
accounted for, as pointed out by Mary Meeker and endorsed by luminaries
such as Paul Volcker and Michael Bloomberg in a recent piece titled
“USA Inc.” However approximate and subjective that number is, no lender
would lend to such a corporation. Because if that company had a printing
press much like the U.S. with an official “reserve currency” seal of
approval affixed to every dollar bill, that lender/saver would have to
know that the only way out of the dilemma, absent very large
entitlement cuts, is to default in one (or a combination) of four ways:
1) outright via contractual abrogation – surely unthinkable, 2)
surreptitiously via accelerating and unexpectedly higher inflation –
likely but not significant in its impact, 3) deceptively via a declining
dollar– currently taking place right in front of our noses, and 4)
stealthily via policy rates and Treasury yields far below historical
levels – paying savers less on their money and hoping they won’t
complain.
If I were sitting before Congress – at a safe olfactory distance –
and giving testimony on our current debt crisis, I would pithily say
something like this:
“I sit before you as a representative of a $1.2 trillion
money manager, historically bond oriented, that has been selling
Treasuries because they have little value within the context of a $75
trillion total debt burden.Unless entitlements are substantially reformed, I
am confident that this country will default on its debt; not in
conventional ways, but by picking the pocket of savers via a combination
of less observable, yet historically verifiable policies – inflation,
currency devaluation and low to negative real interest rates. Our
clients, who represent unions, cities, U.S. and global pension funds,
foundations, as well as Main Street citizens, do not want to be
shortchanged or have their pockets picked. It is incumbent, therefore,
in order to preserve the integrity of the U.S. Treasury market along
with its favorable global interest rates, and to promote a stable U.S.
economy, that entitlement spending be reduced, and that future
liabilities be addressed in terms of healthcare and Social Security cost
containment. You must attack entitlements and make ‘debt’ a four-letter word.”
Thank you, and like Pepé Le Pew, why don’t you try changing your
stripes or at least pretend you’re a French-speaking cat. The odor in
these chambers is all too familiar and a skunk needs all the help it can
get
»
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Yes but if you default you can't still hang around and collect billion dollar bonuses courtesy of the taxpayer
Exactly. No one really wants to think or work hard to fix the problem. The "leaders" and wealthy elitists could give a shit about the general public. Why do you think medical costs have been allowed to inflate year over year for decades? Why did Congress slash the Medicare tax? They want failure of the system, or at least they can point their finger and say "there is nothing we can do...entitlements are xx trillions dollars!!"
The rest of the population that has a brain, perhaps colleged and savvy to this political mess are financially secure enough to ride this mini-catastrophe out over its lifespan. So, more than likely, they could give a shit about finding a solution as well. This is also exemplified by this subpopulation groups willingness to continue on with the current system....minus the naughty entitlements and a few other frivolous eyesores. They are even happy to continue playing the rigged casinos we know as our "free markets". That's evident to me each day I visit blogs. Everyone wants to calculate how to beat the odds and beat the house, which is the most ridiculous unproductive activity you can participate in. Yet some have figured an angle that benefits them....at the expense of another individual.
Some say that the Medicare/SS contract with the government should be realized for what it is....a scam, non-performing at best. Well no shit sherlock. But what are your options? Stop paying into the systems (taxes) and what happens to you? Its a Catch-22. You pay or else we'll break your legs is the mantra we are forced to live under.
I have come to the realization that there are very few courageous, intelligent and compassionate people left in the world, and I think you would agree. The evolution of mankind has never really evolved in either an emotional, spiritual or intelligent sense. We just have more comforts and toys to make our lives a bit easier. For god sakes, we cannot even respond to a nuclear disaster (like Japan) if our lives depended on it. The Fukushima is a perfect example where ego, pride or arrogance were paramount to determining the solution. We supposedly have a world organization, the UN, who in a more realistic (idealistic) world, would organize the necessary resources from all worldly partners to deal with the problem. Embarrasingly, it took the Japanese how many days to get electrical power to the plant? A perfect example of the shitworld we live in.
