This page has been archived and commenting is disabled.

Guest Post: Game Theory And The Unfixable Fiscal Situation

Tyler Durden's picture


Via Simon Black of SovereignMan blog,

In Game Theory, there's a famous hypothetical scenario called the Prisoner's Dilemma in which two criminal suspects are apprehended by police and given a choice: stay silent, or rat out the other guy. But there is a catch.

If both suspects stay silent, they both get off with a very light sentence. If they both turn on each other, they both get a longer sentence. And if only one of them rats out the other, the suspect who squeals goes free, while the one who stayed silent receives the worst sentence.


Naturally, the best choice is for both prisoners to stay silent-- they both get off with a very light sentence.

But imagine that your accomplice is in there being interrogated. You know that he's been offered the same deal... if he rats you out, he'll go free while you take the heat. When it's your turn, would you stay silent and risk a huge prison sentence while he walks?

The scenario points to an inevitable conclusion: each prisoner rats out the other, and they both do heavy jail time. It's clearly a sub-optimal outcome, known in Game Theory as the Nash Equilibrium.

We see examples of this all the time in the real world-- in business, financial markets, diplomacy. The recent fiscal cliff negotiations were almost a textbook case of the theory... resulting in the same sub-optimal outcome.

All the posturing and political strutting were more about trying to obtain personal advantage over the other players, not actually fixing anything. The fiscal cliff, in fact, stopped being about the US economy a long, long time ago.

The uncomfortable truth that nobody in officialdom wants to admit (save outgoing Congressman Ron Paul) is that the fiscal situation is unfixable.

The US government is currently sitting on a whopping $58 billion in cash... less than the $63 billion that Microsoft has on hand. And with that $58 billion in cash, the government (by their own calculation) will be posting yet another trillion dollar deficit this year.

Further, the US Treasury will have nearly $3 trillion in debt mature this year. So that's roughly $4 trillion (25% of the entire economy) of debt that must be newly issued or rolled over in order to avoid default.

Gee, do you think they'll keep printing money?

Meanwhile, the debt ceiling has already been breached, and the Obama administration is scurrying to seize federal pensions as a temporary fix.

Seriously, how long will it be before they start seizing private pensions, IRAs, etc.? How long before mutual funds and banks are required to hold a percentage of their assets in the 'safety and security' of US Treasuries? How long until everyone is involuntarily financing Uncle Sam?

This is why it's so important to consider diversifying internationally... holding a portion of your savings, precious metals, retirement funds, etc. in a jurisdiction that isn't controlled by your home government.

As the next phase continues to play out and the options become scarcer, the real prisoner in this dilemma is going to be the people who chose to ignore the writing on the wall and have everything they've ever worked for locked up by an insolvent government.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 01/02/2013 - 14:52 | 3115531 Cognitive Dissonance
Cognitive Dissonance's picture

"Can't we all get along?" - John (F**k You) Bohner

Wed, 01/02/2013 - 14:53 | 3115539 redpill
redpill's picture

The problem is that at the same time the US Federal Government is taking steps to ensure there is no where to hide.  Increased reporting requirements for foreign accounts, etc.  And don't think you can just up and renounce your citizenship, that's more difficult and more expensive than ever.  The noose is closing, and the world is no longer big enough to have places to hide.  Welcome my son, welcome to the machine.

Wed, 01/02/2013 - 14:58 | 3115567 Cognitive Dissonance
Cognitive Dissonance's picture

In baseball they call that the squeeze play.

<Today it's just called the new normal.>

Wed, 01/02/2013 - 15:22 | 3115671 DoChenRollingBearing
DoChenRollingBearing's picture

The IRAs and the 401k's are the last plump targets out there waiting be seized (DoChen learned this by cashing out HIS IRA in 2008).  That happened in Argentina.  Are we better than Argentina (having re-elected Obama and seeing the FECKLESS Republicans cave)?  Huh, bitchez?

If you want all the way OUT, there are only two ways:

1)  LEAVE the country, but then deal with their .gov...

2)  Go Galt, get off the grid and below the radar.

The Bearing has only begun, sigh...  As redpill noted, it is hard.

