Just ran across this tidbit while surfing ......................
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The Social Security Administration is legally required to take all its surpluses and buy U.S. Government securities, and the U.S. Government readily sells those securities--which automatically and immediately becomes intragovernmental holdings. The economy was doing well due to the dot-com bubble and people were earning a lot of money and paying a lot into Social Security. Since Social Security had more money coming in than it had to pay in benefits to retired persons, all that extra money was immediately used to buy U.S. Government securities. The government was still running deficits, but since there was so much money coming from excess Social Security contributions there was no need to borrow more money directly from the public. As such, the public debt went down while intragovernmental holdings continued to skyrocket.
So, if you are wondering why Social Security is broke (the government claims otherwise, because SS holds a large amount in T Bills and earns interest on those T Bills. ;) ), you don't have to look very far.
Great information, surfer. Now multiply this example of "government math" by about 1,000, and that explains why we can't trust ANYTHING the federal government tells us.
BTW, this is also true of other pension funds that the government "manages".
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Year 2000 Trust Fund Surpluses
Social Security $152.3 billion
Civil Service Retirement Fund $30.9 billion
Federal supplementary medical insurance Trust fund $18.5 billion
Federal Hospital Insurance Trust Fund $15.0 billion
Unemployment Trust Fund $9.0 billion
Military Retirement Fund $8.2 billion
Transportation Trust Funds $3.8 billion
Employee life insurance & retirement $1.8 billion
Other $7.0 billion
TOTAL $246.5 billion
This one year of trust fund surpluses 246.5 Billion buys T Bonds. The T Bonds are federal promisory notes used to "borrow" the surplus cash from the trusts. The bond purchases are reported as revenue in the federal budget. In actuality, the 246.5 Billion is is owed to the trust funds and is truly a debt.
The government, by creative bookkeeping, is using a debt as an offset to the federal expenditures, allowing them to report that they have reduced the annual debt. At the same time they are increasing the National debt.
Exactly, SS. The Social Security "trust fund" is empty, and has actually never contained a single dollar in real, everyday terms. It's the trashiest sort of accounting gimmick designed to keep folks from rebelling against the federal government. Yeah, I know that sounds a bit extreme, but in this case, I think it's not.
The "trust fund" has always been empty. The money came in as working Americans payed their payroll taxes, and the money was instantly removed and replaced with federal paper, mainly worthless treasury bonds. The real money was spent by Congress to help offset the never-ending deficits. As the T-bills in the "trust fund" expired, they were paid off with... new T-bills.
This year -- four years sooner than expected, thanks to the Great Recession -- Social Security payroll taxes failed to match Social Security outlays, meaning that now the federal government has to start printing inflated currency to buy the extra new T-bills it needs to pay off the maturing T-bills AND keep paying out benefits.
It's a very ugly business. :'(
Keep in mind the fact that the high unemployment rate has reduced the SS revenue to Washington. There is no more surplus to support their wasteful spending. Did you notice the other trust funds they have been "borrowing" from? It won't be long before the entire mess collapses on them and us.
Another problem that will be exposed is the depletion of union pension funds. That is another story.
What's the difference between paper bonds and paper money? Not a damn thing. With both, the federal government says they are worth something. Ultimately, they are just pieces of paper and ink.
Quote from: AmericanFlyer on November 27, 2010, 10:40:36 AM
What's the difference between paper bonds and paper money? Not a damn thing. With both, the federal government says they are worth something. Ultimately, they are just pieces of paper and ink.
Big difference, Flyer. Paper money, the stuff we use at WalMart, is effectively backed by the US economy and the wealth of Americans. The bonds are backed by the government, NOT the economy. The difference is difficult to see, but it's there.
The bonds that sit in the Social Security "trust fund" have never had a value beyond their ability to be replaced by more bonds. They represent wealth that does not exist, and never did. The actual wealth -- represented by currency -- that was confiscated from us for Social Security has been removed by Congress every year and spent on other things.
Clear as mud?
Quote from: tbone0106 on November 27, 2010, 01:59:10 PM
Big difference, Flyer. Paper money, the stuff we use at WalMart, is effectively backed by the US economy and the wealth of Americans. The bonds are backed by the government, NOT the economy. The difference is difficult to see, but it's there.
The bonds that sit in the Social Security "trust fund" have never had a value beyond their ability to be replaced by more bonds. They represent wealth that does not exist, and never did. The actual wealth -- represented by currency -- that was confiscated from us for Social Security has been removed by Congress every year and spent on other things.