And today, its all about typing ridiculous responses on websites that no one really reads, and if they do, they will not think twice about a second later. More unproductive action on our part to obviously better the world we live in.
All problems can be solved. But first the root of the problem must be dealt with like a surgeon in combat. Quickly and without hesitation. There's not a minute that goes by when I'm not shaking my head in disgust at the appalling crimes are leaders are committing or at the appalling complicity or lack of action by us. There are plenty of solutions, and many are not likely to be evident because of those in power and their reluctance to let us share in their knowledge and control. Well I say, fuck that, because I'm sick of these bastards putting down our civilization and determining who lives and dies, and how they live and die.
Is the world completely insane??? What about you? Aren't you outraged enough? Haven't had enough of this disgusting, lingering filth that governs our lives? Wake the fuck up Americans! You are the only ones that have the capacity and potential willpower to turn the world around. Are you really satisfied with the way things are going and the people in charge?
So you're going to gather a group of like minded people to 'do something'...
People 'do something' when they get hungry. That has not happend on a large enough scale in the US... yet.
You will not have to beat the bushes for protesters when/if people get hungry.
The strategies of gold, guns and gardens are attempts to starve the beast. People do protest TPTB. Google "G [8,10,15,20] protest" Do you know what you'll find? People protesting our masters of the universe outside of luxury resorts. TPTB hire more cops, EMTs, firefighters. Put them all on Overtime to keep the protesters away from the major players banquet rooms. The first responders get their "high 3" pensions into the six figures, retire, and then you got lots more people willing to do the same thing, even former protesters. Then TPTB sell the .gov bonds to cover the pensions. The .gov raises taxes to cover the vig.
Then you got the protesters who don't sell out, can not and should not challenge the infantry line around the ritz-carlton/casino security, so they walk down the street and put a rock through the window of somebodies apartment/car in the parking lot.
The only way to get this civilization back on track is to starve the inflation/taxation beast. Violence, and even passive aggressive non-violence will not do it. Yoda says "Don't spend any wooden nickels to buy Chinese finger (hand)cuffs."
Change through action in the street is dead. The whole world isn't watching.
What selective data fitting.
While it is correct that US spends about 40% of its budget on SS, Medicare and Medicaid. Gross conveniently ignores the fact that Social Security taxes bring in about 33% of revenues. So the NPV of social safety net programs are calculated at $ 65T, what is the NVP of unfettered defense spending~infinity no! There is no such a thing as UNFOUNDED LIABILITES. All government transactions are settled on CASH BASIS.
Let's suppose all social safety net programs are gutted, does anyone think that FICA and Medicare taxes will be scrapped or used to offset taxes that should be collected from the wealthy like they been used now for over 40 years.
Bill Gross is a pig that makes money from debt and interest paid by the average American.
The retirement fund brings in most of the money, and is sound or can be with minor reforms. In order to fix the medical part, the medical "oligarchy" has to be exposed to the free market. Taking grandma's walker away will not fix this.
Wow!! More fear mongering....
1. Bond sales do not fund spending.
2. The US is not a business or a household. It does not matter if debt is greater than income.
3. US debt is denominated in currency that we issue!!!
4. You cannot have hyperinflation without full employment and full US production. We are nowhere near that.
5. Money supply does not affect aggregate demand.
6. Everyone knows our debt situation, so why do people still buy our debt? (here's a hint: The US cannot default)
All the defaultistas do is talk about "what ifs", I have yet to see some actually layout a scenario step by step that ends in a US default.
you should refrain from posting until you have spent a little more time on ZH
Every single statement is wrong or incomplete.
It is also amazing how many people in the govt, financial sector that do not know how our monetary system actually works. Articles, posts like these just show how ignorant most people are about the working of our system.
Gross and crew may be maggots but they know how the system works (graft, corruption in high places, tbtf wink, wink guarantees, flip that t-bonds, bps shaving). They want more for themselves and none for anyone else. I don't get the sense you even understand the argument put forth by the article.
