Art Cashin Previews Our $202 Trillion Destiny

Tyler Durden's picture

Yesterday's trading was a balance between Italy fears and fiscal cliff hopes-fears-and-hopes-again. While UBS' Art Cashin notes that on the bright side, this will all be over on December 21st when the Mayans predicted the end of the world, he also details what is perhaps even more fearsome - not-the-end-of-the-world as, in his words, demographics, destiny, and the fiscal cliff loom very large not just for the next few weeks but heading out over the next decade as baby boomers retire. As Cashin so wisely points out: "Somewhat lost in the posturing is the fact that the Fiscal Cliff was put in place to force Washington to address the exploding government debt problem. That problem is greatly exacerbated by the rapidly changing demographics in this country. If you fast forward 20 years until all the boomers are retired government debt (taking into account unfunded liabilities) soars to $202 trillion.  Perhaps worth remembering that "The real problem is that regardless of the resolution it will not solve anything. We have passed the point of no return. We cannot mathematically solve this debt problem. We can only slow its progression."


Via Art Cashin of UBS:

Demographics, Destiny And The Fiscal Cliff – Somewhat lost in the posturing is the fact that the Fiscal Cliff was put in place to force Washington to address the exploding government debt problem. That problem is greatly exacerbated by the rapidly changing demographics in this country. Bill Gross, Bill Frezza and others have recently explored this connection and complication. Here's a bit from a tenured veteran of Wall Street, Jim Brown of the Option Investor:

That December 7th attack launched the greatest economic boom of our time once the war was over. That was the baby boom generation. A population explosion in the years after the war increased births by more than four million a year. The "leading edge" boomers (1946-1955) total more than 38 million and the "late boomers" 1956-1964 accounted for another 37 million. Since population demographics have shown the most consumptive years are those between age 40-55 we are heading into a period where consumption (spending) is going to decline sharply as the boomers retire.


Bill Gross penned an article this week showing per capita spending drops off a cliff once people turn 65 and retire. Currently boomers control over 80% of personal financial assets, more than half of all consumer spending, account for 80% of leisure travel, 77% of prescription drugs and 61% of over the counter drugs. Starting in 2011 more than 10,000 boomers retire every day and that will continue for the next 19 years. More than 36% claim they have nothing in retirement savings. More than 35% over age 65 rely entirely on Social Security for their sustenance. A recent AARP survey found that 40% plan to work until they die because they did not plan ahead.


In 1950 every retiree on social security was supported by 15 active workers. By the end of 2010 there were only 3.3 workers for each retiree. The government believes there will only be two per retiree by 2025. A Wall Street Journal editorial a couple weeks ago highlighted the fact the government is facing not a $16 trillion debt but an $87 trillion debt if you take into account the unfunded liabilities of social security, Medicare and Medicaid. If you fast forward 20 years until all the boomers are retired that soars to $202 trillion according to Boston University.


Treasury Secretary Tim Geithner called the fiscal cliff discussions in Washington "orchestrated drama." I call it political theater or basically the same thing. The real problem is that regardless of the resolution it will not solve anything. We have passed the point of no return. We cannot mathematically solve this debt problem. We can only slow its progression. Arguing on whether the 2013 deficit will be $800 million or $1.2 trillion is wasted breath. It is still a deficit. Cutting spending does not mean you only increase the budget over the prior year by $700 billion instead of $900 billion. Until lawmakers can make voters understand the math of ever increasing spending and the disaster that is headed our way, they are just rearranging the deck chairs on the USS Titanic.

Wow! As the Boomers mature, $202 trillion. Hopefully, more on this quandary in coming days.

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Whatta's picture

does anyone else see a "Good Fed, Bad Fed" scenario developing in our future?

crusty curmudgeon's picture

Default is the only option.  Period.

Those who think we can avoid default through hyperinflation don't understand either how hyperinflation works or the nature of our debt, or both.