Clear as mud?
Paper money has value only because the U.S. government SAYS it has value. That whole "full faith and credit of the U.S. government" thing.
Wealth is not measured in paper and ink, as the U.S. government would like all of us to believe. That is the MYTH that began when the Federal Reserve System was signed into law by Woody Wilson, and when FDR forced all Americans to trade in their gold for paper and ink in 1933, and when LBJ decided that our coins shouldn't contain 90% silver after 1964.
Wealth is, and has always been, measured in the amount of TANGIBLE assets you own. Things like land and buildings and houses and machinery and motor vehicles and precious metals, and in it's simplest forms..............cows and pigs and chickens and other food, as well as water and medicines and firearms and ammo and fuel and the list goes on and on.
There is no Social Security "trust fund" or "lock box" or whatever the latest phrase is. Another MYTH that is perpetuated by the politicians. There is only the sad fact that it is our government that decides how much paper and ink we are allowed to possess, and what the "value" of that paper and ink is, in terms of the amount of goods and services they decide the paper and ink can be exchanged for.
Clinton was so full of crap his eyes were brown.
What happened with the budget surplus (YOUR MONEY)???????
Did you get a tax rebate like the REPUBLICAN CONGRESS OPTED for?
NO, slick Willy found new ways to spend it or give it away to the Palestinians or some country like Egypt where I think one of the 9/11 hijackers was from.
Billy
AF, you can also scratch land, homes and other buildings. Don't pay your real estate taxes, and you will find out who really owns them. The real estate tax is the rent you pay for those items. The same can be said about motor vehicles, the government permits you to drive them for a fee as long as you meet government requirements for their operation.
As far as SS is concerned, the value in the trust fund are nothing more than ledger entries. The value of those ledger entries are not backed by any tangible asset such as gold or diamonds.
SS, Tbone, and AF. You're all mostly spot on.
I would simply ask what a Federal Reserve Note is but a promissory note of debt.
In the by and by, a person could redeem a one dollar silver certificate for a dollar of silver, a tangible asset. A Fed Reserve Note is only redeemable for a Fed Reserve Note. Paper for paper. What is the intrinsic value of paper?
When the Gubmint defaults what will any of it be worth?
Good discussion, all!!! 8)
A point that gets past many people is not just that our paper currency is just that -- paper, but that it was once tied to the values of precious metals, and was decoupled by FDR from gold and silver for a reason -- so the printing presses could run and run and run.
FDR simply could not do what he wanted to do with the metals-based supply of dollars on hand, at least not without unthinkably high taxes. By decoupling the dollar from its precious metal base, he could "create" the money he needed out of thin air.
So many people think that inflation is rising prices. Not so. Inflation refers to the inflation of the supply of money, and only the federal government can do that. Prices do rise as a result, but inflation is a direct, willful act of the federal government, designed to "pay" for the government's own expenses. It is the most insidious sort of back-door taxation.
Quote from: tbone0106 on November 28, 2010, 08:33:49 AM
Good discussion, all!!! 8)
A point that gets past many people is not just that our paper currency is just that -- paper, but that it was once tied to the values of precious metals, and was decoupled by FDR from gold and silver for a reason -- so the printing presses could run and run and run.
FDR simply could not do what he wanted to do with the metals-based supply of dollars on hand, at least not without unthinkably high taxes. By decoupling the dollar from its precious metal base, he could "create" the money he needed out of thin air.
So many people think that inflation is rising prices. Not so. Inflation refers to the inflation of the supply of money, and only the federal government can do that. Prices do rise as a result, but inflation is a direct, willful act of the federal government, designed to "pay" for the government's own expenses. It is the most insidious sort of back-door taxation.
I already posted all that stuff about paper money being tied to gold and silver until FDR and LBJ messed with that whole thing.
It looks as though we are all pretty much on the same page. Paper and ink is only worth what the federal government decides it is worth.
Surfer, your point about property taxes and all the other "tentacles" that governmental intervention creates, is an excellent one. NONE of us are totally FREE.
This situation with gold and silver vs paper money is so obvious.
We already have silver in circulation and up until 1964 you could own silver.
Now here is the kicker, we could easily get back on a semblance of the gold standard as we have the monitary system already in place and to some degree in circulation. Those old silver dimes and quarters that you may have hoarded or collected over the years ARE STILL LEGAL TENDER and in the eyes of our Govt are legal coinage and have the monetary value.