Just when I think I have heard the stupidest possible arguments, along comes somebody such as this with literally negative intelligence. Such lame, simplistic, pro-Establishment Keynesian diaperfiller deserves no further response (unless it was intended as sarcasm, which, being so completely and unquestioningly idiotic, is entirely plausible. Please tell me that it was!).
Please tell me what is wrong with my arguments. All you people treat monetary policy as if we are still on the gold standard: FYI: WE ARE NO LONGER ON THE GOLD STANDARD. You must change your way of thinking. We are not Greece, Ireland. They do not issue there own currency in an variable exchange rate system. We do.
I am fairly certain each time you post you add to your accelerating blizzard of fallacy.
Ireland DID actually issue Euro to pay their own debt, just as we do here in America. Link to that ZH article anyone?
No one wants to explain anything to you because the beginning is not ZH it is here: http://mises.org/resources/5706
It is a free .pdf DL, the link is not meant to be insulting, this is a great read for anyone. Well written and wry.
Hazlitt's Economics in one lesson is also very good, shorter, and slightly more advanced.
Actually the ECB is the funder of euros. Please do your research.
dootyfree, you are obviously new here. Stick around, read the articles and teach yourself. No one wants to make that effort.
Not that new actually, just tired of the misinformation thrown around here.
4. Idiotic fail
5. Complete misunderstanding of HYPER-inflation..
6. Solution; every country print up your own funny money prosperity for all forever..
Go back to yahoo or huffpo or wherever the hell you heard this claptrap..
4a. Instead of rhetoric, how about explaining your position.
5a. Why don't you explain HYPER-inflation to me then....
Your comments mean nothing.
4.a How about you tell us how it was possible that the various historic examples of Hyperinflation around the world worked without full employment and full production of that country.
Warren Buffett when asked about foreigners holding more and more of our debt. From a recent interview.
"Everything that we have is denominated in our own currency, and that’s a tremendous advantage."
You are a genius.
Hahaha!
Sarcasm right? Right?!?
lol! is this guy serious?
'You cannot have hyperinflation without full employment and full US production. '
explain please?
My understanding of both Wiemar and Zimbabwe is that neither is or was an economic powerhouse and neither has full employment.
You may be correct about the default issue but not for any of these reasons...
Too many dollars chasing the US production at full capacity. Even then hyperinflation could only occur if the public lost faith in the US dollar. Hyperinflation is more psychological then monetary.
For people like Bill Gross, the word “reform” means that other people need to take a cut in the money they were promised even though it was the Congress and the bankers who looted the accumulated surpluses in the Social Security Trust Fund and left just a stack of worthless I.O.U.s.
As economist Lawrence A. Hunter wrote in January on Forbes.com, it’s time Congress paid back what it looted.
Says Hunter:
“For more than a quarter century after the 1983 amendments to Social Security, the federal government collected more in Social Security payroll taxes each year than it paid out in benefits. Those surplus revenues were supposed to be saved, but instead Congress spent every last dime of them and replaced the excess payroll tax revenue it looted from the Social Security Trust Fund with I.O.U.s written to itself. At the end of 2010 the federal government owed the Trust Fund $2.61 trillion.”
Hunter, president of The Alliance for Retirement Prosperity began with others a campaign in the late 1980s called Stop the Raid on Social Security when he left the Reagan White House. He concludes his article:
"It is time Congress paid restitution for the trillions of dollars it has looted from the Trust Fund. That means it is time Congress stopped spending on special interests to buy votes and redirected that special interest spending to redeeming Trust Fund I.O.U.s to make good on our promises to seniors. It is time for Congress to reverse the raid and restore trust to the Trust Fund by replenishing it with real dollars recovered from cutting other spending, not by borrowing from the public, cutting benefits or raising taxes."
http://www.forbes.com/2011/01/21/social-security-trust-fund-retirement-opinions-contributors-lawrence-hunter.html
strawman argument by desperate Keynesians
I agree. The banksters should go to jail. The money returned and used to pay the debt.
