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The falling dollar, Social Security pyramid scheme, incredible government deficits, falling dollar are almost dragging our whole world direct to an economic collapse.

After doing some intensive research online and just noticing that for most of the important keywords like “falling dollar” , “social security” , “trade deficit” are returning less than 2.000.000 pages in Google (considering that if you type “sex” you would get 424.000.000 pages) it clearly shows that the people who should know(THAT MEANS YOU) what to do and what to expect in the future is clearly completely not aware about the times to come.

Interestingly enough these details are commonly addressed almost everyday where I work and no wonder why some people will come out even richer about what is ahead. This is one of the reasons I decided to have this blog, just to make this information freely available and give you the opportunity to be on the 10% of the people who can profit from anything that lies ahead. I recommend you to be smart and prepare yourself, specially all of us who are still young that will for sure live this chaos, START NOW!.

Before I continue, I have to express that this is merely my opinion which I exert under my right of Freedom of Speech, whatever you decide to do with this information is entirely up to you and not my responsibility as I am not allowed to give you buy or sell advise on any trading activity.

It does not matter what your citizenship is or where on Earth you live, you will be affected by the fall of the U.S dollar. I believe that such a collapse is inevitable and will have a far-reaching international effect. The U.S dollar will no longer be the world’s reserve currency. Amazing amounts of wealth will disappear into thin air, because thin air is the substance of what much of today’s wealth is comprised.

There are any number of occurrences which can cause a U.S dollar meltdown. Let’s look at a few of them.

1. The Social Security System

Social Security is considered to be an entitlement, and is therefore off the Federal budget. However, making it an off-budget item does not make it go away. The high cost of the Social Security System makes it virtually impossible for the U.S to deal with, and an economic disaster looms ahead.

At the time the Social Security System was set up, it was felt that it did not have to be actuarially sound. There were forty-six workers paying into the system for every one person taking money out of the system.

That enviable situation has changed. By the time the baby boomers retire, there will be only two people paying in for each person taking money out. Social Security already takes up 20% of Federal spending. Altogether, Social Security plus other social entitlements such as Medicaid, Medicare, housing aid, food stamps, and unemployment compensation take up a whopping 49% of all Federal spending.

At present, more money is being paid into Social Security than is paid out. However, that money is not set aside to accumulate interest and be there when it is needed to pay future Social Security costs. Instead, the money that is supposed to be in trust is used by the government to pay for current operating expenses.

2. Falling Dollar - Rising Interest

Since what the U.S pays in interest costs on the Federal debt is linked to the U.S interest rate, the Federal government has had a temporary reprieve in having to face the pattern of the past.

Even though it is actually much larger, what if we used a very conservative figure of four trillion dollars of debt (there are those who believe the debt is closer to 19 trillion), each 1% increase in the U.S interest rate creates an extra four billion dollars a year interest cost, or about 4% of Federal income. So now we have 71% of income going for social help, 20% of income for interest on the deficit, and if interest rates rise 1% from where they are now (and these are the lowest in decades), we are looking at 95% of the Federal income going out, and we haven’t even included what the Federal government spends on war, foreign aid, domestic programs such as NASA, medical research, national defense, etc.

3. The Government Deficit

The government deficit is now so large that it takes 14% of all government outlays to pay the interest on it. That means that the true cost of the interest on the debt is really as high as 20% of Federal income.

The U.S is badly in debt and it is just a matter of time until its credit runs out.

4. Taxation

High rates force more and more taxpayers into tax avoidance tactics. People begin to find ways to beat the government, and the cost of collecting taxes becomes higher than the taxes collected.

High taxes also kill business expansion and business spending. High taxes slow the economy, which in turn reduces tax receipts and, in the long run, means less Federal income. It is truly a no way out kind of situation.

Taxpayers know that some taxes must be paid in order to have government. Anarchy is not the choice of most people. They may gripe and carp about paying 15%, 20% or even 30%, but when taxes move higher, they will find ways to beat those taxes. At this moment the U.S cannot meet its bills by raising taxes any more than it already has.

5. U.S bad debt

The U.S will have to squarely face its inability to pay for the social help it has established. This will lead to a breach of the social contract. Today, over 41 million citizens of the U.S receive social help payments. In fifteen years the number will be 70 million. Because entitlements cause the people to feel that the government owes them, they will insist on being paid. But what if the government is unable to pay?

As the seriousness of the situation grows, the U.S economic system moves ever nearer to collapse. There will be a major breach of the social contract between generations, and between the government and the people.

Baby boomers are the after World War II generation (1946-1964) who were prepared for the Industrial age and are also the first generation of the Information Age.

Looking ahead just a few years, we can see that by the year 2010 a massive number of U.S citizens will begin to retire. These are the so-called baby boomers. When they begin to retire, Social Security will be paying out to over 70 million retirees. Even at current low inflation rates, the annual payments will be over US$12,500 per person. That translates to around 1 trillion dollars in the year 2010. Compare that with today’s high Social Security price tag of over $300 billion, and you can see that the U.S is looking at a tripling of Social Security benefits. By the year 2010, Social Security will be running at a deficit compared with today’s surplus.

At that time it will have to draw on the reserves in its trust fund. Those reserves are called U.S Treasury Bonds. Where will the Treasury find the money to pay off those bonds?

The government cannot do it by raising taxes. The U.S will be forced to attempt to borrow more. But the U.S is already the world’s largest debtor nation.

Who will be willing to lend to the U.S? Would you lend to someone who has no visible means of support?

Please read Part 2 of this post, Possible Solutions to avoid the World Social and Economical Meltdown.