The U.S. Federal government will pay every dime it legally owes of its 18 trillion dollars of unfunded Social Security liabilities, and its 89 trillion dollars of unfunded Medicare liabilities (yes, that's 107 trillion, total.)
It will do so by instructing the Department of the Treasury to issue bonds called "Treasuries".
Foreign countries have already purchased and hold about $3.5 trillion of these bonds. China owns $800 billion and Japan owns $751 billion. The U.K., Brazil and the oil exporting countries own about $100 - $250 billion each. These countries will soon stop purchasing these treasuries, since they now realize that even if U.S. citizens were taxed at 100% of their income every year for the next 91 years (until after the year 2100), they still couldn't pay off 18 trillion (SS) + 89 trillion (Medicare) plus the existing 12 trillion (Total = 119 trillion.)
That means if ALL CITIZENS in the U.S. who pay income taxes handed over our ENTIRE PAYCHECK to the IRS, every single month for the NEXT 91 YEARS, we STILL could not pay off JUST THESE TWO entitlement programs and our current national debt.
http://www.heritage.org/research/features/budgetchartbook/Federal-Government-Revenues-Have-More-Than-Tripled-Since-1965.aspx
So, since taxation won't work, and since the U.S. government has run out of suckers to buy its bonds, the Federal Reserve (the "Fed"), under pressure from the U.S. President and U.S. Congress, will step in to buy these treasuries (indirectly from private dealers who buy them directly from DOT) using U.S. currency that is literally created, by the Federal Reserve, out of thin air. An official at the Fed types a "1" followed by twelve zeroes ($1,000,000,000,000) into a computer, clicks the "Transfer" button on his screen to transfer the "funds" to the Dept. of the Treasury's account, and voilà! One trillion more dollars just entered into the federal government's possession and into the U.S. economy.
In exchange for this one trillion dollars, the Fed now owns a bond(s) from the Department of the Treasury (a "Treasury") nominally worth one trillion dollars.
This is the modern day equivalent of a paper currency printing press, and the process of buying of Treasury bonds by the Fed in this manner is called "quantitative easing."
This has already begun. Bernanke, the Chairman of the Federal Reserve, has already done this and added more than two trillion dollars' worth of Treasury debt to the Fed's balance sheet.
"Fed's balance sheet liabilities hit record"
"The Fed's balance sheet -- a broad gauge of its lending to the financial system -- rose to $2.274 trillion in the week ended January 13, 2010"
http://www.reuters.com/article/idUSTRE60D5WK20100114
When the Treasury securities held by the Fed mature (which for a normal borrower would mean that the borrower (the Treasury in this case) has to pay back the face value of the notes in principal) the Federal Reserve simply ROLLS OVER THE DEBT. The Federal Reserve does not demand "its" money back when the U.S. Treasury Department is the debtor. Over time, the nominal market value of the Fed's holdings of Treasury debt continually grows. The Treasury department officials know, and have known for decades, that it will never have to pay back this debt (and couldn't possibly anyway--where would they get 62 trillion dollars?)
This false "creation" of wealth out of thin air by the Fed will create a real dose of hyperinflation that will make Weimar Germany, Argentina, and Zimbabwe look like a Fort Knox triumvirate, in comparison.
A gallon of milk will cost $50, a gallon of gas $100, a night out at the movies with your spouse will set you back $500, and your TV cable bill will be $2,000 per month.
(These are the actual prices for this level of inflation.)
What will NOT be increasing, however, is the size of Social Security checks, nor the caps of dollar amounts for Medicare reimbursements. These will stay at 2010 levels, which means that they will be nearly worthless for all Social Security recipients in about 5 years.
Think about it: what good is a $1,200 monthly check from Social Security when your food bill alone is $7,500 monthly?
But the U.S. will have "legally met" its "entitlements" obligations. And that's what counts, right?
See how that works, leftists? Socialism doesn't work, and thanks to leftists' creation of a socialistic Welfare State here in the U.S., and their support of Keynesian economics at the Fed, politicians have spent our country into bankruptcy (deeply beyond bankruptcy, actually), and ripped off three generations of Americans with false promises of being "socially" "secure." What a lie.