Now, where does the other $61.5 Trillion come from?
Amount coming in, too little. Amount promised, tooooo bigggg.
wow...brilliant. Do you work in a pre-school or just play problem-solver with your dolls?
That frankly is about all the complexity I can get my local SEIU tools to comprehend, well that and just keep yelling "give us the money"..
I swear to God I know how to fix this but nobody listens. Suspend the use of math. We will be fine.
I wonder Why German are happy today?
I thought the FASB already partially imposed that?
Off topic, I apologize; does anybody have any intel on UAL Flight 251? I'm not talking about the swill the kids upstairs are drinking. I'm wanting the good stuff.
What I don't understand with all the naysayers is that Bill is correct about the conversion of unfunded liabilities becoming on book and requiring to be paid. Nobody is suprised by his comments. For someone running a fund as large as PIMCO's TRF, I think I will give Bill a pass - maybe he is just joining the dark side like the rest of us.
We know this thing is going tits up.....it is just a matter of the velocity of all financial inputs to determine when the event will occur.
THIS IS ZIMBABWE M'FERS!!!
BLACKHAWK BEN WILL PRINT USE QUANTUM COMPUTING TO PRINT QE INFINITY^2 ELECTRONIC DOLLARS WE WILL NEED SUPERCOMPUTERS IN EVERY WALMART CASHIER TO CALCULATE OUR RADIOACTIVE GLUTEN-MADE IPADS!!!
Hello Mr Gross,
Care to tell the rest about the plans? I'll be pointed & let the victims do their own research.
Least developed Countries
http://www.unohrlls.org/en/ldc/related/62/
Countries in arrears under Article 19 of UN Charter
http://www.un.org/en/ga/about/art19.shtml
http://www.un.org/en/documents/udhr/index.shtml
Mr Gross, we have a US Constitution that has outlived this UN world government gig.
2008 photo of UN charter.
http://untreaty.un.org/cod/avl/ha/cun/photo32.html
Don't get on the wrong side of this trade. We all see the fraud & corruption within our country. The Constitution will address the echelon criminals. This includes, the active President Obama breaking the land of the laws.
Many of us weigh this New World Order via United Nations, World Bank, BIS, IMF, and other entities. At the end of the day, their efforts are breaking current US laws to push an illegal international agenda.
Good luck Mr. Gross & may you succeed in making the right choices. :)
So over a Great Many Years we are short..
$9.1T
$7.9T
$22.8T
$35.3T
For a Total of.. $75.1T
Which as in all of these puff pieces.. is due this year.. even though the payments are going forward for the next 20 – 50 years.
Bill Gross is out of Treasuries because.. if he doesn’t get his POMO then Treasuries like the rest of the market place will suffer… why is he still in USD if he hates fucking America based on the next 50 fucking years of what is due this year for shock value bullshit.
Move the Market.. Dog and Pony Show.. All for more Entitled Corporate Bond Purchasing Welfare..
And all of the execution freaks here.. or the help.. gets their panties in a twist because this idiot Bill Gross is pumping his own position.. which is his JOB, by the way.. to do.
It is all about POMO Bitchez and the would be, wanna be Republicants / Conservatives / Help.. couldn't wrap their smallish heads around the idea to save their combined fucking lives.
Well, the answer is sooo OBVIOUS!!! Since the real problem is MEDicaid and MEDicare, we just need to pay doctors and hospitals a whole lot less! There!!! I fixed the economy!!!
Squeeky Fromm, Girl Reporter
The US Debt will be easily serviced and paid off with 1 million dollar bills, equivalent in buying power to current 1000 dollar bills. You know things are bad when it's tough to fit enough currency in your pocket to buy a couple ounces of gold.
Bill Gross has tried to distance himself from the 'system', however in this post he shows his true colors and lives up to his last name.
