Archive for September, 2009
This article contains information that is extremely misleading:
http://apnews.myway.com/article/20090927/D9AVHRDG0.html
Social Security is projecting a deficit for at least two years. This means that more money is going out than is coming in. The article helpfully points out that this happened before in the 1980’s.
What is not mentioned is that in the 1980’s there was actually a surplus held by the Social Security Administration, and deficits were funded by reserves at that time (or at least the level of debt was something more manageable.)
The article points out that this spending will add to the Federal deficit. That is because the surplus fund for Social Security was depleted years ago and those funds were replaced by IOU’s issued by Congress.
There is no money in Social Security, only IOU’s, and now expenses exceed income.
How will we ever pay for the 2.5 Trillion dollars already owed to Social Security from past borrowing, while we are adding to the debt at the rate of at least 10 billion dollars per year and rising?
In an economy where an 18-25 year old faces 30 – 50% unemployment, with substandard public education, competing with nations that take their future seriously, I simply don’t see that this Ponzi scheme can survive.
The only thing we can be sure of is that this will end badly.
The attached Memorandum opinion is a judicial wrench thrown into the spinning gears of the corporate/government spin machine.
http://www.scribd.com/doc/19115290/Rakoff-Order-to-SEC-and-BofA
Your Securities and Exchange Commission tried to enter into a settlement whereby Bank of America admitted that it lied to its shareholders (charmingly BoA states that shareholders should have relied instead on media rumor instead of BoA statements). In exchange, BoA was going to scalp the shareholders an additional 30 million to pay off the S.E.C.
For those of you who disdain all lawyers and blame the legal system for all the woes of the world, be aware that there are some out here working at ideals. This is how revolutions start, with a few people making principled decisions that are not in their own best interest. God help this Judge and his cause, because so many powerful people want this to fall down the memory hole.
Good luck, brave Judge.
The ongoing chatter about Healthcare has distracted us from the growing problems in our economy.
The new Japanese government has indicated that their days of buying debt from the United States is over. Come September 30th, U.S. banks are going to be forced to “mark to market” their assets. Now, we have heard the first shot in a growing trade was between China and the U.S.
In a twist of fate, these forces may conspire to help our country in the long run.
In the short-run, we are in for a storm.
Losing Japan as a sponge for our bad debt will drive down the prices of our bonds. This may end with a frenzy as holders of bonds seek to escape the collapsing market. We cannot buy our own debt (not since we already did so to the tune of a couple of trillion dollars.)
Forcing the U.S. banks to show the true value of their collateral will implode a large section of the banking industry this year and next. We have lost 91 banks this year and the FDIC reserve is depleted. All bank failures as of last Friday are not drawn straight from the U.S. Treasury, put on your unborn Grandchild’s credit card.
Now the inevitable trade war between China and the U.S. has started with tariffs on Chinese Tires. I expect this will be followed by more targeted tariffs as our current government desperately tries to preserve jobs (Union jobs first!). The response will be a cutting off of Chinese purchase of U.S. debt.
Our only hope of returning to a nation based on achievement and hard-work is going to be a demonstration of Government’s inability to provide cradle to grave care for the people. The post World War II world allowed some of the Western world the luxury of massive social programs. All of these programs are black holes that were unsustainable from creation. Social Security was known as a Ponzi-scheme from day one, underfunded by design, because to do otherwise would have been to admit that the program could not survive for more than a few decades.
We are at the end of that run. Where the Entitlement generation enjoyed a growing economy, GI bill free college, Medicare and so many other programs designed just for their cohort, the subsequent generations get nothing but bills and depleted resources.
My only advice is that you had better make plans to take care of yourself and your family. Phony concern for our fellow man, in the form of unfunded welfare programs and free healthcare is a lie.
If you can’t pay for it, certainly don’t make your kids pay for it.
Meet the fellow tasked with killing and burying the helplessly crippled General Motors.
http://money.cnn.com/2009/09/03/autos/ron_bloom_general_motors.fortune/index.htm?postversion=2009090311
Putting a Union manager at the helm guarantees that the company will flail and collapse in a humiliating and wasteful manner, all financed by my children and grand-children.
Here are some examples of what your tax dollars are doing to support unsustainable real estate prices.
http://money.cnn.com/galleries/2009/real_estate/0908/gallery.first_time_homebuyers/3.html
This hairstylist and her crane operator boyfriend just bought a $750,000.00 home! They used the $8,000.00 tax credit to pay of their equally poorly conceived wedding, a union born of debt and destined to end in a divorce and bankruptcy.
http://money.cnn.com/galleries/2009/real_estate/0908/gallery.first_time_homebuyers/5.html
These folks just bought $550,000.00 worth of deprecating real estate on a FedEx salesman salary combined with income from a physical therapist. See ya at foreclosure!
We have inundated with nonsense reports of a turn around in real estate. Sadly, only those who act on these reports will be “turned around”. most of this summer “bounce” was made up of disasters like the two above.
It seems to have started in the Great Depression. It started with the idea that We the People did not want to see elderly people, starving and homeless in the streets. Social Security was to provide that bare roof, food and shelter support to the destitute elderly.
That program metastasized into a “right” that all people 65 or older felt was “owed” to them at the requisite age. Today Social Security is less about helping the elderly survive and more about supplementing an retirement that already provides the basics. It has become pocket money, not survival support.
At the same time, the same people created health care support in Medicare and Medicaid, programs that grew from basic health support to the current ridiculous and economically unsustainable model that provides care for everything from a hangnail to erectile dysfunction.
For almost 7 decades we have seen a strip-mining of the Federal and State governments with mismanaged and ill-conceived social programs that are now reaching the point of collapse.
No one seems to be terribly concerned at the moment, but it is certain that when money runs out (or inflation renders fixed-incomes meaningless), we will have come through a full circle which will end with elderly people, starving and homeless in the streets.
We have options. We could stop squandering precious resources on non-citizens. We could stop the massive amounts of foreign aid we pour over the globe. We could stop manning military bases in Europe and Japan.
We could institute a means-test to Social Security and other welfare programs and assure the assistance only go to those in true need.
It would be nice if we made the changes now, while we can plan and implement, rather than wait for the coming collapse. Sadly, any move now is met with hordes of angry, grey-haired folks and the status quo remains.
When the money runs out, we will see those same angry, grey-haired folks on the streets. Holding cardboard signs, living the life these programs were intended to avoid, programs that eventually assured the very end they were meant to avoid.
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Opinion and commentary about law and life.