What Will Happen to U.S. Pensions if the U.S. Dollar Loses World Reserve Status?
So you think that just "working for the man" for a few more years will lead to decades of easy street retirement, do ya?
It was always a mirage.
Stick with the program as a middle or upper-middle class professional, put in your 30 to 35 years, and you will retire still having another 30 to 35 years to live the life of Riley on someone else’s dime or burgeoning value tied to a thriving stock market plus free medical care, paid for by others courtesy of Medicare. Wow… relatively rich, low expenses, and plenty of leisure for as far as the eye can see… except…
Let’s look at the numbers and logic around this fantasy multiplied by millions of people relying on pensions managed by mega-funds like Vanguard and BlackRock. First, where is money going to come from? From the dwindling and population and relative poverty of the Millenials and Gen Z? Nope, not there. Second, who is going to pay the nearly 100 TRILLION dollars of liabilities in Medicare and Social Security alone. Ummmm… I dunno. And then finally, what happens if the BRICS nations (Brazil, Russia, India, China, South Africa) team up with a bevy of developing countries and Middle Eastern oil-rich countries (already abused by U.S. policy) to unseat the USD as the world reserve currency and the basis of the petrodollar? Kablooey!
It all collapses, and quick, when it finally happens.
Now this stuff takes time to unroll, but the arrogance, ignorance, belligerence, and incompetence of current U.S. power brokering (see war in Ukraine, etc.) is speeding things up in a big way. In addition, there is the specter of globalism, in which even U.S. political leaders seem more invested in global rule than national sovereignty. Add to this trend accelerating concentration of wealth, automation, and artificial intelligence, and you have the perfect storm for the undoing of American hegemony and economy (and perhaps even democracy— we shall see).
If any of this goes down, kiss goodbye to your fat pensions, because you WILL get the money, but its purchasing power WON’T be worth crapola. And, really, its just desserts and just deserts both. The bourgeois REALLY thought they could get six figure salaries to punch laptop keys and then have someone pay them for decades at the same rate to do nothing? Social control enabled by automation and artificial intelligence is just the latest cherry on the top of a massively unsustainable system of haves and have nots. We already are in the nascent stage of some version of H.G. Wells’ Time Machine, in which a similar separation of classes gave “rise to two separate human species: the fair, childlike Eloi, and the savage, simian Morlocks, distant descendants of the contemporary upper and lower classes respectively.”
Will you really be arguing to be paid for your permanent vacations, when half of Americans are living paycheck to paycheck even WITH the U.S. dollar as reserve currency? Can you imagine the commotion if the USD loses its status as world reserve currency? We are making a good portion of the American population poor ALREADY. You can be assured they will only be cheering the destruction or a system that has screwed them over since the Reagan 1980’s and the deaf corporate-dominated U.S. uniparty (Republicrats? Demopublicans?)
One prediction: There will be an amazing evaporation of gender dysphoria. Turns out that fighting for what pronoun to use becomes WAY less important when the economic crap hits the fan and people are looking for food!
But I digress…
Collapse of materialist idols leads to freedom of the spirit
What happens when we can no longer pretend, and even those who worked hard for a pension, see their purchasing power largely vanish? Notice, what we have been sold in terms of the aforementioned life of Riley. The “good life” has NOT been construed in our decadent society as one of moral integrity, friendship, faith, family, meaningful contribution, etc., but rather, "GET MINE!” Is it any wonder that this ego-centrism and essential greed might lead to social collapse which depends upon sharing and good will to remain healthy.
Politicians use a revolving door between industry and government to get sweetheart jobs for the sweetheart deals they give big corporations. Former generals, hired by defense contractors, give “expert” gravity to unnecessary and expensive “forever wars.” State and local governments fund their operations and good-ole-boy networks with self-dealing insider-ship. It is the decadent prelude to the fall of Rome all over again. We’ve seen this movie, of the fall of once-proud empires, and it always goes the same way— hubris, arrogance, and overreach exhaust and hollow out the middle of society, including the middle class. Bread and circuses replace real social health, and, before you know it, the empire collapses inward upon its own moral and economic vacuity.
