by Gary North
A 90% cogent article in The New York Times discusses the utter absence of any contact with reality in most Americans' retirement plans. The numbers do not come close to adding up. The article is here.
Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day...
This means that a majority of Americans have not taken seriously the economics of retirement. They have not saved. They have been faithful Keynesians. They have spent. They have borrowed to finance this spending. They have been grasshoppers, not ants.....To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. ...Most people are politically naive. ....I was warned in 1959 that the government would default on its Social Security promises. My high school civics teacher ran the numbers for us. The program would go bankrupt. It did: in 2010. The general fund is now bailing it out....
The confidence that people have in the future is based on ignorance, procrastination, and naivete. The voters do not understand how close the U.S. government is to bankruptcy. I define "bankruptcy" as follows: "the inability of the Treasury to borrow money at rates low enough to keep from producing Great Depression II, but without relying on the Federal Reserve System to lend at these low rates."
Beginning with Lyndon Johnson, the government has cooked the books. It has counted the Social Security's trust fund full of nonmarketable IOUs from the government as if these funds were investments. Then it relegated these IOUs to off-budget expenses. It counted the surplus from Social Security as income, and used this money to reduce the official deficit.
Gary North
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