No he doesn't! The government collects money from workers and businesses for later distribution on a need basis calling it social security(*). However, at the same time it spends more money than it collects on other things and to make up the difference it borrows. As matters stand, your country is up to its armpits in debt to other people, mostly foreigners. It doesn't matter if this or that particular fund is "in surplus", as a whole - you owe! What happens to little countries like Cyprus can happen to big countries, "so stick around, kid, you ain't seen nuthin' yet"!
David -- Most of the U.S. debt is owned by Americans -- not foreigners, and it is not the huge problem you seem to think it is.And Bernie is telling the truth.
Gentlemen, allow me to provide you with Econ. 101!
Your SS programme is similar to, but not exactly the same as, a Ponzi scheme. The latter depends on a continuing supply of new entrants to keep the bubble floating. In the SS case, it depends (as you rightly say) mostly on US government bonds. The 'Good News' (sort of!) is that Us bonds have risen and risen and risen for more than 30 years - the longest unbroken bull market in the history of modern finance. The 'Bad news' is the undoubted fact that if a thing looks too good to be true then it's probably a lie!
In this case the lie is in the fact that the non-stop rise in the bond price is only kept going by the **government buying their own bonds**! They do not do this from profits made on this or that successful enterprise but simply by pushing the 'Start' button on the money printing presses. Mr. Bernanke has pressed this button so often he now has a sore finger so today it is all done by electronic wizardry. At the current rate of government printing and buying, your government will own more US bonds than the rest of the world - you were right on that point. However, the fact that the Chinese, the biggest owners, are quietly but persistently reducing their exposure should start alarm bells ringing.
You have watched the process playing out in various European countries where government-aided bubbles have swollen and then gone pop. Today **you** - not your country! - owe the world $17 trillion and by the time Obama leaves office that will have reached around £20 trillion. If I was a 'working stiff' in America I would try hard to pay as little as possible into SS and instead save my money elsewhere. The 'pop' when it comes will be deafening!
The trust fund consists of a collection of federal government IOUs in the drawer of the Social Security system. Whenever the money collected by the payroll tax exceeds the amount spent on pensions, the extra money is sent to the Treasury, which spends it on other programs and sends Social Security an IOU. When the amount collected by the payroll tax is insufficient, Social Security sends some IOUs back to Treasury, which uses money collected by the income tax to help pay that year's pensions. Some right-wing analysts have said that those IOUs are of zero value. They are right! (Write on a piece of paper that you owe $100 to yourself. Are you better off?) However, the fictional nature of the fund's value does not mean that Social Security cannot pay the pensions it owes. And when Social Security's stock of valueless IOUs has all gone back to Treasury, new arrangements can be made to supplement the payroll tax, or raise it. Whether the trust fund will "run out" in 2033, or is already of zero value, Social Security pensions will be paid if the public wants them paid, and the means will be found to pay them out of current revenue. The public does want that, and always will. People do not want their parents needing financial help from them, or being forced to move in with them, or worse, living on the street. http://www.commondreams.org/view/2012/07/29-4
Th SS system has worked great for 75 years and will continue to do so if we can keep the wealthy special interests away from it. The silly notion that these small deductions from people’s paychecks would see greater returns over time if invested in the stock market is simply not supported by the facts and is more wishful thinking than anything else. Ask most elders who have seen their 401ks disappear in the last 2 recessions, having to put off retirement and even go back to work to pay their bills, IF they can find a job these days.
Pity the poor rich people if you must but if we don’t stop bending the system to allow them to acquire more and more of the wealth, the income disparity will be so great that there will no longer be a consumer base sufficient enough to sustain the economy.
The ONLY reasons the European economies are faltering now is because of the austerity programs implemented by conservative politicians at the behest of wealthy corporate lenders. The silly notion that such tactics will reduce the deficit and generate jobs simply hasn’t panned out. It’s a theory that has been whitewashed by wealthy capital interests, who are the only real winners in such tactics.
Also note, if the SS trust funds runs out and nothing is done, it will still be able to pay about 75% of scheduled benefits. Full benefits could be paid if the SS payroll deduction is increased at that time by about 2%. Full benefits can also be achieved by increasing the deduction by about 0.1% ( or 80 cents per week) per year for about 20 years.
