Social Security: The Futile Fight For What's Been Promised

No discussion of the upcoming collapse of the bond market would be complete without a mention of Social Security.

At least, after they've lost their money in stocks, real estate and bonds, Americans will at least have Social Security to live on, right? Wrong!

You know all that money you pay in Social Security taxes? Where do you think it goes? Into current expenses and US bonds!

That's right, the feds just use the money to finance whatever fool scheme they've got going at the moment...and give the Social Security Administration a bond in return. In theory, the SSA has assets. In practice, all they've got is the hope that the feds can squeeze enough money out of taxpayers to meet their obligations.

Can they?



Professor Laurence Kotlikoff:

Social Security has also played a central role in the massive, six-decade Ponzi scheme known as US fiscal policy, which transfers ever-larger sums from the young to the old.

In so doing, Uncle Sam has assured successive young contributors that they would have their turn, in retirement, to get back much more than they put in. But all chain letters end, and the US's is now collapsing.

The letter's last purchasers -

today's and tomorrow's youngsters - face enormous increases in taxes and cuts in benefits

. This fiscal child abuse, which will turn the American dream into a nightmare, is best summarized by the $202 trillion fiscal gap discussed in my last column.

The gap is the present value difference between future federal spending and revenue. Closing this gap via taxes requires doubling every tax we pay, starting now. Such a policy would hurt younger people much more than older ones because wages constitute most of the tax base.

What about cutting defense instead? Sadly, there's no room there. The defense budget's 5 percent share of gross domestic product is historically low and is projected to decline to 3 percent by 2020. And the $202 trillion figure already incorporates this huge defense cut.

Reducing current benefits, most of which go to the elderly, is another option. But such a policy is highly unlikely. The elderly vote and are well-organized, whereas 3-year-olds can neither vote, nor buy Congressmen.

In contrast, cutting future benefits is politically feasible because it hits the young. And that's where Congress is heading, starting with Social Security. The president's fiscal commission will probably recommend raising Social Security's full retirement age to 70 from 67, for those who are now younger than 45. This won't change the ages at which future retirees can start collecting benefits. It will simply cut by one-fifth what they get.

In other words, there is no question about whether the US government will default or not. It will default. The only question is how. Will it manage to slip out of its obligations by raising the inflation rate enough to slough them off? Or will it have to officially renounce them? Will it refuse to pay retirees? Or bondholders?

Any way you look at it, the situation is interesting. Retirees, employees, loafers and chiselers - all are stakeholders in the US government. They have something to lose and will fight to hold onto what they've been promised. Bondholders have something to lose too.

So far, the bondholders have been largely protected - even enriched. Stakeholders in Greece, Ireland and other countries have begun to feel the pain. In America, the class of stakeholders is actually increasing, as the public sector spends more and the private sector spends less.

Best guess: stakeholders, bondholders, placeholders, cupholders, napkin holders - they'll all take a loss.

Regards,

Bill Bonner
(Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning)

Link -
http://www.silverbearcafe.com/private/08.10/futile.html
=============
I would agree with Bill Bonner here, everyone will take a hair-cut (loss), but perhaps some more than others!

David Rockefellers Speech for Population control

Notwithstanding the written comments at the end of the video, Rockerfeller makes some valid points!

Peak Oil, Carrying Capacity and Overshoot: Population, the Elephant in the Room - Revisited (Cont)

Are there other factors besides oil that may have contributed to the growth of the Earth's carrying capacity?

The main one that is usually cited is the enormous world wide increase in food production created by the growth of industrial agribusiness. There is no question that it has caused a massive increase in both yields and the absolute quantities of food being grown worldwide. While it has been celebrated with the popular label "The Green Revolution", there is nothing terribly miraculous about the process.

When you open up that so-called revolution, you find at its heart our friend petroleum.

Here's how it works. Industrial agriculture as practiced in the 20th and 21st centuries is supported by three legs: mechanization, pesticides/fertilizers and genetic engineering. Of those three legs, the first two are directly dependent on petroleum to run the machines and natural gas to act as the chemical feedstock. The genetic engineering component of agribusiness generally pursues four goals: drought resistance, insect resistance, pesticide resistance and yield enhancement. Meeting that last goal invariably requires mechanical irrigation, which again depends on oil.

Even more than other oil-driven sectors of the global economy, food production is showing signs of strain as it struggles to maintain productivity in the face of rising population, flattening oil production and the depletion of essential resources such as soil fertility and fresh water.

According to figures compiled by the Earth Policy Institute, world grain consumption has exceeded global production in six of the last seven years, falling over 60 million tonnes below consumption in 2006.
After keeping pace with population growth from 1960 until the late 1980s, per capita grain production has shown a distinct flattening and declining trend in the last 20 years.


