Divemedic

JimmyPx makes a comment on my last post that I would like to address.

The first part is the statement that Social Security isn’t an entitlement. This is a common feeling, because many people seem to think that the term “entitlement” means free handout. That’s actually not what the term means. An entitlement is a government program guaranteeing access to some benefit, such as to welfare benefits or tax incentives, by members of a specific group and based on established rights. In other words, it’s called an entitlement because the recipient is entitled to it by law.

The second is his point that pensions are some kind of giveaway. Pensions, at least for fire personnel, I cannot speak for others, were intended as a bargain made to firefighters in lieu of pay. Back in the years following the Carter administration, fire departments were seeing lots of people leave for higher paying jobs in a private sector that was booming from the Reagan economy.

The problem is that the average hourly wage for a starting firefighter in Florida is somewhere around $17 an hour, not much more than the state’s minimum wage. Similar professions with similar education requirements get over $30 an hour. To solve this, the state kicked the can down the road by telling these employees that they could get a pension at the end of their career. This deferred the costs of higher pay.

It costs about 20% of payroll to supply a pension. This raised effective cost to about $20.40, which was still less than the cost of paying a competitive wage. The issue is that elected officials, not knowing much about economics, didn’t properly fund the pensions when they cut budgets so they could fund food pantries for illegal immigrant unwed mothers of anchor babies, as well other electoral baubles. This resulted in shortfalls that had to be made up by kicking the can down the road- just like the shortfall seen with Social Security.

So now you have people who continued working for you, even though the pay was lower, because they were looking forward to that pension. Twenty years later, they are ready to collect, and the city then tells them that they want to cut the pension because it’s too expensive. It’s akin to driving a car until it’s broken, then telling the dealer that you aren’t going to pay for it.

In my case, they took 3% of my gross pay in addition to the fact that I was paid less than my private sector counterparts. When I was approaching retirement age, they told me that they were changing the pension system. The biggest change was going to be that overtime would no longer be part of the calculation of your pension, even though they were still going to take 3% of my overtime pay. Since overtime was almost a third of what I was making, I decided to retire before the changes could take effect, even though it meant that I would get a lower pension amount. I now work as a nurse for a good deal more than I was making as a fire medic.

So we know that cutting pensions and Social Security are just ripping people off. We don’t want to cut the military. There are tons of things that the government does that one could make a good case against cutting them.

It doesn’t matter.

We are at the point where it is inevitable that the nation will collapse. All of those things will be unaffordable. They will all have to go.

It won’t happen until the collapse comes. When the checks don’t come, people will be PISSED. They will DEMAND that the government do something. History says that the something that they will wind up doing is some version of martial law.

The world’s largest bank, JPMorgan, has stated that attempts of Ukraine reconstructing their infrastructure have a 67% chance of failure. Of course, the MSM doesn’t want to hear that. They make plainly biased statements like this one:

[JPMorgan] was essentially wagering against the same Ukrainian agency that has consistently defied institutional expectations.

That statement is not only biased, but reliant on other nations continuing to borrow money that they don’t have, so they can continue to use it to bolster a failing Ukraine economy. Since the war began, the world has donated an amount equal to two years’ of Ukraine’s pre-war GDP. Since the war is only three years old, that is quite a large sum of money. I imagine if someone making $50k a year needed to borrow $100k over a three year period so they could pay their bills.

In the meantime, the nation is having its industrial and farming base systematically blown to smithereens. The only way that is going to be rebuilt is with LARGE amounts of free money. I agree with JPMorgan- any investment in Ukraine is likely to be lost.

The US isn’t far behind. Canada has been the largest of the central banks selling off US treasuries since the first of the year. In fact, just the month of January saw foreigners selling a net $13.3 billion of U.S. notes and bonds. That comes after $49.69 billion was sold in December, following sales of $34.41 billion in the month of U.S. elections, November. Before that, Central Banks had been buying for 15 straight months.