Wed, 01/02/2013 - 15:42 | 3115738 Landotfree
Landotfree's picture

"is that the fiscal situation is unfixable"

Sorry Ron Paul but the financial system is not broken, the equation is working right on cue.   What is called unfixable, I call perfection... that is the system and the underlying equation that is used is working according to real Law ie Math.    Humans will continue to attempt to obtain what is unrealistic i.e. exponential growth and  will tire once more and the equation will output the known outcome.... max potential on the downside.  My guess 1-2 billion unfunded liabilities will have to go but if nukes are used, could be 7 billion plus animal population.

I like Ron Paul but not much he could or could have done to fix anything.  The problem is, the equation is working to perfection, time is approaching to flush it all away.  


I would probably avoid Asia, I would hate to be there with 4 billion others but who knows?  


Wed, 01/02/2013 - 15:43 | 3115766 Joe Davola
Joe Davola's picture

Funny thing how spending is always part of 'permanent' law, but lower tax rates have a limited duration.  Any fiscal conservative who signed on to that deal is a moron at best.

Wed, 01/02/2013 - 20:48 | 3117046 AldousHuxley
AldousHuxley's picture

avoid capital gains taxes by never selling

avoid dividend taxes by buying munis

avoid sales taxes by buying used goods

avoid income taxes by accepting only cash

avoid inflation taxes by buying gold








Wed, 01/02/2013 - 15:50 | 3115800 Zap Powerz
Zap Powerz's picture

Its always hard.  Life is a competetion, a struggle to survive.  Our ancestors defeated all other predators, incliment weather, disease and famine.  You and I and our kids get to defeat our current environment.

The hardest part is going to be the shock.  The shock Americans are going to feel when they are hungry, cold, sick and fighting for their survival.  We have had it easy for so long.  That will change and only the most resourceful (fit) will survive. The same way it has always been, the same way it always will be.

Gird your loins my friend.  The fight for your survival has begun.

Wed, 01/02/2013 - 15:59 | 3115846 GCT
GCT's picture

Screw it dochen cash out your 401k buy physical and keep some cash and then go on welfare.  That ought to work.  No need in hiding when in the USA do as te USA does these days. 

Buy an RV or a sail boat no property taxes that way.  Sail the world make stops to stock up on staples and catch your protein.  Enjoy the world!  Dam my wife just kicked me to wake me up.

Wed, 01/02/2013 - 16:37 | 3116012 FreedomCostsaBu...
FreedomCostsaBuck-o-Five's picture

Have you tried cashing out of a 401k? It ain't easy... You gotta retire or be fired. The govt has us by the short hairs....

Wed, 01/02/2013 - 16:08 | 3115893 Karlus
Karlus's picture

I think Barter (aka Black Market) is going to happen more and more. I also think the govt will frown on this.

I saw that some entity had sued Armslist which is exactly a barter site...I also feel like the actual .gov is going to crack down on like trades as they traditionally want a piece of the action

Wed, 01/02/2013 - 20:50 | 3117053 AldousHuxley
AldousHuxley's picture

that's why they are legalizing certain drugs.....

Wed, 01/02/2013 - 15:00 | 3115570 digitalhermit
digitalhermit's picture

One can still "hide" in plain sight by "offshoring" into Bitcoin's public ledger. :-)

Wed, 01/02/2013 - 15:15 | 3115629 CH1
CH1's picture

One can still "hide" in plain sight by "offshoring" into Bitcoin's public ledger. :-)

Only if you know what you're doing.

Bitcoin is NOT anonymous, and the NSA tracks every Internet transmission.

Don't misunderstand - I LOVE Bitcoin - but you have to do it right.

Freedom ain't free.

Wed, 01/02/2013 - 16:34 | 3115998 FreedomCostsaBu...
FreedomCostsaBuck-o-Five's picture

Dang straight...

Freedom costs a buck-o-five!

Thu, 01/03/2013 - 00:44 | 3117707 TBT or not TBT
TBT or not TBT's picture

and there are three type of people in this world, Chuck.

Wed, 01/02/2013 - 17:37 | 3116307 cxl9
cxl9's picture

the NSA tracks every Internet transmission

This statement is silly.


Wed, 01/02/2013 - 20:48 | 3117044 CH1
CH1's picture


Good luck to you.

Wed, 01/02/2013 - 20:51 | 3117060 AldousHuxley
AldousHuxley's picture

who cares about the NSA. If KGB paid millions into presidential funds, NSA wouldn't care about the ruskies.

