A Stunning Admission About Social Security
A stunning admission about Social Security…
Last week, the government broke the troubling news...
Social Security will pay out more in benefits than it brings in this year for the first time since 1982. Trustees for the program's "trust fund" now expect the fund to be completely empty by 2034. That's less than 16 years from now... and a full three years earlier than it estimated this time last year.
Now, this doesn't mean that Social Security will stop sending out checks at that time. You see, contrary to popular belief, the Social Security trust fund doesn't actually fund the Social Security program in any meaningful way.
If it did, we'd really be in trouble...
While the fund's nearly $3 trillion in assets sounds impressive, Social Security pays out nearly $1 trillion in benefits every year... and that figure is rising rapidly.
Instead, since the beginning, payouts have been funded almost entirely by current tax collections, with any surpluses dumped into the trust fund.
Early on, the surpluses were substantial... According to the Social Security Administration, nearly 160 workers were paying into the program for every single retiree collecting benefits in 1940.
Today, that ratio has plummeted to less than three workers for every one beneficiary... which means virtually all the money you've been forced to pay
So last week's revelation was less a surprise than an inevitable outcome of this trend...
And it's only going to get worse from here... requiring more and more money from the trust fund to make up the difference.
Again, barring any changes, the fund will run dry by 2034, at which point the program would have no choice but to slash payouts by 25% or more. (And all of this assumes the government's official projections – which history shows are typically far too optimistic on these matters – are correct.)
Of course, we don't expect to actually see that happen... Neither party in Congress is going to allow massive cuts to Social Security benefits on their watch. To do so would be political suicide. Instead, we suspect the government will eventually turn to its two favorite "solutions" – tax increases and currency debasement – to keep the program afloat.
Speaking of troubling news...
The excesses in the consumer-credit markets continue to pile up. As the Wall Street Journal reported over the weekend...
In the first quarter, the average loan term for a new car exceeded 69 months, the second consecutive quarter it had ever been above that level, according to credit-reporting firm Experian.
Also in the first quarter, new car loans originated with repayment periods of between 73 and 84 months represented more than a third of total new car loans, up from 7% of loans in late 2009.
Yes, you read that correctly...
The average loan term for new car buyers has now ballooned to a mind-boggling six years. And while lenders say they make most of these longer-term loans to credit-worthy customers who understand the risk, a recent report from
Moody's... found that borrowers who sign up for loans that last six years or longer have lower credit scores and owe a larger share of the vehicle's price than consumers with shorter loans. The loan payments also account for a larger share of their income...
At Ally, for example, borrowers with loans stretching six years or longer owed on average around 100% of the car's purchase price when those loans were originated, according to Moody's.
This can't go on forever...
Every credit "boom" eventually turns to "bust." And as regular Digest readers know, one of the biggest drivers of this boom is already reversing...
The Federal Reserve is now raising interest rates and unwinding its stimulus programs for the first time since the financial crisis. Here in the U.S., the financial "tide" is going out.
Of course, the Fed wasn't alone in flooding the world with "easy money."
Both Europe and Japan's central banks did the same... and they have continued to do so as the Fed has reversed course. But that may not be the case much longer.
In short, despite recent turmoil in Italy and Spain, the European Central Bank ("ECB") is reportedly set to announce the end of its own stimulus program as early as this week. As news
[The ECB] is likely to signal on Thursday that its €2.55 trillion bond purchase scheme will end this year, a key move in dismantling crisis-era stimulus...
The ECB has already said the €2.55 trillion ($2.99 trillion) asset purchase program's fate will be on the agenda on Thursday but ECB President Mario Draghi must decide whether to declare the end or wait until policymakers next meet in July.
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In today's mailbag, a Stansberry Alliance member shares his recent experience in China... and two others respond to Porter's Friday Digest on fatherhood. What's on your mind? Let us know at feedback@stansberryresearch.com.
"I was part of the group attending the [Asia Investment Opportunities Conference] organized by Steve Sjuggerud. What an
"Your team has many pictures taken during this trip which will show you and others at Stansberry what I am referring to.
"The lower area of China next to Hong Kong is being called the Greater Bay Area which is now being developed as the new major transportation hub which will include all the advanced technology companies and is the area which will be the center of their planned new silk road to connect China with many areas including Africa.
"Steve and his group have lots of details about what is coming. America needs to take note of what China is doing, as they are on their way to becoming the new economy of the world." – Paid-up Stansberry Alliance member Doug R.