So the PowersThatBe... having sucked their life blood out of main street for years now... see the need for prudence and to cut costs. Little wonder that they turn their eyes to benefits going to main street. It's a flurry of blows. First they socialise their losses via TARP, then mark-to-fantasy to hide them, then QE and a host of fed backdoor TBTF bailouts to further making them whole.
Now the coup de grace ... kill off entitlements. Nevermind the Bank bailouts (that's water under the bridge they say)... the actual cutting going forward needs to be in 'entitlements'. Granted entitlements are bloated, however we never get a rational analysis out of the entrenched interests and their every move is choreographed to spin opinion
First off, Social Security and the 2 Medixxx's are vastly different.
Anything related to health care in the U.S. has undergone this gauntlet of monied special interests that have perverted any sort of reasonable outcome and twisted it into something meant to funnel $$$ to the medical,insurance,drug,legal,hospital interests.
S.S. is rather different in that there isn't this middle man seeking to interject themselves into the money stream. It's apples & oranges, and to lump the two together is disingenuous. What's especially infuriating about social security is the way the federal government has taken in its revenue and immediately spent it. Then they had the gall to declare they were issuing the S.S. administration these 'special' bonds. What a crock of shit. With every one of those hundreds 1.5 million dollar Tomahawk missiles the U.S. warmongers recently fired off in Libya, I was thinking ... hey assholes, that's my social security contributions you're pissing away.
Bill Gross lives on his little rich enclave islet in Newport Bay.
The deductions for SS,Medicare and Medicad are insignificant to him. He'll never need these programs. For him to even weigh in on them is outrageous.
Sure, entitlements need to be cut, and so do tax deductions for folks such as Bill Gross. Taxes raised, deductions cut! (Got that, that's where the real injustices are... deductions/loopholes). And not just for him and his wealthy breathen, it applies for corporations as well. If corporations are determined to be legally equivalent to humans, then why aren't they paying the same rates in taxes (GE .. this is especially aimed at you).
This is a fairness issue basically.
Only after it has been addressed can we have a dialog about entitlements.
Watch this 4 minute routine, I think It captures some of what you were saying. GE / Taxes etc
http://www.thedailyshow.com/watch/mon-march-28-2011/i-give-up---pay-anything---?xrs=synd_facebookI was going to watch that but Conan is on and I'm kind of tired from the two hour American Idol. Which makes me wonder why Charlie Sheen has been so quiet lately. Very busy...
Well said.
I still can't believe that sheep fall for this unfounded liability ruse. Your house mortgage is unfounded liability and so is your car payment. Payments are made out of future income.
Cute comment - the difference is that they won't normally let you take out a mortgage when you're already in negative savings land. Unless its a NINJA loan of course...
Cute speech but here's reality. Around half of Americans are on the Government teat. Our good jobs are gone via politicians buying votes with short-term hand-outs and impossible longer-term entitlements. Corporations have no souls and seek to maximize profits. It is our politicians who have sold us into slavery for a pathetic amount of payoff. I love ZH but the U.S.A. is a long-shot to save itself at this point; just as planned a century ago. Cheers...
So what does any of that have to do with entitlements. If entitlements caused this max exodus of jobs going overseas then so to did things like minimum wage and other labor exploitation laws so why don't we get rid of them as well. And in no time I will be squatting in the corner of my garage eating my daily bowl of rice because my brother's family gets to live inside on M,W,F and my other brother's family gets to use the house on T,TH,S.
No, the other poster was right. Until we address the taxation disparities (and for that matter the entitlement disparities, btn corporate bailouts, bank bailouts, and individual) we shouldn't even begin to discuss this entitlement issue. And why don't we have a number and same calculation for unfunded debt going to banks as we do for Medcare/caid and Social Security? That is why don't we calculate the discounted present value of future bank bailouts and upcoming QE's to derive some gargantuan number that represents our total liability to the banks. Everyone who breaths readily admits there will be a QE3 to QE99. Put a present value on that the same we are doing for these so called entitlements.
