Weekly Market Update by Retirement Lifestyle Advocates

          Despite the fact that debt excesses are the biggest threat to our economy, the collective group of politicians in Washington just passed another massive, largely unfunded spending package, ostensibly to avert a government shutdown.

          The reality is that the bill contains prolific levels of pork and will add to the already unmanageable federal debt, which is business as usual for Washington.

          In keeping with what has become a common legislative practice, the bill was introduced in the dead of night, at 3 AM on Thursday morning, just 48 hours before the deadline, to get the government funded and avoid a shutdown.  (Source:  https://www.zerohedge.com/political/gay-senior-home-dei-zoo-gender-malarkey-pork-filled-12t-spending-package-faces-uphill)

          The bill was monstrous, 1,012 pages to be exact.  It contained six of the twelve bills that Congress must pass each year to fund the government and comes with a price tag of $1.2 trillion.  The other six bills were already passed earlier in the month of March and came at a cost of $465 billion.

          That means that during the month of March, both houses of Congress authorized spending of $1.665 trillion at a time when the federal government is adding to the level of national debt at a rate of $1 trillion in new debt every 100 days.

          Both spending packages passed in March contain lots of pork.

          Citizens Against Government Waste, a non-profit group, named Senator Chuck Schumer as the “Porker of the Month” for the earmarks he got inserted into the first spending bill passed earlier this month.  This from the group’s website, announcing the ‘award’ for Senator Schumer:

In the Transportation, Housing and Urban Development bill alone, there are seven earmarks worth $12.4 million for two museums and 25 earmarks worth $30.7 million for bike paths. Sen. Schumer got $6.75 million for museums in New York City, one of which had $354 million in income in 2022. Members of Congress like Sen. Schumer use earmarks as “legalized bribery” to get votes for the appropriations bills in exchange for morsels of pork-barrel earmarks.

CAGW President Tom Schatz said, “Sen. Schumer is feeding at the trough and shoveling out billions of dollars in earmarks to members of Congress. Earmarks are one of the most corrupt, costly, and inequitable practices in history. This excessive spending will only further add to the fiscal burdens on taxpayers. Sen. Schumer should instead be working to reduce waste, fraud, abuse, and mismanagement. For his efforts to push expensive pork-barrel earmarks, Sen. Schumer was an easy choice for this month’s Porker.”

          The most recent 1,012-page bill that passed is also a pork-laden monstrosity that includes the following earmarks:

-$850,000 for a gay senior home

-$15 million to pay for Egyptian college tuitions

-$400,000 for a gay activist group to teach elementary kids about being trans

-$500,000 for a DEI zoo (diversity, equity, and inclusion)

-$400,000 for a group that gives clothes to teens to help them hide their gender.  This includes funding for chest binders, tuck equipment, and ‘counseling’ without parental consent.

Without making a political statement on these earmarks, our country’s finances have decayed to the point that austerity should be the number one concern of lawmakers. 

Instead, the reckless spending continues.

Who will pay for all this spending?

As per usual, you and me. 

Maybe not directly, but almost certainly through the inflation tax.

Given that federal spending is running at a deficit of trillions per year, it’s unlikely that the US Government will continue to find buyers for all the US Government bonds that will be issued to finance this out-of-control spending, the Federal Reserve will become the ultimate buyer of these bonds using newly created currency to do so.

That will feed the already uncontrolled level of inflation that we’ve all experienced first-hand.

In past pieces, I’ve commented on the official inflation rate, reported as the Consumer Price Index.  It bears little resemblance to the actual consumer price inflation each of us experiences.

The Chapwood Index is a private measure of consumer prices, tracking what consumers actually pay for 500 different items in 50 different US metropolitan areas.  That measure of consumer prices has seen an average annual increase of 11% to 13% over the past five years, depending on which part of the country one lives in.

Those numbers will end up seeming mild if the current spending trajectory continues.  And it seems as if it will.

In one of my recent “Headline Roundup” newscasts (broadcast Mondays at Noon Eastern Daylight Time), I offered this quote by Austrian economist Ludwig von Mises as to how all this ends:

“There is no means of avoiding the financial collapse brought about by credit expansion.  The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

In other words, if the US Government were to stop spending currency that it doesn’t have and balance the budget, we would have a financial crisis.

In this case, the financial crisis would be deflation.

On the other hand, if the US Government keeps spending more than it takes in from tax receipts and the Federal Reserve ultimately becomes the buyer of last resort of these US Treasuries, creating currency from thin air to make the purchases, then eventually, the currency will be severely damaged or fail.

The latter scenario now seems like the highly likely outcome given the current policy.

And we haven’t even discussed the underfunded liabilities of Medicare or Social Security.

First, Social Security.  The program’s payouts have exceeded revenues since 2010.  But, as ugly as that picture is, it gets even uglier.  According to the latest annual report by Social Security’s trustees, the gap between promised benefits and future payroll tax revenue has reached an eye-popping $59.8 trillion.  (Source:  https://www.benzinga.com/government/24/03/37897893/retirement-crisis-faces-government-and-corporate-pensions)

You read that correctly.  About $25 trillion MORE than the current level of the national debt and up $6.8 trillion from just one year ago!

Now, Medicare. 

According to a recent report published by the U.S. Treasury, both Medicare and Social Security are underfunded to the tune of $175 trillion.  (Source:  https://www.msn.com/en-us/money/retirement/medicare-and-social-security-are-both-in-crisis-as-underfunding-hits-175-trillion-almost-double-the-economic-output-of-every-country-on-earth/ar-BB1jcA3f)

Subtracting the roughly $60 trillion that Social Security is underfunded, we can conclude that Medicare is underfunded to the tune of about $115 trillion, or more than three times the national debt level.

$175 trillion is a number that will be truly impossible to pay with honest currency.

To demonstrate how staggering that number is, it is about double the economic output of every country on the face of the earth combined!

Examined a different way, if you total every dollar spent by the United States from 1787 to the present, it would be approximately equal to the total underfunding of Social Security and Medicare combined!

Short of allowing a deflationary collapse sometime relatively soon, the only other option is more currency creation, which will work until it doesn’t.

          Got gold?

 

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          This week’s radio program is a ‘best of’ program featuring an interview that I did on the “Financial Survival Network” with host Kerry Lutz.   

          Kerry and I discuss the current economy, China’s big real estate problem, how we might be affected, and the US real estate market. 

          Be sure to check out the interview now by clicking on the "Podcast" tab at the top of this page.

 

 

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”

                                        -Vladimir Lenin