Incredible coincidence but no sooner had I clicked off from here to check my Inbox than this arrived from an old friend apropos something on my blog. I thought you should read it:
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt. People must again learn to work instead of living on public assistance."
No, not the Italian Finance Minister, but Cicero, circa 55BC!
Ahhhhh. Cicero was murdered and dismembered and Rome continued with profligate emperors through to A.D. 476. Rome was invaded and conquered by Germany and according to the BBC "For many 19th and earler 20th century commentators, the fall of Rome marked the death knell of education and literacy, sophisticated architecture, advanced economic interaction, and, not least, the rule of written law."
Again, by complete coincidence this morning I came across this audio presentation. It was issued by a finance company looking for business, of course, but the first 90% is simply an explanation of why the USA is headed for a disaster that will make the bank collapse of 2008 look like a piddle in the ocean - you can skip the sales spiel at the end if you like. It lasts about an hour so you need to settle down with a nice cup of coffee - or perhaps a very stiff whisky - as the man spells out the catastrophe that is coming your way when - not if - the US dollar ceases to be a world reserve currency. Incidentally, he lashes out at Republicans, Tea Partiers as well as Democrats. The signs of impending doom are all about you but, as he reminds us, the Jews of Germany took much the same attitude during the inexorable rise and rise of Adolf Hitler - everything will be alright, it'll soon blow over' - BIG WRONG!.
Well, look around, people, one by one your cities are going bankrupt and more of them would do so but for the law in some states. It is only a matter of time before some states themselves go bust. The only thing that has kept you going is the demand for dollars by other countries who can only buy what they want using dollars as the currency of exchange. That is rapidly coming to an end. When it does, the dollar will be worthless and your government's habit (and mine!) of printing zillions of them will add to the disaster. All recent US governments are to blame but there are elements within the Obama administration who will positively welcome it!
Anyway, settle back and listen to this: http://pro.stansberryresearch.com/1303EOASALYN/LPSIP3XA/
ANONYMOUS COMMENTS WILL NOT BE PUBLISHED. And neither will racist,homophobic, or misogynistic comments. I do not mind if you disagree, but make your case in a decent manner.
Bernie speaks truth...a rarity in the political world.
ReplyDeleteNo he doesn't! The government collects money from workers and businesses for later distribution on a need basis calling it social security(*). However, at the same time it spends more money than it collects on other things and to make up the difference it borrows. As matters stand, your country is up to its armpits in debt to other people, mostly foreigners. It doesn't matter if this or that particular fund is "in surplus", as a whole - you owe! What happens to little countries like Cyprus can happen to big countries, "so stick around, kid, you ain't seen nuthin' yet"!
ReplyDeleteSS is not distributed on the basis of need. It is distributed based on how much you have paid into it.
DeleteDavid --
ReplyDeleteMost of the U.S. debt is owned by Americans -- not foreigners, and it is not the huge problem you seem to think it is.And Bernie is telling the truth.
Gentlemen, allow me to provide you with Econ. 101!
ReplyDeleteYour SS programme is similar to, but not exactly the same as, a Ponzi scheme. The latter depends on a continuing supply of new entrants to keep the bubble floating. In the SS case, it depends (as you rightly say) mostly on US government bonds. The 'Good News' (sort of!) is that Us bonds have risen and risen and risen for more than 30 years - the longest unbroken bull market in the history of modern finance. The 'Bad news' is the undoubted fact that if a thing looks too good to be true then it's probably a lie!
In this case the lie is in the fact that the non-stop rise in the bond price is only kept going by the **government buying their own bonds**! They do not do this from profits made on this or that successful enterprise but simply by pushing the 'Start' button on the money printing presses. Mr. Bernanke has pressed this button so often he now has a sore finger so today it is all done by electronic wizardry. At the current rate of government printing and buying, your government will own more US bonds than the rest of the world - you were right on that point. However, the fact that the Chinese, the biggest owners, are quietly but persistently reducing their exposure should start alarm bells ringing.
You have watched the process playing out in various European countries where government-aided bubbles have swollen and then gone pop. Today **you** - not your country! - owe the world $17 trillion and by the time Obama leaves office that will have reached around £20 trillion. If I was a 'working stiff' in America I would try hard to pay as little as possible into SS and instead save my money elsewhere. The 'pop' when it comes will be deafening!
What a crock David.