+ 100
Until the entire matter of distribution of tax burden is dealt with there is absolutely no point in discussing "entitlements".
a) On Social Security...eliminate the cap on earnings, and impose a surcharge on capital gains income. Problem solved;
b) Medicare/Medicaid. Best argument for single payer/single provider. Remove the rent-seeking middleman known as the for-profit health insurance industry and you solve the problem. Another problem solved.
The biggest "entitlement" issue our bought-and-paid-for Congresscritters won't address is the idea that the top 1% of our income earners feel "entitled" to 90% of the nation's income.
When Warren Buffett pays a lower average and marginal tax rate than his 60K per year secretary something is very, very, wrong..... even Warren says so.
"Thank you, and like Pepé Le Pew, why don’t you try changing your stripes or at least pretend you’re a French-speaking cat. The odor in these chambers is all too familiar and a skunk needs all the help it can get"
love this...:)
Does this mean if I want to get back what I put into S.S. and this fetid whale carcass of a country that I should stop paying taxes this year or next?
Bill is probably long to the ying yang Treasuries about now...
Don’t mention the War(s). http://www.youtube.com/watch?v=7xnNhzgcWTk
Yeah! Lets skip all “entitlements” stop the Food stamps and get the draft going to start WOIII.
Bill said 'default'.
Cullen Roche in 5, 4, 3.......
Bill is covering himself. Very obvious where the US is heading and so after making sure his clients interests are protected (in 2008 and 2009), PIMCO (not just Bill himself) has decided that enough is enough. You can't really blame the guy for trying to do his fudiciary duties. He may talk his book, but at least he is doing his job. The difference between him and the banks of this world is that his clients are the ones that benefit most from his service (which is probably the pension funds of a lot of US citizens out there), while the banks are in it for themselves.
He may be a snake, but at least he is not a blood sucking vampire squid.
I'd like to ask a question. I hear much talk about entitlements like Social Security but I can't quite really understand.
All tax money originates from taxpayers, taxpayers who expect to receive benefits in exchange. Whether those benefits are educational, roads, schools, police protection or public programs, like SS.
Let's say that I am the average taxpayer. I have paid nearly $4000 a year toward SS and I have been working for over 40 years. I'm scheduled to take retirement in another 10 years, but in reality, I've lost my job, lost my home, and am facing a bleak future, because no one wants to hire a 55 year old, no matter how good they are. So now I face 10 years of trying to bring in enough income to support and sustain myself and my spouse and our household - unless they raise the retirement age, of course, in which case I will face 12 years, with no job in sight.
Now, if I had been able to take that $4000 a year and put it into something I could earn interest on, how much would I have saved today to pay for my (early, unwilling) retirement?
Now, here is my question: if SS is unsustainable and we must abolish the program, what happens to the $160,000.00 I have "invested" in SS throughout my lifetime? Do I get my money back?
And if I don't, just how do you propose I move forward from here? Just die aleady? Assuming I am about 55 - 57, that seems a little premature to me. Like aout 20 years worth.
I'm afraid that's the plan. Plan accordingly...
"All tax money originates from taxpayers"
Not in an empire... Think about how the price of oil is maintained.
Without empire what would gas at the pump cost you?
Yes, you will get pretty printed pieces of paper back. That much is pretty much assured. On everything else, like what you will be able to do with these paper pieces, good luck!
If I had a billion bucks and kept tossing it into the economy on a daily basis, think maybe there'd be some changes in sellers' behavior? How about some pricing changes if the billions were all being poured into the same limited resources sector? So how come this 'medicaid' thing just slides by with a -ho-hum- yawn and 'we need our free medical care for the elderly' acceptance? Why, oh why do 'health care' costs keep going up? How about the easy answer, at near zero cost to the consumer, expect demand to go up, and without some massive govt. project to 'encourage' people into providing the service, expect cost to go up. Or do we think the iron laws of supply and demand just don't operate because these are 'essential' services to which all are 'entitled'?