"Porter, you are not my dad, but I want to thank you as if you were. I feel blessed to have 'met you' so many years ago (when an Alliance membership cost about the same as a big screen TV).
"You and your team are my mentors, and I learn more from every day. My daughter is 10, my son is 6. Like you, I read to them daily. Soon, I will read your newsletters with my daughter, and my son when he isn't so easily distracted... I took advantage of your OneBlade offer. I already have my own, but I can't wait to give a set to my dad and my brother. Thanks again. Talk soon." – Paid-up Stansberry Alliance member Jake B.
"Thank you for the Father's Day reminder! Almost every day I encounter denigration of the role of fatherhood in ways both subtle and overt. I grew up without a father in the home, and although a grandfather and an eighth-grade teacher went a long way towards filling the void, there still exists today a hole where a father should have been. Not because he was never there but because he wasn't there at the important times.
"My family today includes ten members that call me Dad and five that call me Grandpa. Six adopted, one I caused and three more that joined our family through foster care. As I adopted the first five as a group (aged 5, 4, 3, 3, and 2 years old) and they had been heavily traumatized, I sold my business and spent that first year mostly learning the role of fatherhood but more important, just being there. One day, still firmly etched in the family memory, the family dog was struck by a car and killed. Even now, 20 years later, my sons and daughters remember how important to them it was that I was there.
"Every investment or employment decision I made from then on was based on how it would affect my ability to be there for my family. One of my sons had severe asthma and since I was a licensed respiratory therapist, I was his primary caregiver when he was in trouble. When my oldest son fell off the monkey bars at school and broke his arm, I was the one who came to the school to get him. They saw it as both magic and annoying that somehow I was always there. Especially annoying when my presence interrupted something they should not have been doing.
"In August of 2014, my younger daughter was married with two young sons. I received the phone call no parent wants to get from a State trooper 2500 miles away to notify me that there had been an accident, my son-in-law was on his way to the trauma center by helicopter and my daughter and grandsons were to be taken there by ground ambulance. I stayed behind coordinating the response but had family airborne within the hour and on the ground there before my daughter woke up from surgery; unfortunately, my son-in-law never would wake up and would die the following day. We brought my daughter and grandsons back home and they have mostly recovered. For much of the year after the accident, I wished I had gone but my daughter continues to insist that I was there to hold on to, both through the people that were there on my behalf and through our telephone and video calls. Her injuries have taken a long time to heal but she has been surrounded by supportive family and, yes, a protective father who took care of the legal and insurance issues when she was not able to do so.
"Our family has had remarkable success and I am as mystified by it as anyone. We have had no substance abuse or criminal issues and our family now includes a nurse, a CPA, a Spec Ops soldier, a grocery store checker, a phlebotomist, two college students, one high school student and one younger. Some of them are weird as hell, but in a kind, respectful and productive way. My daughters have five sons between them and all are growing up to be well-behaved and adjusted young men. My widowed daughter is starting to date again but one of her staunch criteria is 'what kind of father will this man be to my sons?'. In the interim, they have their Grandpa close by and we see each other on nearly a daily basis but I have high hopes that she marries a man willing to become as devoted to them as I became devoted to her since her sons now are roughly the same age as she was when we became a family.
"Not a week doesn't go by when another parent will share the horror story of a child gone astray and asking me what I did
"The only answer I can give is that I was always there and involved; that I took being a Dad to be my highest calling and priority. We went through a period of time when my older daughters stopped calling me 'Dad' because they had been convinced that it was a label suggesting an oppressive patriarchal structure and if they wanted to take back their power, they had to stop calling me Dad and instead use my given name. That hurt a lot more than I was willing to admit, but in retrospect, giving them the freedom to experiment with those ideas eventually led them to realize that 'Dad' did not mean 'oppressive
"Fathers are important, terribly important, and we need to fight back vigorously against the idea that our responsibility and involvement ends with the donation of sperm to the reproductive process. Single moms have, by and large, done one hell of a job trying to stand in the gap and I don't need to denigrate their positive contributions to suggest that many of our social challenges might very well have their origins in what we have done to the importance of fathers and more, broadly, the family. And both your story and mine suggest that we can succeed as fathers even without the genetic connection advantage that accrues to a biological parent.
"Thank you, Porter, for your essay about your father. It is an important
Regards,
Justin Brill
Baltimore, Maryland
June 11, 2018