Predictably, as I've shown in earlier blogs:
the corporate media continues its effort to brainwash Americans with drivel and propaganda - this time on the value of the "IOUs" (actually Treasury bonds) the government has issued as it has raided Social Security monies. According to a front page report appearing in today's local paper - this year (2010) marks the first time since 1983 the U.S. Government will have to pay out more: $29 billion, than it takes in from Social Security.
At the same time, the media report points out that $2.5 trillion in IOUs are stuffed into safes as government securities, in Parkersburg, WVa. The argument implicit in the report is that the IOUs are essentially worthless and that the government will have to borrow even more money in order to redeem any of them.
The arguments against the canard that Social Security is going "broke" or "bankrupt" can be the subject of a future blog. My attention here is the claim that the bonds are merely worthless scraps of paper and nothing more.
Evidently, the reporters who filed the story either don't know or don't care that not paying on those government bonds would send this country hurtling into such an economic catastrophe from which it would never get out. One which would make the 2008 market meltdown from credit default swaps look like a walk in the park, and take most of the world with it.
It would be an economic holocaust, compounding the existing dollar value debacle that these reckless miscreants have allowed.Right now, bond holders trust in the "full faith and credit" of the U.S. government, is the only thin veneer left in justifying why they continue to hold U.S. T-bonds. If that is flagrantly ignored and the bonds not repaid, the whole global bond system would collapse overnight. Never mind the type of bonds for which the SS Trust Funds are invested are not the same as the others (Treasuries) that many foreigners hold.
In most foreigners minds' there is not an iota of difference, and wagging one's tongue all day long trying to explain any - will merely drain the claimant of his energy and voice. As my Swiss friend Rolf has noted, "if the U.S. gov't reneged on paying out those SS bonds, the Swiss would interpret this as meaning that 'full faith and credit' in any U.S. financial instruments could no longer be counted on" . In his words, from an e-mail in 2002 - after the former Treasury Secretary (O'Neill) averred the SS Trust Funds contained no real money:
"If they let that happen to their own people, what's stopping them from doing it to foreign bond holders? Nothing! What kind of demonstration is that of full faith and credit? None! At least here in Switzerland we believe it a terrible omen and message to send the international bond community. If you renege on your own people, you can certainly do it to us. So why should we not cash in our bonds when the Social Security betrayal of American citizens arrives?"
What would follow would be a mass withdrawal from all held securities: treasurys, monies invested, and by not only Switzerland but all EU nations, and most likely Japan and China too. Talks with other foreign friends involved in global investment and finance, from Germany and the UK, essentially echo Rolf's perceptions. They make no distinction between rescinding on SS bonds (which yes, they believe are real and exist) and other bonds they may hold.
Splitting hairs about bond definitions is a fool's errand, because in the end, none of these foreign investors, finance-business types will buy it. At least those with whom I'm acquainted. To them, a bond is a bond is a bond. Whether an IOU from the U.S. gov't to its own people, or an IOU to a foreign investor, interest. Indeed, my late German friend Kurt averred (in 2004) that a bond must be worth even more if owed to a nation's own people. Otherwise the nation itself truly isn't worth a pound of "schwein scheiss".
What are the solutions? Are they as draconian as some claim? No, they're not - but they all would mean congress critters having to get off their butts and act- in some cases for politically unpopular changes. Some of those - which would not require raising the retirement age to receive full benefits (which I and many others regard as unfair and off the table) include:
- Raising the FICA limit to at least $500,000. In other words garner additional SS monies by raising this threshold - obviously on higher earners. (Who, from recent reports in the WSJ - are now back to buying their Porsches, Lamborghinis, and yachts. If they can afford those, they can afford to assist a national social insurance program that will preserve more peace and tranquility for them to go about their business, than anything else)
- Enforce the Budget Enforcement Act of 1991 which incorporates a "lockbox" provision it, to force congress to desist from all future raids on Social Security - for general revenues. (For more on this little known provision and act, see Michael Hiltzik's: The Plot to Kill Social Security.
- Increase the FICA payroll tax rate by 1% - to 7.2%.
All these changes will ensure Social Security won't be consuming all its trust fund dollars by 2037 as currently projected.