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[quote=”sweikert925″][quote=”imxploring”]
People keep throwing out numbers telling us how long the trust fund is secure for and able to continue making it’s promised payments to those that paid in. But keep in mind that’s ONLY if Uncle Sam can make good on the IOUs the fund is full of.
[/quote]What you don’;t understand is that the trust fund is invested in treasury bills that are bought periodically, those bonds mature and are then redeemed and new ones issued. It is NOT like a collection of IOUs that someday have to be redeemed all at once. This has been going on for decades. There has never yet been a case where treasury bills issued by the federal treasury go unsold. Is it possible that someday that will happen? Well, yes, I suppose, but it is also true that someday I may win the Powerball jackpot.
Read more about how SS funds are administered here:
http://www.ssa.gov/oact/progdata/fundFAQ.html#n6
[/quote]There is a good chance that those bonds will go unsold. With the reckless governance and a unwillingness to make difficult decisions it is very possible that you won’t find a buyer. Forget powerball, the odds of winning are to great, no buyers for bonds many times more likely.
[quote=”sweikert925″][quote=”imxploring”]
People keep throwing out numbers telling us how long the trust fund is secure for and able to continue making it’s promised payments to those that paid in. But keep in mind that’s ONLY if Uncle Sam can make good on the IOUs the fund is full of.
[/quote]What you don’;t understand is that the trust fund is invested in treasury bills that are bought periodically, those bonds mature and are then redeemed and new ones issued. It is NOT like a collection of IOUs that someday have to be redeemed all at once. This has been going on for decades. There has never yet been a case where treasury bills issued by the federal treasury go unsold. Is it possible that someday that will happen? Well, yes, I suppose, but it is also true that someday I may win the Powerball jackpot.
Read more about how SS funds are administered here:
http://www.ssa.gov/oact/progdata/fundFAQ.html#n6
[/quote]So Uncle Sam created a built in market for his borrowing at the same time he created the positive cash flow that Social Security was for the federal government for so many year. A treasury bill is nothing more than an IOU that pays interest when it comes due. And as those treasury bills that Uncle Sam “sold” our retirement plan (Social Security Trust fund) come due and must be repaid with interest on the loan…. who pays the interest and the principal back? THE SAME FOLKS THAT THE MONEY WAS BORROWED FROM…. YOU AND ME AND EVERYONE ELSE FORCED TO PARTICIPATE IN THE GREATEST PONZI SCHEME EVERY CREATED.
As for using the word NEVER. Be very careful. Most schemes like to use that term. It seems to placate people into believing a lie.
[quote=”sweikert925″][quote=”imxploring”]
People keep throwing out numbers telling us how long the trust fund is secure for and able to continue making it’s promised payments to those that paid in. But keep in mind that’s ONLY if Uncle Sam can make good on the IOUs the fund is full of.
[/quote]What you don’;t understand is that the trust fund is invested in treasury bills that are bought periodically, those bonds mature and are then redeemed and new ones issued. It is NOT like a collection of IOUs that someday have to be redeemed all at once. This has been going on for decades. There has never yet been a case where treasury bills issued by the federal treasury go unsold. Is it possible that someday that will happen? Well, yes, I suppose, but it is also true that someday I may win the Powerball jackpot.
Read more about how SS funds are administered here:
http://www.ssa.gov/oact/progdata/fundFAQ.html#n6
[/quote]You better take your time and re-read the Social Security Facts sheet you provided a link to. IT’S SCARY!
I guess the double speak term for an IOU is “Special-issue security”….. something ONLY available to the SS trust fund and created ONLY for use in the relationship between Uncle Sam and the trust fund. NOT an open market treasury bill as you stated. Seems, if you read the “facts” as they present them that they pretty much “redeem” these special-issue securities at will as needed…. in other words they just electronically “print” money in the form of a deposit placed in the bank account of the retiree getting his social security payment each month.
Once you get past the idea and accept that Uncle Sam and the Social Security administration are the same person…. the whole scheme becomes pretty easy to understand.
Anyone with any sense can see right through the dribble on that facts sheet. But more people are researching which flat screen TV to buy right now than reading up on how Social Security is funded.
Omigawd! Someone with a mastery of the actual facts! Leave it to sweikert925 to derail the conversation with the truth.
Party pooper!
[quote=”sweikert925″][quote=”imxploring”]
People keep throwing out numbers telling us how long the trust fund is secure for and able to continue making it’s promised payments to those that paid in. But keep in mind that’s ONLY if Uncle Sam can make good on the IOUs the fund is full of.
[/quote]What you don’;t understand is that the trust fund is invested in treasury bills that are bought periodically, those bonds mature and are then redeemed and new ones issued. It is NOT like a collection of IOUs that someday have to be redeemed all at once. This has been going on for decades. There has never yet been a case where treasury bills issued by the federal treasury go unsold. Is it possible that someday that will happen? Well, yes, I suppose, but it is also true that someday I may win the Powerball jackpot.
Read more about how SS funds are administered here:
http://www.ssa.gov/oact/progdata/fundFAQ.html#n6
[/quote]So, finally, someone who understands that the feds are more likely to be unable to redeem the treasury notes before SS becomes insolvent.