Without large quantities of cheap oil, this revolution could not have occurred.

The United States currently uses over 12% of its total oil consumption for the production and distribution of food. As the oil supply begins its inevitable decline, food production will be affected. While it is probable that most nations will preferentially allocate oil and natural gas resources to agriculture by one means or another, it is inevitable that over the next decades the food supply key to maintaining our burgeoning population will come under increasing pressure, and will be subject to its own inescapable decline.


Oil and its companion natural gas together make up about 60% of humanity's primary energy. In addition, the energy of oil has been leveraged through its use in the extraction and transport of coal as well as the construction and maintenance of hydro and nuclear generating facilities.

Oil is as the heart of humanity's enormous energy economy as well as at the heart of its food supply.
Humanity's use of oil has quadrupled the Earth's carrying capacity since 1900.

As we all know but are sometimes reluctant to contemplate, oil is a finite, non-renewable resource. This automatically means that its use is not sustainable. If the use of oil is not sustainable, then of course the added carrying capacity the oil has provided is likewise unsustainable.

Carrying capacity has been added to the world in direct proportion to the use of oil, and the disturbing implication is that if our oil supply declines, the carrying capacity of the world will automatically fall with it.

These two observations (that oil has expanded the world's carrying capacity and oil use is unsustainable) combine to yield a further implication. While humanity has apparently not yet reached the carrying capacity of a world with oil, we are already in drastic overshoot when you consider a world without oil.


What are the chances that we will experience a decline in our global oil supply? Of course given that oil is a finite, non-renewable resource, such an occurrence is inevitable.

Individual oil fields tend to show a more or less bell-shaped curve of production rates - rising, peaking and then falling. Once a field has entered decline it has been found that no amount of remedial drilling or new technology will raise its output back to the peak rate.

The signals of Peak Oil are all around for those who know what to look for: the continuing two-year-old plateau in the world's conventional crude oil production; the crash of Mexico's giant Cantarell oil field last year; the U.K. slipping from being an oil exporting nation to a net importer in 2005; the fact that three of the world's four largest oil fields are confirmed to be in decline; the analysis on The Oil Drum of Saudi Arabia's super-giant Ghawar field that indicates it may be teetering on the brink of a crash; the fact that over two thirds of the world's oil producing nations are experiencing declining production; delays and cost overruns in new projects in the Middle East, Kazakhstan and Canada's tar sands.

To make matters worse, according to several analyses including a very thorough one (pdf warning) done by a PhD candidate in Sweden, the addition of new projects is unlikely to delay the terminal decline by more than a few years.

Understanding the role of oil in expanding the earth's carrying capacity brings a new urgency to the topic of Peak Oil. The decline in oil supply will reduce the planet's carrying capacity, thus forcing humanity into overshoot with the inevitable consequence of a population decline.

The date of the peak will mark the point at which we should expect to see the first effects of overshoot. The rapidity of the decline following the peak will determine whether our descent will be a leisurely stroll down to the canyon floor or a headlong tumble carrying a little sign reading, "Help!"


The first questions everyone one asks when they accept the concept of Peak Oil is, "When is it going to happen?" and "How fast is the decline going to be?" Peak Oil predictions are hampered by the lack of data transparency by many oil producers.

As a result the fully correct answer to both questions is, "We don't know yet." This isn't the whole answer, though. As with many predictions we can specify probable ranges based on the current evidence, observed trends over the last few years and published future development and production plans.

The guesses are becoming more and more educated as time goes by.

Several "heavy hitters" in the Peak Oil field have said the peak has already happened. These include Dr. Kenneth Deffeyes (a colleague of Dr. M. King Hubbert), major energy investor T. Boone Pickens, energy investment banker Matthew Simmons (who first sounded the alarm about Saudi Arabia's impending depletion) and Samsam Bakhtiari, a retired senior expert with the National Iranian Oil Company.

The steepness of the post-peak decline is open to more debate than the timing of the peak itself. There seems to be general agreement that the decline will start off very slowly, and will increase gradually as more and more oil fields enter decline and fewer replacement fields are brought on line.

A full picture of the oil age is given in the graph below. This model incorporates actual production figures up to 2005 and my best estimate of a reasonable shape for the decline curve.

It also incorporates my belief that the peak is happening as we speak.


============
To paraphrase M. King Hubbert, it appears as if our ignorance is not as vast as our failure to use what we already know.

Carl Sagan put it this way -
“When Kepler found his long-cherished belief did not agree with the most precise observation, he accepted the uncomfortable fact. He preferred the hard truth to his dearest illusions; that is the heart of science.”

Or finally, as Don Rumsfeld would put it, "this is a known unknown"!