While dumping treasuries, central banks across the world have been selling before using the funds to buy gold. De-dollarization isn’t a new idea, but has taken a life of its own after the U.S. froze Russian assets. Central banks added 1,045 tons to global gold reserves in 2024, exceeding 1,000 tons of gold purchased for the third straight year. That’s why gold prices are surging. It seems that Central Banks are thinking that the US dollar isn’t the safe haven that it used to be.

With other nations, particularly China, in the middle of dumping US treasuries, the Fed is bolstering the dollar and attempting to keep the interest on the debt low. They are doing this by buying US treasuries, in other words, they are monetizing the debt- printing more money in order to pay the bills. The Fed purchased $43.6 billion in 30-year bonds during the second week of May alone.

Of the $37 in US government debt, the Fed holds about an eighth of it- 12%. The US government owns about 20% of that debt, mostly because they have to repay what they “borrowed” from the Social Security Trust fund. In other words, there is no trust fund, because they already spent it all.

The Fed is playing a game here- they are buying Treasuries when inflation is low, then selling them when inflation is high. This allows the country to pay back the debt using inflated dollars. Of course, we continue to borrow and spend at a rate that is higher than the Fed is monetizing it. That means it is in the Fed’s (and our government’s) best interests to have high inflation. Why? It allows them to spend more money, which is how they simultaneously buy votes and make themselves rich through graft, corruption, and kickbacks. As our debt gets larger, expect more of this.

That’s why the DOGE team found so much wasteful spending, yet weren’t able to get either party to cut any of it. For example, the US paid $10 million a year to fund circumcisions in Mozambique. Why are we paying for that? The powers that be claim that it’s to prevent the spread of HIV. That’s crap. For one, it isn’t in the US interest to pay for medical care for other countries, and for another, you can assume that most of that money is being wasted or redirected. We are borrowing ourselves into the poorhouse to pay for medical care for an African nation with money that we don’t have.

Yet when Elon Musk and DOGE found dozens of examples of wasteful spending, the members of both parties couldn’t find it in themselves to cut that spending. This is why Musk finally quit. His quote on Social Media was “I tried my best.” All it did was make him hated by half the country, while not doing a thing. The only thing you can conclude from this, is that the Republicans are just as crooked as the Democrats. They are all stealing us blind.

So what does all of this mean? It means that the nation’s economy, followed by its government, is going to collapse. I’ve been saying that on this blog for nearly the entire 18 years of its existence and was saying it to others for years before that. In fact, my econ professor in college, an avowed socialist, gave me low grades on a few papers for making those same claims in college papers.

Anyone who thinks that this fiscal ship can be righted is simply deluding themselves. This nation’s economic ship is going down like the Titanic, and the only question remains is what will replace it. History shows us that the new government will result in far less freedom and will be far more Orwellian, a result of the people who have lost their bread and circuses demanding that daddy government step in and restore their freebies.

Food for thought.

Global wealth manager UBS has released a report that says the government may make its growing debt more manageable by turning to additional financial repression measures that would artificially lower the yield on government bonds. The way that this works, is the government wouls be deliberately keep interest rates low and allow inflation to rise to devalue the government’s debt by paying the debt with inflated dollars.

This strategy lowers the interest rate on the debt, and makes it easier to pay the debt by making the interest rate on government debt lower than the rate of inflation, which allows the government to pay yesterday’s debt with today’s lower valued currency. This is yet another hidden tax, as savings and other assets denominated in dollars lose value to inflation faster than they gain value from returns.

“For a country as large and wealthy as the US, widespread financial repression seems feasible and could enable the government to continue financing a growing debt burden without materially increasing its risk of default.

Financial repression policies could be deployed temporarily to provide fiscal breathing room, allowing for budget consolidation and improvement, followed by a phase-out and a return to more conventional policy settings. In such a scenario, economic distortions should remain temporary and manageable.”

Yeah, right. When has the government, any government, instituted a temporary emergency measure that allowed them to spend more money? Once this begins, you will know that the fiscal ship is sinking. Physical assets that you control are the key to navigating this particular issue.

Hard times are a comin’