Social Security Trust Fund
President Obama released his 2015 budget proposal this week...and as expected, it contained even more language about his MyRA initiative. As we’ve discussed so many times in the past, IRAs are an irresistible kitty for such a bankrupt government. The US government itself estimates that over $5 trillion is tucked away in American retirement accounts. They need that money. Your money. The US government is struggling to come up with new funding sources… and retirement accounts are by far the easiest target. Why? Because the majority of retirement accounts at trapped at big Wall Street banks, which are all de facto agents of the government. All the Treasury Department has to do is make a phone call. Yesterday’s budget announcement constitutes the next phase: automatic enrollment.
On the heels of the President's State of the Union address, in which he announced his new executive order to raise the minimum wage by nearly 40% for those employed by federal contractors, Barack Obama is now peddling said promises to the heartlands. While discussing the rightness or wrongness of such a move is frustrating, and we're sympathetic to those who earn $7.24/hour, a simple thought entered our minds once again; a thought that often crops up whenever we hear a politician make such a magnanimous and grandiose claim - how is this going to be paid for?
2013 already saw violent unrest in some of the most stable countries in the world like Singapore and Sweden, all underpinned by absolute disgust for the status quo. Whether today or tomorrow, this year or next, there will be a reckoning. The system is far too broken to repair, it must be reset. It’s simply absurd to look at the situation objectively and presume this status quo can continue indefinitely... that this time is different… that we’re somehow special and immune to universal principles.
“Truth. noun. The quality of state of being in accordance with fact or reality.” This is how the dictionary defines truth: it can be ‘fact’. But it can also mean ‘reality’. The people who control the system have figured this out - if they can change someone’s reality, they control the truth. This is also the case in finance and economics. For example, I heard the following statements just in the last 48-hours while visiting the Land of the Free: “America will never default on its debt.” , “The debt doesn’t matter because we owe it to ourselves.” Again, these statements are totally unsupported by the facts. The notion that the US government won’t default on its debt is simply historically inaccurate. Such close-mindedness is dangerous, especially in economics. People’s lives and livelihoods depend on an objective understanding of the facts, not this altered reality.
If S&P had any guts it would lower the US another notch.
Don't believe those Press headlines that paint a rosy picture for SS. There's no good news in this report card.
An import report on a key element of the economy will show big problems looming for Social Security - it will be ignored.
The budget for "rat fees" comes to $125m.
To the Execs at Walmart, and all of those other retailers that are feeling the SS pinch, I say "Welcome to the club".
The Keynesian belief that the government can print/ borrow and spend enough money to trigger self-sustaining prosperity is a nonsensical, magical-thinking Cargo Cult. The following charts show why it will continue to fail, with eventually catastrophic results: the returns on this unprecedented borrow-spend policy are diminishing to near-zero or negative. As long as the interest rate on debt is low, the path of least resistance is to keep borrowing to support politically untouchable fiefdoms, cartels and constituencies. Eventually, the cost of servicing the debt overwhelms the diminishing returns on the debt-based spending.
Bottom line: The coin is a phony solution to a real problem.
Denial doesn't change reality. It only cripples our response to reality. Psychologists and behavioral economists have found that we deceive ourselves (conceal the truth) to serve our own interests. Perhaps this is why the mainstream ignores the Id Monsters in the shadows: shadow banking, shadow housing inventory and shadow liabilities.
"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies... That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on. Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities."
Will Congress go over the fiscal cliff? Yes, we've been going for decades, really since the social unrest of the 1970s.