My Life in Key West
SATURDAY, JANUARY 29, 2011
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I hit Social Security hard. The American people are getting a crock of improper information from the right. Social Security is not insolvent. It will be either 8 years or 24 years before there is a problem. Deal with the other issues at this time which are critical at the moment. Deal with Social Security later in a precautionary fashion to make sure no problems occur down the road.
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Social Security isn’t insolvent?
Guess we have different definitions of what “insolvent” means!
in·sol·vent adj \(ˌ)in-ˈsäl-vənt, -ˈsȯl-\
Definition of INSOLVENT
a (1) : unable to pay debts as they fall due in the usual course of business (2) : having liabilities in excess of a reasonable market value of assets held
b : insufficient to pay all debts <an insolvent estate>
c : not up to a normal standard or complement : impoverished
We’ll just go to that “lockbox” each month an take out what’s needed to pay the pensioners.
Oh, there is NO lockbox!
That proverbial lockbox is full of IOUs from the Treasury.
Surely the Treasury has a “treasure room” to redeem these IOUs against? Fort Knox?
No, Treasury thru the FED borrows money from China!
Now, I know it’s hard for folk to think of their precious Gooferment as being “broke”. But it is.
Not that it doesn’t have resources. Not that it is without people.
It’s short on clarity.
It all starts back in 1913 with the creation of the FED, with stops along the way at FDR’s gold confiscation, Nixon closing the gold window, and “Helicopter” Ben with his “printing press”.
What we are calling money has no intrinsic value. No scarcity. We’re lucky that we’ve pulled the proverbial wool over the world’s eyes with the “Dollar as the World’s Reserve currency”. Our new modern Dollar is worth whatever you can exchange it for. We kid ourselves that it has “value”.
(Saddam whispering, that he wanted to be paid for “his” oil in the golden dinar, was enough to get him overthrown.)
The OPEC countries and China are wising up to the scam. Their problem is how do they hit the exit from the Dollar while it still worth something. And, they are not in a position to go without the USA markets. Yet. Why do you suppose that China is buying everything in sight with its dollars? Much like the Japanese in the 80’s who bought Rockefeller Center, golf courses galore, and stuff. It didn’t save them.
Now, back to Social Security. When I was on Wall Street, everyone always worried about “counter party risk”. If I do a trade with you, will you complete the deal. Us old folks have a “moral IOU” from Uncle Sam that says we have sort of a claim on future generations for an annuity. (An annuity that pays a negative interest rate, I might add. But, let’s keep it simple.) Congress can with the stroke of pen change the terms of that annuity. (As it can with any public servants’ pension.)
Now there are any number of reasons that they abrogate the deal. It’s too expensive. It’s inconvenient. Or, there are not enough future taxpayers to make good on the promise.
So how can you say that Social Security isn’t broke? It’s not like a real Insurance Company. It makes Bernie Made-Off look penny ante.
Did you skip MC’s eckynomics class?
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