Wed, 01/02/2013 - 15:00 | 3115572 Shell Game
Shell Game's picture

“And how we burned in the camps later, thinking: What would things have been like if every Security operative, when he went out at night to make an arrest, had been uncertain whether he would return alive and had to say good-bye to his family? Or if, during periods of mass arrests, as for example in Leningrad, when they arrested a quarter of the entire city, people had not simply sat there in their lairs, paling with terror at every bang of the downstairs door and at every step on the staircase, but had understood they had nothing left to lose and had boldly set up in the downstairs hall an ambush of half a dozen people with axes, hammers, pokers, or whatever else was at hand?... The Organs would very quickly have suffered a shortage of officers and transport and, notwithstanding all of Stalin's thirst, the cursed machine would have ground to a halt! If...if...We didn't love freedom enough. And even more – we had no awareness of the real situation.... We purely and simply deserved everything that happened afterward.”   -Aleksandr I. Solzhenitsyn, The Gulag Archipeligo

Wed, 01/02/2013 - 15:07 | 3115597 Joe Davola
Joe Davola's picture

Nah, it'll be different here.  /sarc_off

Wed, 01/02/2013 - 15:30 | 3115706 bank guy in Brussels
bank guy in Brussels's picture

Every Jew needs a gun against the Nazis

And we are all Jews

Wed, 01/02/2013 - 16:05 | 3115879 Stud Duck
Stud Duck's picture

Great comment there, Shell Game, great comment!

"We purely and simly deserved everything that happened afterward" get right to the point!

I wonder how many of these "revolutionaries" commenting in here really know about "the big ugly". I can assure you all, ugly is not strong enough word for it!

Thu, 01/03/2013 - 00:47 | 3117718 TBT or not TBT
TBT or not TBT's picture

Gun control will be big on the govt agenda this year, suddenly.   A lof of people are wise to the pent up danger of tyranny, too, which explains gun stores being out of stock with long backorders on everything, ammo particularly.

Wed, 01/02/2013 - 15:20 | 3115655 kliguy38
kliguy38's picture

But, but I thot we just fixed the cliff and now its safe to go out into the pool.....did they lie???? I think I'll put a stack of Ben's in my pocket and see how I get through the TSA next week.......

Thu, 01/03/2013 - 02:11 | 3117852 Vandemar
Vandemar's picture

The can has been kicked.  Alea iacta est.

But hey, the "MARKETS" seem to think it's been "fixed".  Increasing both deficits and taxes is good for the economy?  Who knew?

Wed, 01/02/2013 - 14:56 | 3115557 Michaelwiseguy
Michaelwiseguy's picture

The complete and total economic collapse of the USA that's 100 guaranteed will solve many problems for us.

The federal government will be starved to death of money used to carry out tyrannical terrorist activities against the American people.

Wed, 01/02/2013 - 15:07 | 3115593 Manthong
Manthong's picture

“the federal government will be starved to death of money”

That could have happened in the Constitutional United States of America, but it can’t happen now that the subversion is near complete and the states are subservient to the federal government.

Our last chance is a House of Representatives that could act to defund, but they seem to all be tools of the Federal Dominion, too.

Kiss freedom goodbye.

Wed, 01/02/2013 - 15:12 | 3115618 CH1
CH1's picture

Dump the system and start building better things.

Wed, 01/02/2013 - 15:40 | 3115754 Michaelwiseguy
Michaelwiseguy's picture

The financial nuclear bombs are all in place. A zero dollar value for you and me also applies to the US government. Derivatives collapse, bond market collapse, and dollar collapse all at the same time should do it.

Wed, 01/02/2013 - 15:17 | 3115599 CH1
CH1's picture

economic collapse of the USA that's 100 guaranteed will solve many problems for us.

NO. Free lunches will not be forthcoming.

There is no safety from Big Brother unless you WORK or PAY to protect yourself.

Computing power continues to get cheaper - and they already have more than enough. Only those who ACT have any protection.

Wed, 01/02/2013 - 15:53 | 3115814 Zap Powerz
Zap Powerz's picture

A collapse will indeed solve many problems.  It will also create new problems.  But there are always problems to be solved.  Im bored with the old problems so bring on the new ones!

Wed, 01/02/2013 - 15:17 | 3115641 rwe2late
rwe2late's picture

From the movie "Cool Hand Luke"

"What we have here is a failure to communicate"

(said by the warden to prisoner Luke after having him beaten by guards)

Wed, 01/02/2013 - 15:32 | 3115714 Cognitive Dissonance
Cognitive Dissonance's picture

A classic scene.......soon to be repeated everywhere.