In other words a silver dollar is still worth a dollar, likewise a 50, quarter and dime.
Yeah it is worth more than their monetary value due to silver (90% silver) but the point is we could start using it again. Those coins were minted in the millions and probably billions, only a relatively small portion of them were melted.
Think about it, what if we, grass roots common man, started using this sytem as a type of barter, IF IT WERE WIDESPREAD ENOUGH, it might be able to force the Govt to go with silver coinage backing Obamaobucks.
Just a thought.
Billy
Billy, there are many, many "ma and pa" stores around the country who accept silver coins as payment for goods, and honor whatever the spot price for gold or silver is that particular day.
The chief reason why this country ceased making "common" 90% silver coins in 1965 (except for the 40% silver Kennedy silver half dollar from 1965-70) is that the U.S. Mint was having a difficult time procuring enough silver to mint the coins.
Also, there are not anywhere close to "billions" of silver coins floating around out there. Quite a bit has gotten melted down over the years, especially since the industrial demand for silver has skyrocketed since the 1960s.
The chief difficulty with the United States returning to a gold standard is that there is presently not enough gold inventory available in the ENTIRE WORLD to support it. As it is now, The U.S. Mint is having a very difficult time fulfilling their gold coin minting requirements and orders due to the shortage of gold blanks.
The U.S. Mint still produces .999% silver dollars, 90% silver commemoratives, and 90% silver half-dollars, quarters, and dimes (as part of yearly proof sets). And once again, the U.S. Mint has been having problems with supply, this time with silver blanks.
A hybrid gold/silver standard is possible, but it would be difficult.
Decoupling the dollar from precious metals essentially relegated those metals to commodity status. Their currency value is no longer valid. Before FDR, the dollar was supported -- and limited -- by the value of gold. Now the value of gold rockets up and down based on speculation and the Fed's willingness to print more paper money. Since FDR, the spot price for gold has hip-hopped up and down, but the current value of one American dollar has gone down steadily, sometimes faster and sometimes slower, but always down. (Can you hear those printing presses?)
I'm afraid recoupling the dollar to gold and/or silver would be just about impossible now. The US money supply has outstripped the actual wealth that backs it up by many multiples because the government routinely prints paper money to pay its bills. Recoupling the dollar to metals would require a currency devaluation so extreme that it would probably collapse the dollar, at least on international markets.
I would love to see a chain of stores refuse to accept "federal reserve notes" and accept ONLY U.S. minted gold and silver coins at the prevailing daily spot price.
An observation: It seems that gold and silver are not the only metals that are in demand ............. rhodium, platinum, and other rare earth metals are now being hoarded by governments. On the local scene, we are witnessing thefts of metal from housing developments and abandoned houses.
It sort of makes me wonder ..................... why all the fuss over metals? When it comes to life's realities, you can't eat metals. IMO, having a good stock of survival supplies has more value than hoarding metals. The commodities of water, dry or freeze-dried packaged foods, emergency medical supplies, emergency electric power and protective firearms are of more importance to me. When people are desperate, how much of their metalic wealth would they pay for survival commodities?
Quote from: AmericanFlyer on November 28, 2010, 05:12:32 PM
Billy, there are many, many "ma and pa" stores around the country who accept silver coins as payment for goods, and honor whatever the spot price for gold or silver is that particular day.
The chief reason why this country ceased making "common" 90% silver coins in 1965 (except for the 40% silver Kennedy silver half dollar from 1965-70) is that the U.S. Mint was having a difficult time procuring enough silver to mint the coins.
Also, there are not anywhere close to "billions" of silver coins floating around out there. Quite a bit has gotten melted down over the years, especially since the industrial demand for silver has skyrocketed since the 1960s.
The chief difficulty with the United States returning to a gold standard is that there is presently not enough gold inventory available in the ENTIRE WORLD to support it. As it is now, The U.S. Mint is having a very difficult time fulfilling their gold coin minting requirements and orders due to the shortage of gold blanks.
The U.S. Mint still produces .999% silver dollars, 90% silver commemoratives, and 90% silver half-dollars, quarters, and dimes (as part of yearly proof sets). And once again, the U.S. Mint has been having problems with supply, this time with silver blanks.
A hybrid gold/silver standard is possible, but it would be difficult.
I am avid collector of all types of coins since I was like 7 years old and a great proponent of the Gold standard. I recall when Pres Reagan mandated that Americans could own gold again and the Mint began selling off US gold reserves fort Knox, few know that this is how a lot of our debt was paid.