Congress, both sides, is playing games with federal finances and prolonging the recovery interminably.
There are combination of fixes for Social Security but the only fix for congress is to vote them out of office.
[quote=”sweikert925″][quote=”waggoner41″]
There are combination of fixes for Social Security but the only fix for congress is to vote them out of office.[/quote]Trouble is, new ones pop up in place of the ousted ones. They’re exactly like weeds in that respect.[/quote]
Perhaps you can explain to me , that when the Fed buys it’s own bonds it basically increases its balance sheet with the good faith and credit of the government, meaning the taxpayer is on the hook. When banks go to the window for cheap money 0% or so and buy bonds from the government that pay 3% (when they should be loaning money to the public) isn’t that the taxpayer also. Because of all that printing I made under 1% on my money.
Greek bonds are they not supported by the EU and the Euro? I drove thru Yugoslavia some years back and exchange some dollars for dinars. When I got to Greece I could not exchange the money back. If the Greeks were on their own do you think their bonds would be purchased?
[quote=”sweikert925″][quote=”jmcbuilder”]
Perhaps you can explain to me , that when the Fed buys it’s own bonds it basically increases its balance sheet with the good faith and credit of the government, meaning the taxpayer is on the hook. When banks go to the window for cheap money 0% or so and buy bonds from the government that pay 3% (when they should be loaning money to the public) isn’t that the taxpayer also?[/quote]The taxpayer is always on the hook for anything related to high finance these days. I wish it weren’t the case but the horse is out of the barn after the 2008 experience. Too Big to Fail is even more true now than it was 5 years ago. It is deplorable and I wish that weren’t the case, but it is.
[quote=”jmcbuilder”]
Because of all that printing I made under 1% on my money.[/quote]No matter where the Fed positions interest rates it will help some and hurt others. Low interest rates are great for borrowers abd bad for savers and high interest rates are vice versa. There is no way the Fed can act and please everyone.
[quote=”jmcbuilder”]
Greek bonds are they not supported by the EU and the Euro?[/quote]To a large extent, yes. But the Germans have made it pretty clear that their support (and let’s face it, the Germans control the Euro zone) is not unlimited. Would Greek bonds be purchased if they were on their own? No way to say for certan but I think yes, as long as the interest were high enough. Here is a chart of current bond yields by country – as you can see Greece is currently among the highest offered. Without Euro zone backing it would no doubt be even higher.
http://www.tradingeconomics.com/country-list/government-bond-10y%5B/quote%5D
Thanks for the response. What you are saying make sense but like you said who knows. People are still buying gold also.
[quote=”jmcbuilder”] People are still buying gold also.[/quote]
. . . the price of which has dropped lately to 2011 levels.
In the past day or two, Paul Krugman quoted Adam Smith on the value of gold. He was writing with regard to Bitcoin, but I think it’s still relevant . . .
Krugman wrote, “Smith actually wrote eloquently about the fundamental foolishness of relying on gold and silver currency, which — as he pointed out — serve only a symbolic function, yet absorbed real resources in their production, and why it would be smart to replace them with paper currency:
[and then quoted Adam Smith] “The gold and silver money which circulates in any country, and by means of which, the produce of its land and labour is annually circulated and distributed to the proper consumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country, which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great part of this gold and silver, enable the country to convert a great part of this dead stock into active and productive stock; into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures, and corn fields, and thereby to increase, very considerably, the annual produce of its land and labour.”
[quote=”DavidCMurray”][quote=”jmcbuilder”] People are still buying gold also.[/quote]
. . . the price of which has dropped lately to 2011 levels.
In the past day or two, Paul Krugman quoted Adam Smith on the value of gold. I’ll try to find the link.
[/quote]David, if you find the link shoot it to us. I would be interested. With gold I have never been able to get a handle on it.
Good job David.
[quote=”sweikert925″][/quote]
The Fed does NOT “create” money as you seem to suggest, i.e., it doesn’t just tramp down to their basement printing presses and whip off a new batch of $100 bills. It floats bonds, which people buy USING ACTUAL MONEY. The sale of those bonds finance the portion of federal spending that isn’t covered by tax revenue.
Pixframe replied:
If the Fed doesn’t “create” money how do you explain the growth of the amount of it in circulation? Your explanation implies a finite amount of currency in circulation … which isn’t true. Yes, the Feds float bonds. Yes, people buy them using actual money … BUT the amount of actual money in circulation is ever growing (thanks to the Feds printing presses) and ever diluting the worth of the money in circulation.[quote=”sweikert925″][/quote]
This is no different than when a corporation issues bonds and offers them for sale on the open market.Pixframe replied:
Untrue. Corporations issue bonds but they don’t have the power of the printing press, as the Feds do, to create more money to purchase their bonds.[quote=”jmcbuilder”]
David, if you find the link shoot it to us. I would be interested. With gold I have never been able to get a handle on it.[/quote]
Please see my comment above with today’s date at 1:31pm. I pasted in Krugman’s introduction and the Adam Smith passage.