The poor warden was so reluctant to "discipline" an unrepentant and subversive Cool Hand Luke.

Wed, 01/02/2013 - 15:53 | 3115817 Zap Powerz
Zap Powerz's picture

And the beatings will continue until moral improves.

Wed, 01/02/2013 - 14:52 | 3115534 lemonobrien
lemonobrien's picture

this is why i buys golds

Wed, 01/02/2013 - 15:12 | 3115616 foxenburg
foxenburg's picture

I buys them also. and keeps them in various holes in the ground. but I suspect that in 10 years, when I might want to sell a few coins, that it'll be like trying to fence stolen property. The various govts would say it was indeed stolen property, as I ought to have handed over anything i earned to them in the first place, then i'd have nothing to worry about. But I'm sure it will involve exfiltrating with part of one's stash and selling it somewhere like like the middle east. then infiltrating back with your fiat.

Wed, 01/02/2013 - 16:16 | 3115931 Karlus
Karlus's picture

It will come in the form of patriotic "anti-hoarding" legislation. It wont just food either. Your "private property" will be broadcast as a greedy threat to your brother man.

Thu, 01/03/2013 - 15:19 | 3119593 lemonobrien
lemonobrien's picture

sell your silver to get out of the country; use your gold to build a new life.

Wed, 01/02/2013 - 14:54 | 3115543 JPM Hater001
JPM Hater001's picture

"the Obama administration is scurrying to seize federal pensions as a temporary fix."

Private companies get to go to prison for doing this dont they?

Wed, 01/02/2013 - 14:54 | 3115548 redpill
redpill's picture

Depends whether or not you used to be the Governor of New Jersey.

Wed, 01/02/2013 - 15:12 | 3115614 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Over the years, he worked his way up to Chairman and CEO of the company (Goldman Sachs) in 1994 and successfully converted the investment firm from a private partnership to a publicly traded corporation.

That previous 'gig' prolly did at least a little bit to help Mr. Corzine through the that very trying time in his life -- post MF Global.

Fucking sub-human!

Wed, 01/02/2013 - 14:55 | 3115550 lunaticfringe
lunaticfringe's picture

Love this piece. Captures the essence of what happened and proves why Congress' actions are so predictable. 

Wed, 01/02/2013 - 15:09 | 3115579 ZerOhead
ZerOhead's picture

Distilled to it's essence for the ADHD challenged readers out there...

The uncomfortable truth that nobody in officialdom wants to admit (save outgoing Congressman Ron Paul) is that the fiscal situation is unfixable.

"Unfixable" as in if you aren't taking proactive actions to deal with the inevitable outcome you will find yourself completely fucked.

Wed, 01/02/2013 - 15:18 | 3115643 redpill
redpill's picture

Funny how things remain unfixable when you refuse to even try to fix them.

Wed, 01/02/2013 - 14:56 | 3115558 TerminalDebt
TerminalDebt's picture

Don't worry, Uncle Ben is ready and willing

Wed, 01/02/2013 - 15:00 | 3115564 wee-weed up
wee-weed up's picture

Ah, but Big Brother has a solution to the Prisoner's Dilemma...

Waterboard the fuckers - they'll both talk then!

Wed, 01/02/2013 - 15:01 | 3115576 youngman
youngman's picture

The problem I see is the we think we can play in the worlds sandbox....where I see them sending us back to our own backyard and playing in our own little sandbox...our dollars will not be wanted outside of the USA...

Wed, 01/02/2013 - 15:28 | 3115695 DoChenRollingBearing
DoChenRollingBearing's picture

For now plenty of people & countries will take your $.  The secret to is to get assets OUT of the USA now (yesterday) to a juriscition that you feel is relatively safe (or where you know the ropes, have family, and so on).

South America, with all its problems (legion) is at least behind the digital totalitarian curve.  Some countries are better than others.

Wed, 01/02/2013 - 15:01 | 3115578 Snakeeyes
Snakeeyes's picture

You don't need game theory to figure this one out. Democrats ar expert at class warfare and demonization. Look at what just happened. The Republicans surrendered with a fight.

We ARE Greece, but far bigger.

Wed, 01/02/2013 - 15:20 | 3115649 CH1
CH1's picture

The Republicans surrendered with a fight.

Well... duh!

Wed, 01/02/2013 - 15:02 | 3115583 q99x2
q99x2's picture

Rats in a sinking ship. Their ship not mine.

