The last two Administrations, Republican and Democrat, doubled government debt during their time in office. George W. Bush increased the national debt from $5 trillion to $10 trillion. Barack Obama doubled it from $10 trillion to $20 trillion. Obama did have the 2008 financial crisis to clean up, but the crisis had abated by the end of 2009, and deficits ran over $1 trillion five times during his two terms.
The public has largely been conditioned to not be concerned about deficits and debt. Former Vice President, Dick Cheney, famously was quoted as saying “Deficits don’t matter!” (Cheney was taken out of context, he was referring to the fact that the public doesn’t believe they matter, as opposed to whether they actually do or don’t).
It is important to note that these figures above are merely a drop in the bucket as to the true nature of our debt liabilities. Unfunded liabilities and state and local debts dwarf the size of the officially reported federal government’s public debt. Just consider some of the numbers:
1) ALL State Debt: $1.2 trillion
2) ALL local municipal debt: $1.8 trillion
3) Social Security unfunded liabilities: $20 trillion
4) Medicare unfunded liabilities: $30 trillion
5) Unfunded pension liabilities: $6 trillion
The personal household debt for each individual household is currently $19 trillion (consumer debts, credit cards, auto loans) and this does not include mortgages and student loans – which the Federal Government has guaranteed. The total debt per household if we were just to pay our federal liabilities is $997,000 dollars. It may exceed $1 million per household by the time this blog goes to print.
How can we create so much debt? Ironically, a US balance sheet would look pretty good. Assets total $149 trillion, debts total $122 trillion, combined with annual revenue of $3.5 trillion……for now, on paper, we are a safe bet for lending purposes.
There is also the matter of the currency – the dollar remains the global reserve currency. Used in over 60% of all transactions and over 80% in all banking transactions on the planet, the reserve currency status allows us to borrow cheaply and to print money easily. But This may not last forever – for the last decade adversaries such as China and Russia have been attempting to move global finance towards different currency options or a global currency. For the first time, allies such as Europe are now helping in this regard. The world will change, and so will your retirement portfolio, in ways we cannot imagine if they are successful in replacing the dollar’s reserve currency status.
But being credit worthy to borrow is not the same as being able to pay. Current budget projections do not show us managing, or paying down debt, but increasing it. Ominous headlines include notes in your annual social security statements which read:
Fixing the debt will require sacrifice and hard work, and it needs to be done now before it is too late. Spending restraint, entitlement reform, and additional tax reform could go a long way towards reducing deficits, but that is just the starting point. And that assumes a political will that our leaders have not exhibited in some time.
You should not risk your retirement future on unreliable government promises. Make sure to contact our office and ask for a financial review from one of our agents…..let’s make sure you are protected from market loss – and government incompetence.
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