[quote=”sweikert925″][quote=”pixframe”]
Pixframe replied:
Untrue. Corporations issue bonds but they don’t have the power of the printing press, as the Feds do, to create more money to purchase their bonds.[/quote]No, that’s not correct. If by “The Feds” you mean the Federal Reserve, they don’t simply whip up a batch of currency. The purchasers of Treasury bonds pay for them just exactly as they do if they purchase a corpoate bond.
There’s no dispute, the purchase process is the same BUT the nature of the “pool” of funds to purchase them is different. Fed bonds are purchased with an infinite source of “self-manufactured” money and Corporate’s are purchased with a finite amount. The Feds printing presses, of late, never sleep and are constantly in perpetual motion watering down the value of every dollar out there. BIG difference! The issue I was directing my comments to are your statements “The Fed does NOT “create” money as you seem to suggest, i.e., it doesn’t just tramp down to their basement printing presses and whip off a new batch of $100 bills. It floats bonds, which people buy USING ACTUAL MONEY. The sale of those bonds finance the portion of federal spending that isn’t covered by tax revenue.” and “This is no different than when a corporation issues bonds and offers them for sale on the open market.”.
The Fed creates money out of thin air. It lends that fiat (fake) money to the government. The Treasury bonds are the government promise in writing to pay the bank real money for the fake money that bank loaned.
The government gets the real money for which to pay off that bank loan from citizens who have to work and produce value in exchange for the fake IOU fiat currency. Thus the banks, via the government, extract our wealth and hollow out the country.
Nearly all of the income tax collected is used to pay the interest the banks charge on that loaned fake money. According to a study ordered by president Reagan back in the 80’s, income tax collected does NOT go towards infrastructure.
Think about it;
The government borrows money from the banks at interest in exchange for Treasury bonds. The government then buys the treasury bonds back from the banks with that borrowed money (to the tune of $85 billion a month). The banks create the money out of thin air, loan it to the government and are finally given it back WITH INTEREST.[quote=”sweikert925″][quote=”pixframe”]
Pixframe replied:
Untrue. Corporations issue bonds but they don’t have the power of the printing press, as the Feds do, to create more money to purchase their bonds.[/quote]No, that’s not correct. If by “The Feds” you mean the Federal Reserve, they don’t simply whip up a batch of currency. The purchasers of Treasury bonds pay for them just exactly as they do if they purchase a corpoate bond.
No silly the Department of printing and engraving prints money…. not the Federal Reserve. But me puzzle this… where does the money (be it electronic in nature and magically transferred with the push of a button)come from that the federal reserve uses to purchase bonds and thus “inject” liquidity (M1) into the economy? And while we’re at it how has the money supply been increased (almost doubled) in the last 5 years? Where is the money coming from for QE1, Q2, and so on if dollars are not being “created”.
The FR does not create and market bonds. They control the money supply. Where were all these dollars sitting prior to being used to engage in quantitative easing? Sitting in a shoe box for an emergency perhaps?
I’ll reply to your statements about the Social Security Trust fund after your answer as we’ve already established your misunderstanding as to what is actually in it…. not open market treasury bills as you previously stated, but special issue securities that are issued at face value, redeemable at any time, and unique to the trust fund. Yes my friend…. sounds a lot like an IOU! 🙂
[quote=”imxploring”][quote=”sweikert925″][quote=”pixframe”]
Pixframe replied:
Untrue. Corporations issue bonds but they don’t have the power of the printing press, as the Feds do, to create more money to purchase their bonds.[/quote]No, that’s not correct. If by “The Feds” you mean the Federal Reserve, they don’t simply whip up a batch of currency. The purchasers of Treasury bonds pay for them just exactly as they do if they purchase a corpoate bond.
No silly the Department of printing and engraving prints money…. not the Federal Reserve. But me puzzle this… where does the money (be it electronic in nature and magically transferred with the push of a button)come from that the federal reserve uses to purchase bonds and thus “inject” liquidity (M1) into the economy? And while we’re at it how has the money supply been increased (almost doubled) in the last 5 years? Where is the money coming from for QE1, Q2, and so on if dollars are not being “created”.
The FR does not create and market bonds. They control the money supply. Where were all these dollars sitting prior to being used to engage in quantitative easing? Sitting in a shoe box for an emergency perhaps?
I’ll reply to your statements about the Social Security Trust fund after your answer as we’ve already established your misunderstanding as to what is actually in it…. not open market treasury bills as you previously stated, but special issue securities that are issued at face value, redeemable at any time, and unique to the trust fund. Yes my friend…. sounds a lot like an IOU! :-)[/quote]
I have been saying since the QE1,2,3,4 started, that influx of fiat currency will have the opposite effect that it was intended for, devaluation of the USD. When you increase the total number of dollars without the backing of a tangible asset (fiat), then there is no other option than to dilute the power of the USD.
So what we are left with is the “promise” that the USD is good. There will come a time in the near future when then promise is nothing more that what it sounds like, a promise. You can’t cash a promise. I will gladly pay you Tuesday for a hamburger today….
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