Wed, 01/02/2013 - 15:02 | 3115584 Mike in GA
Mike in GA's picture

anyone know where he gets the 'cash-on-hand' number?

Wed, 01/02/2013 - 15:23 | 3115640 Taint Boil
Taint Boil's picture



Here *

* rounded in millions <snicker>

Wed, 01/02/2013 - 15:05 | 3115590 FreeMktFisherMN
FreeMktFisherMN's picture

Eventually there will be too many moles (Black swan triggers) to whack and one will pop and then the domino sequence happens at the speed of a silver comex smashdown. 

The Fed cannot print purchasing power/supply. When it prints money and rates go down it creates the illusion there is a stock of savings that is there, which implies that, in correspondence, that much value has been created as well. People thus are willing to for a while accept dollars believing they will be able to trade them for things that they want and thus they build things up in malinvestment fashion to get dollars in return for the output. But the bidding for real things of value will only go up. People will re-learn the difference between a need and a want, and the houses they barely are afloat on and they were counting on for 'savings' to extract equity will diminish as food, fuel, water, PMs soar. 

Low interest rates are a good thing if they are earned, but the stock of savings right now warrants double digit interest rates. The Fed actually thinks it can replace these savings with Benjamins. 

What's sad is that under a gold/silver (free money) standard, prices would be going down always, and the interest would be 'baked into' the gold in the form of time value. Storing gold at a bank would not even need interest in the form of more actual oz. of gold as in 6 months or what have you, the supply of goods/services has gone up, while the supply of PMs has barely gone up in comparison. Thus none of this usury/frac-reserve banking. 


Wed, 01/02/2013 - 15:06 | 3115592 Atlantis Consigliore
Atlantis Consigliore's picture

Canada, the only Free market Capitalist economy 15% corp rate, left.   Singapore 0 cap grains Netherlands. 

Wed, 01/02/2013 - 15:49 | 3115610 CH1
CH1's picture

Free Market?? Canada??? You may wish to upgrade them definitions.

Then, look at Eastern Europe.

Wed, 01/02/2013 - 15:07 | 3115595 walküre
walküre's picture

Both parties are acting like the couple who is broke and bankrupt and still discussing their "options". You just know the type. Entitlement and privilege up to their eyeballs and full of hubris.

They have no options. They're broke, overleveraged and need to accept whatever comes their way. They can however reneg on their paper as much as anyone can reneg on paper (promises).

Un-Happy 100th anniversary FED

Wed, 01/02/2013 - 15:40 | 3115756 Joe Davola
Joe Davola's picture

How long until everyone is involuntarily financing Uncle Sam?


Yeah, I was going to say we're T+100 on this.

Wed, 01/02/2013 - 15:11 | 3115611 Market_Magician
Market_Magician's picture

So what should I do? Liquidate my money and buy gold? Any practical suggestions?

Wed, 01/02/2013 - 15:18 | 3115645 Dr. Richard Head
Dr. Richard Head's picture

That is precisely what I did back in 2007/08.  It has served me well so far.  Then again, the party is about to get started.

Wed, 01/02/2013 - 15:24 | 3115680 kliguy38
kliguy38's picture

If you're asking now on this site then your window is not only closing very fast but you are undoubtedly NOT going to make a move in time. So that leaves the two choices.....1 you are just a troll or 2 You're fucked.......I say you're both

Wed, 01/02/2013 - 15:26 | 3115690 Market_Magician
Market_Magician's picture

More just curious what the recomendations are. All I ever take away from this site is that I should buy gold and short everything USA. 

Wed, 01/02/2013 - 15:44 | 3115769 Zap Powerz
Zap Powerz's picture


Not unless you have a boat that can sink with all of your gold along with it.

Instead of gold, buy up all the "hookers and blow" you can get your hands on.

Remember that.

Gov agent: "Mr. Magician, what are all these cash with drawls for?"

You: "hookers and blow."


Wed, 01/02/2013 - 15:46 | 3115784 Panafrican Funk...
Panafrican Funktron Robot's picture

Pay off all your debt first.  A slave with gold is still a slave.  

Wed, 01/02/2013 - 19:16 | 3116746 DoChenRollingBearing
DoChenRollingBearing's picture

Yes.  Then buy your gold.