Dr. Richard Head's picture

The sad thing is that the establishment media is so cunning and effective in their pushing of ideas that many plebes are calling for more inflation.  Drinks on me, cuz we be fucked.

tsx500's picture

All I can see is NO FED .         Then I wake up.

CClarity's picture

Debt jubilee.  Reset.  Current tax code GONE, then simple progressive flat tax on income that includes all income not just wage; and property taxes that gear to public safety, water, rule of law etc. No mortgage deductions, no charitable deductions, no marriage or child deductions.  Taxes that are rational and therefore people behave more rationally in spending, saving, earning choices.  Do things because you "can" or it "feels good", not because you evade taxes by owning steers or donate a painting to a museum.

tango's picture

What is a "progressive flat tax"?  lol  Taxes on income are not rational unless one accepts the notion that we owe it to those less fortunate.  This is why through most of our history, taxes were mostly local.   I agree - get rid of the mortgage deduction and force people to buy houses they can afford.  (This, however, almost surely lead to gov't subsidy of the deduction.) Wealthy donors built our museums and funded colleges, libraries, theaters and hospitals through tax deductions so it's not all bad. 

In America,the "poor" have smart phones & cable, big bellies, cars and plama TVs because of double and triple taxation plus massive debt. The idea of savings is cultural.  what a society deems important makes a difference:  India, Japan, Germany and China save because it is taught from an early age.  The US doesn't because it is not deemed important. 

Shevva's picture

cuz we be fucked - depends when your currency changes to live bullets = dollars and spent bullets = cents, if you don't hold ammo you be funked.

Whatta's picture

But, how can we default on ourselves?

Bad Fed takes the old pile of fiat-backed debt and fads into oblivion....debts unpaid.

New Good Fed steps up with a fresh balance sheet and continues the farce ad infinitum!

The perfect Utopia for freeshitters!!!

indygo55's picture

The gold in fort knoz has been removed and taken as collaeral on our national debt. Even if we end the fed we have no claim to our gold since the last thirty years or so the gold has been secured at a new fed facility in Virginia. Even if there is some gold in fort knox or in new york none of it belongs to the US anymore. These foriegn families that own the fed have taken extra precautions to secure the gold before the big bang happens and pissed off americans want their gold back. Read;



AmCockerSpaniel's picture

I say; Give me hyperinflation before default, or stick it to the bankers first.

smlbizman's picture

i dont think its the voters that need to understand our position...the ones paying attention understand it perfectly...its the maxine walters, the pelosis, and on and on and on that do not have a clue...

Mike in GA's picture

"Until lawmakers can make voters understand the math of ever increasing spending and the disaster that is headed our way, they are just rearranging the deck chairs on the USS Titanic."

You caught that too, huh?  I thought that was pretty brazenly passing off the responsibility from our elected representatives back to us.  Or passing the blame off.

Dr. Richard Head's picture

Well, 48 out of 49 economists agree that the Fed will pump up assets with $4 TRILLION in new Treasury buying.  Deutsche Bank Securities believes this will be open-ended in size.  Jesus Christ! Didn't the Fed recently announce open-ended MBS purchases?  Bad Fed!  Bad, bad Fed!

SheepDog-One's picture

Groundhog Day FED! Oh....we already went all in on bonds equity and MBS purchasing? Ok...lets do that again then!

Dr. Richard Head's picture

My pops always taught me, "If at first you don't succeed, try, try again." He also gave me the advice about instanity according to Einstein.  Ben had a bad childhood apparently.

NeedtoSecede's picture

Stealing this from Mike Church (radio guy you can hear on Sirius/XM), but it might also apply: "If at first you don't secede, try, try again!"

USA: A nation in decline since 1913.

Rip van Wrinkle's picture

But none of this is, of course, priced into the market...yet.

eclectic syncretist's picture

The time is nigh when a mass exodus of workers simply choose to do nothing and collect checks from home, since the Fed's "everything is imaginary credit-based and money doesn't exist" system allows it to be so and actually promotes it.  We berate the people who are "freeloading" off the system while forgeting or ignoring the long-standing fact that our Federal Reserve system is and was intentionally designed to allow people to freeload.  Initially it was designed for the banksters and politicians to freeload off the work of the common citizen, but today the common citizens are increasingly waking up to the dawning realization of the pointlessness of working hard when the parasitic and dilutive effects of our Federal Reserve/Government system make the "American Dream" an eidelon not worth chasing anymore.  

