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The Elephant in the Room: Unfunded Liabilities

The Elephant in the Room: Unfunded Liabilities

Jul 8, 2024
Marty's Ƀent

The Elephant in the Room: Unfunded Liabilities

There are hundreds of millions of people in the West who all hold the same delusional belief; that their pensions will be there for them when they finally retire. These pension plans are structural Ponzi schemes that will end in one of two ways; the markets these pensions are allocated to will correct as more people begin to retire en masse or governments and central banks will debase their currencies to the point of being worthless to fill the holes.

The chart above shows how dire the situation is across the European Union, with some countries boasting unfunded pension liabilities that are 500% of their GDP.

The situation here in the US isn't much better with total federal unfunded liabilities at $217 TRILLION. Social Security makes up $27 TRILLION of that total. Collectively, unfunded liabilities are more than 6.2 times larger than our national debt. When broken down to the level of the citizen, each US citizen would need to cough up $643,535 to cover these liabilities. Doing some back-of-the-napkin math it seems like this may be untenable considering the fact that more than 60% of Americans cannot afford a $400 emergency expense without going into debt.

To make matters worse, these numbers don't even factor in Target Date Funds, which manage $3.5 TRILLION in retirement savings for many upper middle class individuals who have been funneling their assets directly into these retirement funds. Target Date Funds are herd funds that shift their clients' portfolios from 60/40 stocks/bonds to 20/80 methodically over time as people approach retirement age. I'm not sure if you've checked how bonds are doing in recent years but it's... not very good.

While these Target Date Funds aren't unfunded liabilities they are one of the alternatives to Social Security that millions of Americans depend on to meet their financial needs in retirement and their under performance simply adds to the collective pain Americans have to look forward to when they go to retire.

This is the elephant in the room that nobody in a position of power wants to talk about. Sure are those on the conservative side who pay lip service to the growing unfunded liabilities problems, but no one ever presents any solutions. That's probably because there really aren't any good solutions.

Again, the only way out is to admit that they're underfunded, not getting paid back what they paid in in full and everyone needs to figure out what they're going to do without, or print money to fill the gap, which would ensure that everyone gets their monthly stipend but can't buy much with it.

Anyone who is dependent on these unfunded programs should do what they can to diversify away from the systemically fragile fiat system dependent on liquidity flows from money creation and toward hard assets like bitcoin that cannot be manipulated by central planners. No one is coming to save you and no amount of wishful thinking can make the math work. Western governments have bit off more than can chew with the promises they've made to their citizens and they will inevitably choke on these empty promises.

Final thought...

Adding some baking soda to your meatballs really elevates the texture.

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