We need to accept the Reality that Energy depletion of Fossil Fuels is coming and it will arrive sooner, rather than later.

Given the fact that our world's carrying capacity is supported by oil, and that the oil is about to start going away, it seems that a population decline is inevitable. The form it will take, the factors that will precipitate it and the widely differing regional effects are all imponderables.

Some questions that we might be able to answer (though with a great degree of uncertainty) are "When will it start?", "When will it end?", "How much control will we have?", "How bad will it be?" and "How many people will be left?"

To set the parameters of our model, we need to answer the four questions I posed above.


This depends entirely on the timing of Peak Oil.
My conclusion that the peak is occurring now makes it easy to pick a start date. The model starts this year, though a start date five or ten years from now would not affect the overall picture.


Given that oil is a primary determinant of carrying capacity, the obvious answer is that the situation will stabilize when the oil is gone. The oil will never be completely gone of course, so we can modify that to read, "When oil is unavailable to most of humanity." We know that point will come, because oil is a finite, non-renewable resource, but when will that be?

Based on the model in the figure above I chose an end date of 2082, 75 years from now.

How Much Control Will We Have?
Will we be able to mitigate the population decline rate through voluntary actions such as reducing global fertility rates, and making the oil substitutions I mentioned above.

I have decided (perhaps arbitrarily) that the oil substitutions would not affect the course of the decline, but would be used to determine the sustainable number of people at the end of the simulation.

Fertility rates are an important consideration. The approach I've taken is to model the net birth rate, the combination of natural fertility and death rates that give us our current global population growth of 75 million per year. I modified that by having it decline by 0.015% per year. This reflects both a declining fertility rate due to environmental factors and some degree of women's education and empowerment, as well as a rising death rate due to a decline in the the global economy. I do not think that traditional humane models such as the Benign Demographic Transition theory will be able to influence events, given that the required economic growth is likely to be unavailable.

How Bad Will It Be?

This question comes from the assumption that the decline in net births alone will not be enough to solve the problem (and the simulation bears this out). This means that some level of excess deaths will result from a wide variety of circumstances. I postulate a rate of excess deaths that starts off quite low, rises over the decades to some maximum and then declines. The rise is driven by the worsening global situation as the overshoot takes effect, and the subsequent fall is due to human numbers and activities gradually coming back into balance with the resources available.


Taking the carrying capacity effects discussed above into account, I initially set the bar for a sustainable population at the population when we discovered oil in about 1850. This was about 1.2 billion people.

Next I subtracted some number to account for the world's degraded carrying capacity, then added back a bit to account for our increased knowledge and the ameliorating effects of oil substitutes. This is a necessarily imprecise calculation, but I have settled on a round number of one billion people as the long-term sustainable population of the planet in the absence of oil.


The model is a simple arithmetical simulation that answers the following question: "Given the assumptions about birth and death rates listed above, how will human population numbers evolve to get from our current population of 6.6 billion to a sustainable population of 1 billion in 75 years?" It is not a predictive model. It is aggregated to a global level, and so can tell us nothing about regional effects. It also cannot address social outcomes. Its primary intent is to allow us to examine the roll that excess deaths will play in the next 75 years.
==============
With the exception of the start date, which I put down as 2005 for Peak Oil, these are very subjective issues, with many possible variations.

That said, my guestimate would be around 2 Billion by the end of this century & I hope that figure will be sustainable.

Whilst I fully recognise the consequences here, I must point out that the consequences of trying to maintain "business as usual", would be far greater!

Hi Perceptions,

Quoting experts perceptions doesn't make it right,and these arguments have been around for years!
The experts in the 1970,s claimed that by NOW we would be out of oil!
Which reflected high prices,in which made firms get off their arses and find more!
Today we have twice as much and we use three as much,since 'the end is near days' of the 70's,or thereabouts. They want U to believe in peak oil,so they can get as much mileage as possible before technology takes over oil,and they out the door with nothing to sell.
And because its logical to assume that a substance like oil takes about 1million odd years to to produced its obviously finite,a top selling point! So up go the prices,oil is used to suck the life blood out of the economy!
Don't U think they wont happen to find more oil?
How many inventors of other forms of engines have been silenced bought out,over the decades?
New sources like Canada sands once claimed by the EXPERTS again as noncommercial?
And lets talk about Australia's  Energy problems... what problems?
With our small population we have gas supplies alone that exceed 100 odd years,we have oil too, and coal  and yellow cake so what's the problem?

lerche007 wrote on Sep 12^th, 2010 at 8:04pm:


The fact is we (humans) will soon be unable to support 7 Billion people on this planet.

That fact will still remain, irrespective of what wealth some people have and I have no doubt that those in "wealthy countries" will have a better cahnce of survival, than those in not so wealthy countries.