However, this is like a forest fire that clears the underbrush and the overaged trees (like Nancy Pelosi) standing in the way of a newer, more vital regeneration of life from the forest floor. We, the concerned and reality-based middle are those new shoots of life that have been parasitically been kept down by an unsustainable favoritism to the least productive, laptop pounding “managerial classes” guided by an unaccountable, corrupt and incompetent “administrative state.”
A radical realignment of values, forced by a radical rearrangement of the world
The timing is difficult to predict, but the outcome is not difficult to predict: We will likely have a collapse of a global consumerist economy and a collapse of American visions of the “good life” centered around material prosperity. Along with this, American geo-political dominance will likely fall as well, much as with Rome, and for the same reasons. As with Rome, we are bleeding our coffers spending trillions of dollars funding 800 military bases, endless wars, and expensive, ineffective war equipment all to create a world “safe for oligarchs” and not for democracy or the “little people,” who are being levied taxes for bank bailouts and other bloated corporate largesse. This will likely create a further hollowing out of the middle class and a collapse of purchasing power to pursue a material-intensive “American Dream”. In other words, America will be forced to come up with a new, non-monetary and non-consumerist dream.
Once it becomes clear, even to the lower-totem beneficiaries of crony capitalism that they too are screwed (including the laptop class bourgeois), there will all have to be some soul-searching: “Why did I sell my soul for my retirement promise of endless money and leisure, only to be “rewarded” with a wheelbarrow full of worthless devalued U.S. dollars? I am about as well off as the person who did whatever they wanted!” (This has led me for some time to counsel people: “There has never been a better time to be who you are!” Why? Because you are going to be screwed anyway by selling out. Why not simply be authentic?)
It won’t matter if your house value has doubled or tripled if purchasing power has been cut by a factor of ten. It happened in Germany after World War I, and the U.S. is following the exact same playbook. In Germany bad policies diminished the value of the the German Mark (also unbacked by gold, just like the USD), by a trillion fold (see illustration below). But let’s say it only diminished the USD by ten fold. Then your house that tripled in value from 500,000 to 1.5 million USD, is REALLY only worth 150,000 in purchasing power. You have literally had your house purchasing VALUE-TO-DOLLAR cut by two-thirds even as it increased by 300% in putative total dollars. Your pensions likewise will be paid in dollars unbacked by gold, whose purchasing power has value has diminished in proportion to the hyperinflation caused by hyper-printing money to pay off increasing interest on debt, badly considered spending, and bloated governance.
Those dream vacations will also be gone, because a cruise that once cost 1,000 dollars USD, will now cost 10,000 dollars USD.
Parallel between the U.S. today and Germany post-World War I
It is instructive to revisit the German example between World War I and II. The debacle of the hyperinflation caused by government indebtedness and mismanagement, directly caused REAL poverty and hardship among responsible citizens, and this in turn led them to turn to the rise of a charismatic Nazi, Adolph Hitler, to address their pain. I think we will have to turn to each other, because no leader, charismatic or not, can really help. Neither self-serving Trump nor corrupt Biden has the background. But let’s look at the direct comparison between post-World War I Germany (Weimar Republic) and our own:
To pay for the large costs of the ongoing First World War, Germany suspended the gold standard”. The U.S. already went off the gold standard in 1971 and now is simply printing money to support some 800 military bases around the world, while involving itself in a costly proxy war in Ukraine. This drunken sailor spending is in addition to the 5 trillion or so dollars printed to fight the “war” on Covid AND the 8 trillion or so spent on the 20-year Afghanistan/Iraq “war” that ended in withdrawal and defeat.
The German Weimar Republic thought it could pay off debts from territory and resources won during the war. That didn’t work out. The U.S. similarly thinks it can use its status as world reserve currency and its military power to endlessly access the world’s natural resources and print money at will, a move which is now creating massive inflation for middle class Americans.
The U.S. is highly indebted to other countries, such as China and Saudi Arabia, much as post-World War I Germany was to France and Belgium (which ended up occupying the industrial Ruhr valley in order to extract reparations). China could sell U.S. debt massively and plunge the value of the dollar.
If the world goes away from the U.S. dollar to an alternate world standard currency (as the BRICS nations are making moves to do), then the U.S. dollar could NOT be printed endlessly, and if it were, it would go the same way as the German mark— hyperinflation and worthlessness. Again, you and I would get our “retirement” money, but it wouldn’t buy a loaf of bread!