Thu, 01/10/2013 - 01:38 | 3139879 MeelionDollerBogus
MeelionDollerBogus's picture

pfft, debt is for slaves. If THEY can default YOU CAN TOO. How easy is it to use debt to get gold & silver, elsewhere, and never come back... and never pay that debt? Meh, will you cry?

Wed, 01/02/2013 - 16:43 | 3116033 auric1234
auric1234's picture

Gold, silver, farmland, stocks... anything with actual value. On the long run, paper money is just an empty promise from those insolvent liars.


Wed, 01/02/2013 - 21:39 | 3117210 Wave-Tech
Wave-Tech's picture

Acquire a balanced measure of assurances in the form of tangible assets relative to your net worth.


Wed, 01/02/2013 - 15:15 | 3115621 Dr Benway
Dr Benway's picture

Agh trolled again by a Simon Black 'article'..


SB could not correctly define a Nash Equilibrium if his life depended on it, since SB very obviously knows next to nothing about game theory. Fucking learn your shit before writing about it, you tool.


Furthermore, the Prisoner's Dilemma is an entirely inapt analogy here. A more apt, but still imperfect analogy would be a Mexican Standoff.

Wed, 01/02/2013 - 17:13 | 3116183 AgAu_man
AgAu_man's picture

Getting kind of personal here. Got an issue you need to address mano-a-mano?
Can we keep it civil and collegial?

Wed, 01/02/2013 - 15:15 | 3115627 Zap Powerz
Zap Powerz's picture

Im already involuntarily supporting uncle same thank you very little.

Wed, 01/02/2013 - 15:15 | 3115635 km4
km4's picture

the US Treasury will have nearly $3 trillion in debt mature this year. So that's roughly $4 trillion (25% of the entire economy) of debt that must be newly issued or rolled over in order to avoid default.

Gee, do you think they'll keep printing money?

Yes Ben will have presses on the moon Alice !

Wed, 01/02/2013 - 15:28 | 3115694 yogibear
yogibear's picture

Gee, do you think they'll keep printing money?"

Some of it. Some of the debt magically is acquired by the Fed and disappears.  

Stealth default.

Wed, 01/02/2013 - 15:17 | 3115638 The Joker
The Joker's picture

I do plan on holding my precious metals in another jurisdiction.  I just need to rent a boat first, you know, in order to get them there.

Wed, 01/02/2013 - 15:21 | 3115658 CH1
CH1's picture

But be really careful on the way.

For some reason, gold and silver always find a way to fall overboard.

Wed, 01/02/2013 - 15:21 | 3115651 topshelfstuff
topshelfstuff's picture

How is it possible to get away with all the scare talk about supposed Social Security & Medicare deficit while a CAP is on FICA? All the talking heads go on and on, and nobody mentions it. I guess The People aren't supposed to know. SS as-is is solvent till 2037 and if no changes were made in the Cap, it would have to be paid @ 75% of what's expected. So why not Raise the Cap? It should be removed. If it was Medicare would be solvent along with SS, and the rate could be lowered for everyone. The Cap was $110,100 in 2012, and with the increasing amount in Total Wages going to the Top 1% to 10% all those Billions escape taxation.
What percentage of The People know such a CAP exists?

Imagine this: the Pres could have ended the whole fiscal cliff fiasco by simply saying, "OK, we don't have to raise taxes by 4%, I'll just remove the CAP on FICA". Notice they use "Payroll Tax", nobody supposed to mention FICA, much less any CAP

Income inequality in the United States
Wed, 01/02/2013 - 16:58 | 3116094 August
August's picture

"So why not Raise the Cap? It should be removed. If it was Medicare would be solvent along with SS, and the rate could be lowered for everyone."

At least you're conceding that FICA taxes are just part of general federal revenues, as opposed to being "premiums" for, say, health care coverage or old age pensions.

From what I read, the SS "trust fund" (great name, by the way) will be at a zero balance in 2020 or so, at which point the automatic cut to 75% benefits will take place,

Wed, 01/02/2013 - 15:23 | 3115670 ShrNfr
ShrNfr's picture

I Nash my teeth all the time over this problem.

Wed, 01/02/2013 - 15:25 | 3115681 WallowaMountainMan
WallowaMountainMan's picture

"How long until everyone is involuntarily financing Uncle Sam?"

since tarp?

Wed, 01/02/2013 - 15:29 | 3115689 CrashisOptimistic
CrashisOptimistic's picture

Wait, why does maturing Treasuries require printing money (buying Treasuries)?  This does not follow at all.

