Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Phantom wealth cannot possibly fund unprecedented retirement and healthcare promises.
The narrative that Social Security, Medicare and pension funds invested in stocks and bonds can fund the retirement of 65 million people is a misleading fantasy. The sad reality is we can't fund the enormous expense of retirement/healthcare for 20% of the populace out of our national earned income, and the savings that have been set aside are either fictitious (the Social Security Trust Fund) or based on phantom wealth created by speculative asset bubbles in stocks, bonds and real estate.
I explain the fraud of the Social Security Trust Fund in detail in The Fraud at the Heart of Social Security (January 17, 2011).
To tap this phantom wealth, assets must be sold at bubblicious valuations; this raise the question, Who Will Boomers Sell Their Stocks To? (June 23, 2014)
So if bonds decline by 50% as interest rates normalize (i.e. rise), and stocks fall 50% as corporate profits and central bank intervention normalize, and real estate declines 50% in most locales as declining wages meet rising interest rates, then what source of funding will replace the $30 trillion in phantom wealth that evaporated?
In sum, phantom wealth cannot possibly fund unprecedented retirement and healthcare promises. Only real wealth can do that, and central bank liquidity and the asset bubbles it inflates are not real wealth.