LongSoupLine's picture

I'm still.waiting on the Art Cashin "coming to Jesus" article on his own fucked up TBTF, UBS. You can't have both fucking sides Art, Piss off you complicit old fuck. You're the floor operations version of fucking Warren Buffett...loving and trusting until the fucking cameras go off.
Fuck you UBS.

TruthInSunshine's picture

I will have to agree with this opinion. Art talks a good game from time to time, but he can't play worth a shit.'s picture

Nobody will be able to retire in 20 years...people will just go into "Re-Hirement" (greaters at wallmart)

centerline's picture

In 20 years?  That's seriously optimistic.'s picture

true...but I only said 20 years cause thats what the article mentioned....

fonzannoon's picture

No offense to anyone but honestly.....whatthefuckever. It is what it is. We are 1 month post election. They were supposed to have held this thing together with duct tape and then it was all going to fall apart right after. The S&P is 1425 and climbing. Gold is being sold off prior to them going double full retard with LSAP. Nothing makes sense and gravity apparently can be suspended. I am sure it will reassert itself but they should change the phrase to "the markets can stay irrational longer than you can stay sane".

Dr. Engali's picture

I hear you. That juicy steak is looking pretty good right now.

fonzannoon's picture

It certainly does. Prepare as best you can for the worst case scenario's. But don't forget to enjoy the time you have.

ITrustMyGut's picture

so true... endless dooms day predictions.. endless deadlines.. etc.. ad nauseum.. and yet... not a fucking thing has changed...


pretty much over the BS in so many ways

Im convinced of one thing.. no one, has a fucking clue. No oracles, prophets, intel, insiders, you name it.. 99% of it is raw shit peeps make up to get hits and reads. PM's make sense, thats simple. someday.. the paper will fade.. but not one fucking jack wagon has a clue as to when..

jmeyer's picture

Keynes said markets can stay crazy longer than you can stay solvent.

Sanksion's picture

There is a say: 'Rome wasn't build on one day'.Rome didn't fall apart on one night either.

Don't expect a doomsday, expect everything to fall apart in slow motion for decade(s): living standards, infrastructures, values shared among society.

centerline's picture

I figured something in the MENA area would really break loose by now (post-election).  I was wrong there.  The timing aspect sure is a bitch.  Lots of moving parts though.


BraveSirRobin's picture

Everyone here talks of immediate gloom and doom. It takes a very long time to destroy a nation as powerful and wealthy as the United States. We can live off our inherited infrastructure and savings for quite some time. It took the Soviet Union 70 years deplete the wealth and prosperity of the Russian Empire. It will take some time for us to collapse. The "system" is much stronger than you think. I think the question is if we stagnate and collapse (probably 15 - 20 years in the future), or a slow glide to general destitution, which will be a long, painful process over 20 - 50 years.

I think the attitudes and processes are in place for our destruction, but it will take a while yet to get there. I think we may have reached the tipping point, and it is a matter of time, but there will be time.

Lastly, going from here to there will not be a straight line process. There will be many false dawns to give us false hope, but unless we fundamentally change what we are teaching our kids and expecting from our government, we are, indeed, lost.

ReactionToClosedMinds's picture

"How long can this go on?"

We all want the answer to that question but with life/'reality' ...will never get the answer.

