Massive Unfunded Liabilities Will Continue to Weigh on TaxpayersAdam Gardiner
How much money does the US government owe? If you answered $22 trillion, you’re right… but only partially so. The national debt is hovering at around $22 trillion, a staggering figure of itself, and one that exceeds the nation’s entire economic output. But that’s not the full amount the government will have to pay in the future.
A recent report published by Truth in Accounting puts the US government’s full liabilities at an astonishing $105 trillion, a sum that’s so enormous that it will likely never be paid off. That $105 trillion figure includes nearly $35 trillion in Social Security liabilities and nearly $50 trillion in Medicare liabilities. With a population that continues to age and that will continue to demand the government benefits that it is owed, those sums will likely only grow larger, not smaller.
The costs to taxpayers will be massive, and whatever can’t be paid for out of the existing revenue stream will have to come from higher taxes or more issuance of debt. Either one of those methods will result in an ever-growing inflationary spiral as the Federal Reserve monetizes that growing debt to pay for those benefits.
Without major structural changes, federal government spending will continue to grow exponentially over the next several decades, severely harming taxpayers and retirees. Those who hope to leave the workforce and enter retirement in the coming years will find themselves with a finite amount of savings, an ever-growing cost of living, and higher taxes to pay for the government’s growing liabilities. Investors who don’t take steps to prepare for that higher cost of living now will find themselves unpleasantly surprised in the future.
That’s all the more reason for investors to diversify their portfolios by investing in assets that aren’t reliant for their value on the strength of the dollar. With the dollar weakening year by year due to inflation, dollar-denominated assets face a never-ending hurdle that investors have to overcome.
Compared to assets like gold, which not only maintains its value against inflation but also has outperformed stock markets over the past few decades, dollar-denominated financial assets such as stocks and bonds will become increasingly risky investments as the US government’s fiscal situation deteriorates. Don’t wait until it’s too late, start diversifying your investment portfolio with gold today and stay ahead of the curve.