Ice or Fire

Some say the Fed will inflate,
Others expect deflation.
From reading the Z1 report

I’ve seen debt-disinflation.

But when the funds run out at last,
And there’s no more to spend,
We know the pattern of the past
Repeats again.
The die is cast.

Over the last four years, our national debt has grown by more than $5 trillion to over $16 trillion. We have to service that debt. The Federal Reserve is keeping rates historically low but here’s the cost of paying interest on the debt for fiscal 2012: $359,796,008,919.49

What do you get for that? Nothing.

The greatest fiscal challenge to the U.S. government is not just its annual deficit but its total liabilities. Our federal balance sheet does not include the unfunded social insurance obligations of Medicare, Social Security, and the future retirement benefits of federal employees. Only in the small print of the financial statements do you get some idea of the enormous size of the unfunded commitments. Today the estimated unfunded total is more than $87 trillion, or 550 percent of our GDP.

The interesting thing about this information isn’t that it is news.  It isn’t.  Karl Denninger and I, among numerous others, have been attempting to draw attention to this for years.  What is interesting is that it is now beginning to appear in mainstream organs such as US News and World Report.

What does this mean in practical terms? Well, for one thing, you can be certain that either you won’t be collecting Social Security or what you’ll be collecting will be dollars that are worth pennies in real 2012 dollars.