But we all know 'things happen' ....... often of the most unpredictable kind.  The sub-prime mortgage/MBS (and overall credit binge) was common knowledge.  When Henry Cisneros (remember him - no you don't, I bet) resigned (if you go back .....he kind of 'had to' ....) as Board member at his 'child', Countrywide Mortgage, I knew the 'end' was beginnning.   But it took Bear Stearns weakness two years later to 'alert' everyone ... then the  correct (in my principled estimation) decision to let Lehman fail .... but no one anticipated the rapid collapse of money market obligations liquidity due to Lehman's large amount of short paper, and as short term paper market facilitator, and so the seizing up of the money market funds occurred ........ where everyone nows keeps their savings versus 'FDIC' insured savings banks. 

This 'seizure' of money market instruments and potential of 'breaking the buck' of money market funds funds pricing jumped over to derivatives as everyone became spooked ...... trade out now, ask questions later ...... all of a sudden AIG was not as well-capitalized as everyone had thought .... and the same for every other TBTF bank ....hilariously including Goldman Sachs who had to go to Warren Buffett on bended knee.

Speaking of Warren Buffett, if I recall correctly, a few months ago Buffett (whether via BerkshireH or in combination with it or just personally) appeared to dramatically lessen up his on his 'take-the-other-side' derivatives exposure (risky but a sure profit margin collector trade if there is one .... if no 'shit' is about to happen).   Just prudent periodic adjustment or realization he cannot, even at his massive liquid size, backstop all the liquidity that the western central banks have unleashed into the marketplace? 

The point of the preceding is to advocate reading the two excellent recent postings ZH  re: Eliot's Paul Singer. Those two have to be must reads ...

That is all any of us can do .... try to peer into the fog of the future to spot the icebergs in time to protect your personal interests.





lolmao500's picture

In 20 years? It's already happening.

Chief KnocAHoma's picture

Awe ... Rat Farts! I knew I wouldn't ever see that money I've been paying in to SS for the last 30 years. Maybe I should quit participating.

Chief KnocAHoma's picture

Wait... to do that I would have to quit working, draw unemployment or SSI. Then I could fish and golf everyday. Sounds like a plan worth considering.

lolmao500's picture

Well better that than work so your money can go to fund the biggest terrorist organisation and bank shill on earth (the US government). Help the current system end : go on welfare and drain the system as much as you can.

Cognitive Dissonance's picture

"The real problem is that regardless of the resolution it will not solve anything. We have passed the point of no return. We cannot mathematically solve this debt problem. We can only slow its progression."

When I was 17 I found a summer job with an old craftsman who proceeded to teach me many tricks of the construction trade. Near the end of the summer I was on a roof with him as he flashed around a chimney. He carefully explained to me that you can never stop water for very long, even with huge concrete dams. After several hundred years the concrete simply crumbles away. You're much better off trying to divert the flow rather than attempting to stop it or even slow it down.

It seems Art Cashin worked with the same craftsman.

centerline's picture

In our case, the systems requries growth.  Slowing means not growing.  Not growing means cannabalizing itself for yield.  Fun fun.

Flakmeister's picture

Well, if you assume that the Health Care spending increases at its current rate you get this kind of number. In other words, Health Care will be ~40-50% of the economy which ain't gonna happen...

Garbage in, garbage out....

Kaiser Sousa's picture

and once again b 4 the FOMC announcement we get the "coincedence....

SheepDog-One's picture

I'm wondering what happens if 'FOMC' is not all in the bag as everyone thinks and we dont get the 'double secret free monies' like everyone has baked in?

Ah, probably like Europe which is suddenly basking in some kind of hockey helmeted full retard euphoria. 

Quinvarius's picture

I'd be more worried about truckloads of free money if they started trying to hide what they were printing than if they admitted it. 

SheepDog-One's picture

Problem is, they could never have found the trees and cotton to actually print what they've added in zero's on computer screens in 10 million years time.

SheepDog-One's picture

I just puke at these kind of articles projecting out '20 years from now, blah blah' yea whatever.

Quinvarius's picture

The problem must be made bigger.  That is the only way to deal with it.

WillyGroper's picture

"Until lawmakers can make the voters understand the math"

WTF, did they get a public education also? Now all of a sudden they comprehend 3rd grade math? They dug this hole & they are the ones that need to be buried in it.