Why economics matter
The real state of affairs for the USA is dire. The TV news or your politicians won't tell you that, because it is business & political suicide. But the real economic data matters for your daily life and it is the reason you are and will continue to be constrained.
Here is the stark reality of money for you and your family in 2019.
- Anyone reaching or above the age of 65 around the year 2030, will unlikely have any social security available to them for financial support
- Anyone reaching or above the age of 65 around the year 2030, will unlikely have any free medical services available to them
- In order to negate the above conditions, we would need to double everyone's income tax (rich, middle class or poor) and likely impose a 35% sales tax on all goods & services
- Additionally the purchasing power of the $USD will be so diluted, that a tank of gas could cost $150 as an example
- No one is willing to address this situation because it is political suicide
Sounds pretty stark and scary. It is real. I'm sorry to tell you this, but the reality is that there won't be any govt money for you when you retire. There just isn't enough available.
Now many will call me a scare monger with this, but I'm basing this on simple economic reality. We are spending ourselves into oblivion. And because raising taxes is considered political suicide, there is little or no will in Washington to address this. The reality is that it is like eating food. You can continue to pretend to yourself that eating pizza, burgers and ice cream is fine and you won't get fat. Then one day you step on the scale and the "oh my god" situation occurs. Maybe that is enough to have you start a diet. Maybe you choose to live in denial and continue on your merry way. The US government and citizenry have chosen the latter when it comes to an over-spending problem.
What are we over-spending on?
First, we have been doing this for a while so we have a $21 trillion dollar current debt load. We pay interest on that massive debt. Imagine if that was a credit card bill. You'd never get on top of it. Well that is exactly what has been happening for decades. We continue to ask federal reserve & bankers to print more money, and all this does is dilute the value of a $1. The more you put into the economy, the less each is worth. That's basic physics. You can't pretend away physics.
Then we have administration after administration who spend trillions on military purchases, war campaigns, etc. to police the world. In many cases, into countries that don't want the US there. We have a "fight them over there, so we don't have to fight them here" approach. But so much of the time there wasn't a fight to begin with. We destroy the sovereignty of foreign countries while doing the same to our own citizenry. And this all costs trillions. We have to pay for that from somewhere.
Meanwhile we are committed to funding our baby boomers in their retirement, which means about $84 trillion of unfunded future liabilities that runs out of funds around 2030. That is 11 years away as of the date I write this article. Not very long. I mean 11 years ago, the iPhone first came out. So think of the time period since the first iPhone to today to get a sense of just how close that time period is.
Of that money, a large portion of it goes to Medicare. I've written previously on the Outrageous cost of US healthcare. But rather than address this at the service level, we are assuming that we can't change the cost structure so better if no one gets healthcare. How that is a realistic strategy has me completely confused. But it is how things are being treated right now.
At the time when people need healthcare the most, they will be denied it. Of course, if you have money you are welcome. But if you don't have social security and you don't have Medicare, then it is unlikely you won't have money to pay for healthcare. We've already been seeing a reduction in the average lifespan of a US male to 76.1 years, which represents a number of years of continual decline, despite the advances in medical techologies, etc.
Yes folks. It is dire.
So I've given you 11 years notice of the pending money running out. You've been warned. If you want to live in denial and follow the fiction that some smart cookie in Washington will save us, then I have some swampland in Florida to sell you. You know in your heart that this is not going to happen. It is time to realize only YOU can save you. So maybe it is now time to start to get frugal and save. You should have been doing this for years anyway, but it is time to stop living in an illusion that things will just get better and realize that we are going down the drain fast and we need a strategy that will help us. Not some macro-economic solution, but a YOU solution.
There are many theories on how this might be solved, but the most likely scenario that I see is the dilution of the value of the $USD to erode or absolve the current debt load. This means one thing - inflation. Yes, when inflation is on the rise, interest rates go up. So it is time, while interest rates are so attractively low, to pay off your debt. Yep, you heard me. Since you shouldn't be paying a massive amount of interest in your regular monthly payments, use that savings to pay down the principal. Your home mortgage, your car, your credit cards, your student loans, etc. Pay them all off. Sure, they want you to borrow more at this incredible low interest rates, but with inflation coming you can't do that. Learn to say NO to things you don't absolutely need and start saving.
But here's the thing.... Just saving in $USD isn't going to work. The fact is that the value of the $USD is going to be diluted so you should be saving in something that is a bit more impervious to inflation.
Everything that glitters
I'm a huge fan of Gold. I just think it has the staying power that will get through the worst economies. Sure, it doesn't really go up or down that much, but if the $USD is diluted, then Gold goes WAY up. But the thing is that you can't just buy gold on Wall Street (GLD). You need physical gold. Gold you can hold in your hand or put in your savings deposit box at the bank or bury in the backyard. Gold coins are probably the best form and I would recommend checking these guys out if you are looking to get Gold (I'm not a paid advertiser of them at all - just a believer)
Gold can be used as a direct investment or you can even put a portion of your IRA in Gold (or all of it). If you are looking down the barrel at the next 11 years, I'd say you want to have a strategy now that will get you the financial support you need because then government are not likely to be there for you. Or if some magic happens, it probably won't last more than a few years. They will try and stave off the innevitable and extend the retirement age out to 70 or something, but with life expectency reducing and not getting longer, you need to realize this is a joke.
Holding physical gold is your safest strategy here to avoid the coming economic collapse. But there is more you can do.
Although most major economies are tied to the "petro-dollar" (the $USD), there are many that will put up firewalls to protect their citizenry if the US economy collapses. You need to use the time you have now to find safe haven. This means 2nd passport, and ideally finding a "crib" somewhere outside of the USA that you can escape to until the dust settles. I believe that in the case of a pending collapse, the natives in the USA will not just get restless, but will take up arms. Sure, that sounds pretty extreme but think of the hair trigger that everyone has been living with in regards to tribal ideological political allegiance and how that is translating into gun violence. I can't remember seeing this level in the past 20 or so years. People are being "triggered" just be what they see on TV or read on social media. This is a society with high anxiety and heavily armed.
I don't want to be near this keg when the fuse runs out. It will explode and people will lose everything. Those that have saved and worked hard for their chance to be unconstrained could have their bank accounts emptied by government "bail ins" as we have seen in Cyprus after the 2008 collapse. The fact is that you don't want your wealth in one place where it can be targeted. Sure, you have to fill out forms and declare your investments with FBAR and FATCA regulations, but that is a low cost of doing business in a powder keg economy as it is now and as it will continue to get worse.
You need a 2nd passport. Check out Nomad Capitalist if you need more information about this.
You also need to look at investing in international real estate. Not only will this give you a place to go if things get really bad, but you can then take advantage of AirBnB as an income generation machine while you are not using it. Just remember that when this all goes pear shaped, everyone will want to get out. You need to already have your residency VISAs or 2nd passports in place ahead of that, and a place to stay until this all calms down.
And most importantly you can take advantage of Medical Tourism in other countries where the cost of medical care is affordable, high quality and available.
You've been warned. But what if I'm wrong?
Sounds to me like this is just prudent advice but if I'm wrong, the worst thing that could happen is that you have a 2nd passport, a pile of gold going up in value and an international place to live and rent out to make money with AirBnB. Hmmmm..... Doesn't sound much like a downside to me. But you do you. I've said enough - now it is your turn.