Subsidized materialism is not a way to live
There was a term, “affluenza,” to denote what happens when people become rich, shallow, and materialistic on the backs of others. That imbalance is now coming back to bite America. “Affluenza is described as "a painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste resulting from the dogged pursuit of more". Starting wars in other countries to maintain American access to dominance and oil has only resulted in a hollowing out of quality of life in America. The American middle class is staggering under skyrocketing inflation, profit-driven corporatized medical care which is twice as expensive as the rest of the world (and with some of the worst health results), skyrocketing prices of gas (while extending hundreds of billions of dollars to a war in Ukraine), so say nothing of a Covid debacle that made billionaires increase their net worth 30%, while wiping out small businesses and seriously challenging the health of 330,000,000 citizens.
This is not a way to live: To pay more and more and more to get less and less. To continue to dream of a cloudcuckoo leisure-land where one spends one’s millions in saved-up retirement on what exactly— on the hollowed out husk one has become by selling one’s soul to material comfort? There is a collapse of this mountain of Mammon coming, this Tower of Babel, built to reach the god of Comfort and blissful unconcern with others.
Reasserting faith, care, democracy, human contact, and spiritual confidence (and competence!)
We can do much better for ourselves if we actually respect ourselves and each other.
What are the costs of selling ourselves to American materialism on one hand and international bullying in our name on the other? We get screwed. By doing the old global dine-and-dash (“do unto others and then split”), we end up shooting ourselves in the foot. We now have two parents working full-time with advanced college degrees in a way that doesn’t buy them what one parent working full-time job with a high school diploma would have bought in the early 1970’s. The productivity is being siphoned off and not awarded to those who produced it. But there is this carrot dangling out there about FUTURE promises: It will all be worth it as your retirement plan, which is invested in morally crooked asset managers like BlackRock, will extract your blood money to pay you back from your “sacrifice” to the gods of profit.
Don’t bet on it.
Start investing now in people, in care, in spiritual faith, in community, in health. THAT’S real quality of life NOW, and not in some dim promised future material nirvana, that, believe me will not and cannot arrive. We are at the tipping point, and we need to be on the right side of history as lunacy and greed crest. j
Instead of engaging in culture wars, team up ACROSS ideological boundaries to fight for middle and working class dignity and fairness. Make class consciousness more important than skin color, gender identity, ethnic division, and sexual politics.
Massively decentralize and localize your life by unplugging from “bread and circus” spectacle. Cut your cable cord. Attend farmer’s markets. Play board games with friends. Find alternatives to the big media companies. Organize and run for local offices like school board, mayor, city council, to ensure the “good ole boys and girls” are not merely calling the shots.
Stop patronizing corporations you know are adding to the problem. Boycotts of Target and Bud Light (whether you agree with them or not), have shown to effectiveness of mass consumer abandonment of corporations.
Convert your wealth into “relationship capital” and not merely financial capital. I show a lot of ways to do this in my book, Transforming Economy: From Corrupted Capitalism to Connected Communities.
In the next few weeks I will be reposting updated articles I have written on just this economic, spiritual, cultural, and community move AWAY from the worship of empty wealth toward REAL wealth which is based in care, courage, and creativity. Stay tuned! Comment on your economic situation below!
We can do this!
I am 8 years from 'retirement' at 67. I do not anticipate receiving it, small though it would be ($500 a month approx.) Unlike my siblings, I was born without the drive to make money. The sacrifices required never seemed worth it. In the end, I am glad I gave the US government as little money as possible these last 40 years, what a horrid 'return on investment' they are. Only a fool would continue to let them handle our personal funds. They want us dead, dead, dead and they are succeeding in this goal.
Great article Zeus, points out how history is repeating itself again and again. This convinces me that there are other forces in charge of this world. From Roman times forward throughout history these scenarios keep repeating themselves. Is it a pattern in Homo Sapiens, I don't think we are that smart, thus I believe there are other forces controlling life on this planet, cosmic forces of some kind and we are just a Monopoly board game that they keep playing over and over. For what eventual outcome I have not idea and it kind of pisses me off. We are pawns of a galactic chessboard. Thank you again for all your great insight. Much love from Texas my friend