DeleteThe trust fund consists of a collection of federal government IOUs in the drawer of the Social Security system. Whenever the money collected by the payroll tax exceeds the amount spent on pensions, the extra money is sent to the Treasury, which spends it on other programs and sends Social Security an IOU. When the amount collected by the payroll tax is insufficient, Social Security sends some IOUs back to Treasury, which uses money collected by the income tax to help pay that year's pensions.
Some right-wing analysts have said that those IOUs are of zero value. They are right! (Write on a piece of paper that you owe $100 to yourself. Are you better off?) However, the fictional nature of the fund's value does not mean that Social Security cannot pay the pensions it owes. And when Social Security's stock of valueless IOUs has all gone back to Treasury, new arrangements can be made to supplement the payroll tax, or raise it.
Whether the trust fund will "run out" in 2033, or is already of zero value, Social Security pensions will be paid if the public wants them paid, and the means will be found to pay them out of current revenue. The public does want that, and always will. People do not want their parents needing financial help from them, or being forced to move in with them, or worse, living on the street. http://www.commondreams.org/view/2012/07/29-4
Th SS system has worked great for 75 years and will continue to do so if we can keep the wealthy special interests away from it. The silly notion that these small deductions from people’s paychecks would see greater returns over time if invested in the stock market is simply not supported by the facts and is more wishful thinking than anything else. Ask most elders who have seen their 401ks disappear in the last 2 recessions, having to put off retirement and even go back to work to pay their bills, IF they can find a job these days.
Pity the poor rich people if you must but if we don’t stop bending the system to allow them to acquire more and more of the wealth, the income disparity will be so great that there will no longer be a consumer base sufficient enough to sustain the economy.
The ONLY reasons the European economies are faltering now is because of the austerity programs implemented by conservative politicians at the behest of wealthy corporate lenders. The silly notion that such tactics will reduce the deficit and generate jobs simply hasn’t panned out. It’s a theory that has been whitewashed by wealthy capital interests, who are the only real winners in such tactics.
Well said, Larry.
DeleteAlso note, if the SS trust funds runs out and nothing is done, it will still be able to pay about 75% of scheduled benefits. Full benefits could be paid if the SS payroll deduction is increased at that time by about 2%. Full benefits can also be achieved by increasing the deduction by about 0.1% ( or 80 cents per week) per year for about 20 years.
SS will never "go broke".
Incredible coincidence but no sooner had I clicked off from here to check my Inbox than this arrived from an old friend apropos something on my blog. I thought you should read it:
ReplyDelete"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt. People must again learn to work instead of living on public assistance."
No, not the Italian Finance Minister, but Cicero, circa 55BC!
Ahhhhh. Cicero was murdered and dismembered and Rome continued with profligate emperors through to A.D. 476. Rome was invaded and conquered by Germany and according to the BBC "For many 19th and earler 20th century commentators, the fall of Rome marked the death knell of education and literacy, sophisticated architecture, advanced economic interaction, and, not least, the rule of written law."
DeleteAgain, by complete coincidence this morning I came across this audio presentation. It was issued by a finance company looking for business, of course, but the first 90% is simply an explanation of why the USA is headed for a disaster that will make the bank collapse of 2008 look like a piddle in the ocean - you can skip the sales spiel at the end if you like. It lasts about an hour so you need to settle down with a nice cup of coffee - or perhaps a very stiff whisky - as the man spells out the catastrophe that is coming your way when - not if - the US dollar ceases to be a world reserve currency. Incidentally, he lashes out at Republicans, Tea Partiers as well as Democrats. The signs of impending doom are all about you but, as he reminds us, the Jews of Germany took much the same attitude during the inexorable rise and rise of Adolf Hitler - everything will be alright, it'll soon blow over' - BIG WRONG!.
ReplyDeleteWell, look around, people, one by one your cities are going bankrupt and more of them would do so but for the law in some states. It is only a matter of time before some states themselves go bust. The only thing that has kept you going is the demand for dollars by other countries who can only buy what they want using dollars as the currency of exchange. That is rapidly coming to an end. When it does, the dollar will be worthless and your government's habit (and mine!) of printing zillions of them will add to the disaster. All recent US governments are to blame but there are elements within the Obama administration who will positively welcome it!
Anyway, settle back and listen to this:
http://pro.stansberryresearch.com/1303EOASALYN/LPSIP3XA/