As a collector, I think there are more coins out there than is generally beleived and not as many of them were melted, a lot may have been taken out of the country by the Japanese, Middle east types though.
People also forget that the price of silver (and gold) is tied in with the price of production. IT COSTS MONEY to mine, process and transport Gold and Silver to where it can be minted. The price of gas, machinery and labour costs has a lot to do with it.
Billy
Quote from: bama_beau_redux on November 28, 2010, 09:38:23 PM
Spot price measured in what?
Euros, of course. Now
there's a hottie on the currency market!
Quote from: BILLY-bONNEY on November 28, 2010, 09:17:01 PM
I am avid collector of all types of coins since I was like 7 years old and a great proponent of the Gold standard. I recall when Pres Reagan mandated that Americans could own gold again and the Mint began selling off US gold reserves fort Knox, few know that this is how a lot of our debt was paid.
As a collector, I think there are more coins out there than is generally beleived and not as many of them were melted, a lot may have been taken out of the country by the Japanese, Middle east types though.
People also forget that the price of silver (and gold) is tied in with the price of production. IT COSTS MONEY to mine, process and transport Gold and Silver to where it can be minted. The price of gas, machinery and labour costs has a lot to do with it.
Billy
I am also a collector of graded coins, Billy, and I have been heavily involved in the gold and silver market for about three years now. That's what great about this forum. Everybody has experience in many areas of expertise, and it makes for interesting conversation.
Silver in particular is a very difficult metal to extract and process. Silver also has many industrial applications. Gold, on the other hand, is more of a TRUE "precious" metal. Gold has always been mostly a measure of wealth.
Quote from: surfer_squirrel on November 28, 2010, 09:01:42 PM
An observation: It seems that gold and silver are not the only metals that are in demand ............. rhodium, platinum, and other rare earth metals are now being hoarded by governments. On the local scene, we are witnessing thefts of metal from housing developments and abandoned houses.
It sort of makes me wonder ..................... why all the fuss over metals? When it comes to life's realities, you can't eat metals. IMO, having a good stock of survival supplies has more value than hoarding metals. The commodities of water, dry or freeze-dried packaged foods, emergency medical supplies, emergency electric power and protective firearms are of more importance to me. When people are desperate, how much of their metalic wealth would they pay for survival commodities?
Surfer, you nailed it. You can't eat gold and silver and platinum and copper and zinc and nickel. When it comes right down to it, when the shit hits the fan the basics (food, water, shelter, safety) are much more valuable.
However, a "bartering system" is only a short term solution, and eventually a monetary system must be established. So having some silver and maybe a little gold stashed away is a good idea.
Quote from: bama_beau_redux on November 28, 2010, 09:38:23 PM
Spot price measured in what?
Um, how about the daily spot price on the commodities exchange. Ever heard of that? If not, look it up, Bama.
Quote from: AmericanFlyer on November 29, 2010, 08:41:21 AM
I am also a collector of graded coins, Billy, and I have been heavily involved in the gold and silver market for about three years now. That's what great about this forum. Everybody has experience in many areas of expertise, and it makes for interesting conversation.
Silver in particular is a very difficult metal to extract and process. Silver also has many industrial applications. Gold, on the other hand, is more of a TRUE "precious" metal. Gold has always been mostly a measure of wealth.
Ah a fellow numismatist!
you are Correct about gold, it should also be noted that in many parts of the world I have been gold is often used in every day transactions. From the mountains of Northern Thailand to Indonesia, people barter gold for other goods, lots of people wear gold and have chains that can be used to break off a certain amount to use as barter for rice, livestock etc.
These are people who don't use banks and if they have any extra money they buy a gold chain or whatever. If they are in the city and need cash they hock it.
At one time Al Quieda was offering new recruits fifty grams of gold to fight the Americans in Ghanny.
Makes you think
50 grams is 6+grams shy of 2.0 ounces which would be about $3,000.00 US. :o
Quote from: BILLY-bONNEY on November 29, 2010, 09:13:44 PM
Ah a fellow numismatist!
Oh, THAT's what you guys are. I had this weird feeling you were coin collectors...
Yes sir, numismatics is a very interesting hobby. My only advice is to stick with coins graded by PCGS and NGC. All other coin graders are at least one tier lower than those two.
I'm mostly into silver bullion right now. Not doing any "collectible" coin buying right now.