Legendary investor Stanley Druckenmiller is warning that America’s fiscal situation could force the nation to give up on much of its social programs and entitlements.
In a new keynote speech, Druckenmiller, known as “The Druck”, says few are giving an honest look of the severity of the US debt, and most are not accounting for the massive amounts of entitlement programs that need to be paid out in the future.
Druckenmiller says that if you account for what the government owes to the future senior citizens of America, the US is actually closer to $200 trillion in debt, nearly seven times the official number.
“The fiscal recklessness of the last decade has been like watching a horror movie unfold. During the last decade, our debt grew from $15 trillion to $31 trillion today… a level of indebtment only comparable to that after WWII. But what is worse is that this debt does not account for what the government has promised it will pay you in terms of social security and Medicare. It actually assumes these payments will be zero.
In the 1950s this ‘off-the-book’ debt was small as baby boomers were just being born so actual debt was a reasonable measure of the country’s indebtedness. Not anymore. There are credible estimates that if you assume the government will pay the same to seniors in the future as it is paying today, the present value of that debt approaches $200 trillion. That’s trillion with a ‘T.”
Druckenmiller, famous for working with billionaire financier George Soros in the 1990s, says that most analysts are kidding themselves when they ignore or rationalize the US’ level of indebtedness.
According to him, the US absolutely has to get rid of some of its social programs immediately to avoid much worse consequences in the future.
“It is time that we let go of the false pretense that cutting entitlements is a choice. It is not. Either we cut them today or we will have to cut them much more tomorrow.”
The investor also warns that the “demographic storm” is already underway, with a rapidly rising tide of Americans entering retirement, but not enough funds to support them.
At time of publishing, the US national debt clocks in at $31.7 trillion.
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