If a bond matures, it means money loaned by a lender (the Fed, perhaps) to the US Gov't must be returned to the lender.  The rollover is new issuance, but not new *net* issuance.  The Fed's balance sheet would not expand on that transaction.  One bond disappears from Fed inventory in return for cash from Treasury while another is purchased with that cash.  Treasury's cash sent to the Fed to retire the maturing bond is simply used to buy the new bond (re-lend).

It's a zero net transastion, not a Fed balance sheet expansion (money printing) transaction.

Wed, 01/02/2013 - 15:30 | 3115708 yogibear
yogibear's picture

Watch for both the Fed and the Treasury to play accounting tricks and make debt vanish.

That's why Bernanke is amuused.

Wed, 01/02/2013 - 15:35 | 3115728 GMadScientist
GMadScientist's picture

Exact same maturities, rates, callability...? ;)

Thu, 01/03/2013 - 00:54 | 3117728 TBT or not TBT
TBT or not TBT's picture

Re-read.   There is 3 trillion to roll and a trillion new net issuance.   Someone has to buy all 4T, probably in part by the Fed, front-run by the dealers with guaranteed buyback from the Fed, as it has been going for a while.    Seriously, non-Fed treasury buyers will soak up 4T this year given the moronic-slash-evil innumeracy of the Obama administration and Dem dominated Congress?

Wed, 01/02/2013 - 15:36 | 3115729 SKY85hawk
SKY85hawk's picture

The Tylers should require journalistic integrity from 'professional' writers like you!

Please supply proof of inforce laws that allow these scare tactics.

How long before mutual funds and banks are required to hold a percentage of their assets in the 'safety and security' of US Treasuries? How long until everyone is involuntarily financing Uncle Sam?

If there is no proof, you should be banned from posting!

And don't use any garbage about what THEY are talking about.  Show real Proof!


Wed, 01/02/2013 - 15:51 | 3115808 drbill
drbill's picture

When posing questions or hypothetical situations, references are not needed.

Thu, 01/10/2013 - 01:30 | 3139864 MeelionDollerBogus
MeelionDollerBogus's picture

if you think the answer is "never" then say so & explain WHY you think so. It's a simple question & you replied yet didn't really try to ANSWER it.

Wed, 01/02/2013 - 15:54 | 3115818 The worst trader
The worst trader's picture

It's all finaly setting into my little mind....... we are fucked. Can someone tell me if The repubs had stood their ground and got some serious cuts would it have helped? What if we went cliffdiving?

Wed, 01/02/2013 - 16:08 | 3115895 are we there yet
are we there yet's picture

I think the surprising fast and furrious repub surrender was because boths sides fear a trigger cascading economy with escilating civil unrest. Once started I think that they see the cascade as beyond their ability to stop. We are fighting 2 foreign wars now and they privately fear domestic civil unrest from the class on welfare, unemployment, etc..  

Wed, 01/02/2013 - 16:06 | 3115882 GCT
GCT's picture

Did we expect anything else honestly did you ask yourself this?  The republican leadership caved big time and allowed the vote. As I looked at the vote the repub leadership passed this with the dems.  They remind me of the mythical hydra, a beast with multiple heads and one body.  Sums it up for both parties to me well.

Some great comments on this one.


Wed, 01/02/2013 - 16:08 | 3115892 Fix It Again Timmy
Fix It Again Timmy's picture

Putting all our hopes in the sustainability of unsustainability - treacherous waters, to be sure....

Wed, 01/02/2013 - 16:25 | 3115966 Mad Mohel
Mad Mohel's picture

So based on the above Game Theory scenario, are we the prison bitch that both the criminals get to tag team in the big house?

Wed, 01/02/2013 - 17:35 | 3116297 AgAu_man
AgAu_man's picture

I've been enjoying international diversification for decades, and while I may have a slightly different mix in mind, fundamentally I have to concur with SB.

It amazes me how many ppl and ZH 'clever Dicks' remind me of rabbits, when it comes to crisis mitigation: Rabbits may zig and zag, but ultimately they run circles around their rabbit holes.

Only the few, the brave, the real survive & thrive types have the brains and balls to go abroad. Many love to praise the immigrants who came here long ago for the very reason more and more are now leaving, but (ironically) can't admit or act on this now that the shoe is on the other foot.

Can you say Stockholm Syndrome?

Do NOT follow this link or you will be banned from the site!