And a non-hyper-inflated-away one at that!
Because, yes, while the United States' economic fundamentals have been doing nothing but deteriorating over our entire lives
And yes, nobody in their right mind would lend money to an individual with the US government's finances
There are three main reasons that I am increasingly optimistic that we Gen Xer's will receive social security AND those checks will still have purchasing power.
However, we first need to understand what threatens social security. It's not that the US government will be unable to print SS checks off and the worthless pieces of paper to finance them thereafter. That has never been called into question. It's whether those pieces of paper will have any purchasing power left to them. The federal government's debt now hovers around 105% GDP, we run deficits and not surpluses, and to finance all this the federal government, since Obama alone, has doubled the M2 money supply and tripled the M1 money supply.. Normally, these hallmark traits of insolvency would render a traditional borrower's currency worthless. Lenders would stop extending credit, and the entity would go bankrupt. But the US is not a traditional borrower, nor is this a traditional lending market. And it is here there are three reasons I predict Gen X will get as social security check...and should be incredibly grateful for it!
One, the US is the world's reserve currency.
Without boring you with an incredibly dull lesson in international economics, the world has always needed a "world reserve currency." The reason why is such a thing is very useful and therefore in demand. First, countries that want to conduct international trade may not trust each other's government to inflate away their currency. So they write their contracts and settle their accounts in a currency that is stable and everybody has faith in. In the olden days this was the Roman "denarius," in not so olden days it was the British Sterling, and after WWII (when there was no functional economy left in the world) it was - and remains today- the US dollar. Second, there is also international demand for a safe haven currency, especially amongst unstable 2nd and 3rd world economies. Even to this day, entire economies can become "dollarized" wherein there is ultimately no faith in the local currency, but there is faith in the US dollar. These forces, and more, result in a HUGE global demand for the US dollar that goes beyond what domestic demand we have here for the consumption of goods and services. And it also allows for the seemingly magical trick where we can triple our money supply, but see little-to-no inflation here at home. The short answer is, all those extra dollars were sopped up by countries in even worse shape than us.
Two, this then puts the onus on the US maintaining its world reserve currency status to ensure our future social security checks have value. And there are two reasons I believe the US dollar as the world reserve currency is here to stay (or at least as long as I need it to be before I die). First, a lot of the dollar's reserve status is due to hold-over habit. After WWII the dollar was the OBVIOUS reserve currency, even though it's fundamentals no longer warrant it now. But the world is dumb. Most people don't look up debt to GDP ratios, current account deficits, nor GDP growth. They've grown up their entire lives eating, sleeping, and breathing "the dollar is stable and has value." So you can have a financial home-wrecker like Obama come in, print off all the money in the world, and the reputation our forefathers and WWII vets gave the US will still hold in the eyes of the world's sheeple. The second reason is a bit more concrete. The US is about the only country today that could be the world's reserve currency because of its size. For example there are scores of currencies whose countries' underlying fundamentals are vastly superior to the US. Switzerland's Franc. Norway's Krone. Even Mexico's Peso (it's true! look up Mexico's finances!). But these countries' economies are puny compared to the US. Ergo, Switzerland could print off trillions in Francs in an attempt to make it the world's reserve currency, but it would become rapidly apparently the Swiss could not produce the GDP to honor all those newly minted Francs. The US, however, accounts for about 30% of the world's GDP and is a deep enough reserve of economic production that it can provide at least some modicum of value to the dollars it prints if the world so decided to repatriate those dollars and buy US goods with them. This then leads to the third reason Gen X might see a social security check, which we can highlight through China.
Three, China. More specifically, corruption.
Many people will rush to point out that China, with it's $11 trillion economy, most of which is producing PHYSICAL TANGIBLE ITEMS (not services like the US) is a better candidate for the world's reserve currency than the US. It has less debt, much higher economic growth, and on paper is a superior candidate for the world's reserve currency. There was even talk about a "BRIC country" cartel (consisting of Brazil, Russia, India and China) issuing their own currency to dethrone the US dollar as the world's reserve currency as these economies actually have more legitimate production of valuable stuff compared to the US. But there is a problem with all of these potential rivals to the US, and that is corruption.
According to The Corruption Perceptions Index, the US has a score (out of 100) of 74. This is not perfect like the squeaky clean, goodie two shoes, ass-kissing, teacher's pets of Canadians, New Zealanders, and Scandinavians, but it's CERTAINLY and DRASTICALLY better than any near-candidate competitor for the world's reserve currency:
Russia is HORRENDOUSLY corrupt with a corrupt score of 29. While China, India and Brazil all score 40, putting them on par with Jamaica, Mexico, and Turkey.
This strikes at the heart of being a world reserve currency because it's all about trust. It's all about faith. And if you are so corrupt that you don't know if the Russian mafia is going to force you into an insurance arrangement, or the Chinese government may revoke your license at anytime, or the Turkish government may declare you an infidel and imprison you, then what value does your currency have? Ergo, the purchasing power of Gen Xer's future social security checks does not so much depend on the US' sucky economic fundamentals, as much as it depends on the rest of the world just plain sucking. And given the entrenchment of communism in China, corruption in Russia, and socialism in Brazil, there's not going to be any viable contenders against an albeit imperfect Western nation that accounts for 30% global GDP.
So cautiously rejoice my fellow Gen Xer's. The curse we thought the baby boomers saddled us with - paying for their social security - may skip a generation, landing squarely on a generation that could not deserve it more. The millennials will not only pay for the baby boomers' social security, but ours as well. And I don't know what's better. That we might actually get to see a social security check. Or that it will be the entitled, whiny, leftist millennials who pay for it.
Enjoy the decline and remember to save for retirement!
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