Social security, please, don't make me laugh this early in the AM. If I have to listen to another clueless boomer explain how they paid in for their whole lives and now they're entitled to a payout I may have to go on a tri-state killing spree. Sure, you paid in. But now you're buying gold because the dollar has lost 80% of it's value during the time you paid in to SS. Can you do the math? In current dollars, you paid in PENNIES, and now you demand to get back big BUCKS for the remainder of your non-productive parasitic existence. How about we make you a one time offer; We'll give you exactly what you paid in, dollar for dollar, in a single payout right now. Regrettable that when you paid in a new car was only $5k and a loaf of bread 25 cents. But hey, you liked the Keynesian clowns while they drove up the value of your 401k, so don't complain now that your actual contribution won't buy a new Cadillac, let alone support you for the next 20 years.
Recap for the ADD folks: Medicaid/Medicare cause the increase in health care costs by encouraging consumption of a limited resource in a multi-decade inflationary environment. There is no 'reform' possible because when you peel away all the feel-good propaganda around it, it's just another socialism-lite program running out of other people's money. You'll never get out of SS in inflation adjusted dollars what you put into it. Your 'Social Security INSURANCE" (SSI) was spent on your dead grandma, years ago. And your boom generation failed that quaint notion of be fruitful and multiply. Hence the population you were depending on to support you just ain't there.
Either this is a world of unlimited resources where we can just continue to connive how to transfer wealth from those who make it to those who don't, or it's a world of limited resources where any extra you get means less that I get. It can't be both at the same time. I don't care which belief you pick, just pick one and then try to logically make sense of some of the bumper sticker philosophy that gets kicked around up here as 'insightful' or 'provocative' analysis.
Bill fails to mention the most important one of all -- Zimbabwe Ben's QE infinity. Unless he includes that under "currency devaluation". But conventional default is nonsense. If the US defaults on its debt the way Venezuela or Greece might have back in the day, the notion of "debt" would simply cease to have meaning. If the reserve currency is no good, then we're back in the Dark Ages and central banking ceases to exist.
This ain't rocket science people. BUY MORE SILVER!
I'm for a quick default of this bubble economy and then a reboot back to a production base profit system.
So what if most of the paper wealth of Pimco and company falls to zero and Bill can't pay the mortgage on his new Newport mansion. He can just walk away, no?
GDP means the annual output of the economy.
The US GDP is about 15 trillion dollar per year.
This means that the US economy has an economic output of 150 trillion dollars per decade, even if the GDP is stagnant, and doesn't grow any more. In 40 years, this means an economic output of 600 trillion dollars.
Remember that when someone tell you about the "heavy burdens" of "entitlements".
And remember that the military and defense spendings are about 1 trillion dollars per year now. At this pace, the US will spend 40 trillion dollars with the military and defense in the next 40 years. Who will challenge this "entitlement"?
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Only the rich use the word "entitlement".
Entitlement programs are dragging the nation into economic ruination, I am told. Social security is a threat to our economic survival.
BS!
Raise your hands, everyone who pursued the government, demanding to be allowed to take part in the social security and medicare scam. We've all paid into that "insurance" program, whether or not we thought it was a good and viable concept. This isn't some sort of voluntary ponzi scheme.
Likewise, isn't some sort of welfare program where old people are bustin' and saggin', hats cocked sideways as they go into some welfare office, spinners on their wheelchair tires.
We have all paid EXTRA taxes to fund these insurance programs (assuming you all are legal and have had jobs), so the notion that these two programs are targeted by both major political parties is pathetic.
After all unnecessary and/or detrimental programs are defunded, THEN let's discuss social security and medicare. When there is no more Department of Education, Department of Energy, when Planned Parenthood gets not a single dime, when no dirtbag is paid tax dollars to hang a cross in urine and call it art, and when our military isn't used to pursue unconstitutional "kinetic military actions", then let's talk.