Ron Paul: "The U.S. Government Must Admit It Is Bankrupt"

Is USA bankrupt?

  • Yes

    Votes: 93 66.9%

  • No

    Votes: 46 33.1%
  • Total voters
    139
Trefoil, yea I worked at a bank too. You sound like you are trying to justify why robo signing is OK even though it is perjury to the court. I love this, you say that Soc. Security is the largest holder of Treasury securities...I call you on it and ask for a cite, then you admit that it is not true and then proceed to tell me that it doesn't matter, and then you start asking me for cites to prove stuff you realize that you don't know. Let me ask you this, how much accrued interest from treasury debt, do you think the Soc. Security has on its books...if its the same as treasury securities, then how much interest has accrued and is owing to Soc. Sec. in addition to principle? Was the interest paid timely every six months like it is on some actual trasury securities? Can you find it on their balance sheet? Can you find the interest owed on the Treasury's balance sheet?
 
Quote from Ed Breen:

Trefoil, yea I worked at a bank too. You sound like you are trying to justify why robo signing is OK even though it is perjury to the court. I love this, you say that Soc. Security is the largest holder of Treasury securities...I call you on it and ask for a cite, then you admit that it is not true and then proceed to tell me that it doesn't matter, and then you start asking me for cites to prove stuff you realize that you don't know. Let me ask you this, how much accrued interest from treasury debt, do you think the Soc. Security has on its books...if its the same as treasury securities, then how much interest has accrued and is owing to Soc. Sec. in addition to principle? Was the interest paid timely every six months like it is on some actual trasury securities? Can you find it on their balance sheet? Can you find the interest owed on the Treasury's balance sheet?
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Hmm. I didn't know this was a point of ideological contention.
First of all, I never said anything wasn't true. I said, as I recall, that your unsubstantiated assertion that there is no liability to the Treasury because it's a book entry doesn't correspond with my experience. Book entries record assets and liabilities, you know, so the statement makes no sense on its face and that's what I said. I stand by that.
Just because you say it's not a liability doesn't make it so. I don't know where you get the nerve to come up with that.

From the SSA:

(This is a transcript of a talk, but I think the info will do for our purposes. I have to get some shuteye, but I'll come back to go into the details if not tomorrow then day after.)



http://www.ssa.gov/history/reports/trustees/transcript2.html


My purpose in outlining the current investment policies is not to go into details or to evaluate or analyze them in any way at this stage. We do have the internal work done by the SSA and Treasury staff, to which Susan referred, and which we can make available to you in due course if any of you want, a more detailed explanation. Please let Dalmar know. The information is in almost final form and we created it for the benefit of people so we'd be happy to make that available to you.

What I just want to do is to make sure that for those of you who don't know how the trust funds are invested, that I'll just briefly tell you what their invested in, and what some of the principles are so that you'll have it as a context for listening to and debating and dialoguing about the possible scenarios and alternatives that you will be dealing with today.

First of all, the trust funds are required by law to be invested in issues either issued by or guaranteed by the United States Government, and that's the Federal Government. Up to 1960, there was heavy investment in the marketable government securities. Starting in 1960's there started to be a preference for special obligations, which were securities created for the sole purpose of being invested in by the trust funds.

Since 1980, no new investments have been made in marketable securities, but only in the special obligation securities. Now what were these? These were designed to provide security to the trust funds. They have the unique characteristic of being redeemable at par prior to maturity, so that there is no risk of lost of principal if in fact the trust -- this money is needed to pay benefits ahead of the maturity date.

The interest rate. That is a formula now. It is calculated as the average of all government securities, marketable securities with a call -- due or callable date of four years or later. So again this was an attempt to recognize that these trust funds are essentially long-term funds, and to create a rate that approximates the market rate, but that is a totally predictable rate and not one that is subject to the judgement of anybody making these investment decisions.

The maturities were by administrative practice set to be distributed over 15 years into the future. Again the principle here is to design the maturities to reflect the anticipated needs of the trust funds, so that when the money comes in throughout the year, it's invested first in short-term certificates of indebtedness. All of these have a due date of June 30th of the coming year.

So that everything that comes in every month now during 1988 through June 30, 1989 will be invested in a short-term certificate of indebtedness, with a due date, maturity date of June 30, 1989. Then on June 30, 1989 these are rolled over into a long-term note, special obligation note, calculated with the rate that I just described and given a maturity that spreads out over 15 years, the various maturities of that investment, coupled with whatever else is within the portfolio at that time.

Now when we are in a period where the outgo is exceeding the income and securities have to be redeemed, these are redeemed at par as I mentioned, and they take the earliest maturity date first and then for all those securities maturing on the same date, they take the lowest interest rate first. So that's how that's organized, to actually make the funds available to pay benefits.

So that's basically how they're invested. When we undertook our work, first to figure out what was being done now and why and to look at possibilities for the future, we articulated, we went back into the documentation and made an attempt to articulate the principles which underlie these selections of current investment policies and which would underlie any choices that might be made out into the future to change those.

We identified four principles, one of which is non-intervention in the private economy. This is why we are confined to the issues either issued by or guaranteed by the Federal Government. So no state, no local, and no direct intervention in the private economy. Another was no active management by the managing trustee.

The Secretary of the Treasury is the managing trustee. He has the sole discretion to manage the trust funds however it's done throughout the organization. So it's been always very important to the Secretaries of Treasury that they be in a position where they're not actively managing these funds or they're not subject to the debate, controversy and liability involved in doing that. So minimum discretion as been one of the principles as well.

The other -- the third one is investment only financially secure instruments, and this is why the backing of the U.S. Government has been an intrinsic and essential part of all the investments. The other is a concept called neutrality, and this comes from the fact that the managing trustee is both managing the general fund and managing the trust funds. Since the trust funds are invested in obligations of the general funds, it's very important that as policies are developed, there isn't undue advantage or discretionary advantage given either to the Social Security trust funds or to the general funds.

So that in setting interest the interest rate as a formula that was all part of this -- implementing this principle, instituting the maturity spread out over 15 years. You know, you're not going to create maturities based on what you think the interest rates are going to do, so you maximize the earnings of a trust fund because by doing that, you'll be disadvantaging the general funds.

Then the whole process of redemption, where you take the earliest date and within that the lowest interest rate. The redemptions are only to be made prior to maturity for the purpose of supporting the Social Security program. There are no redemptions to be made for redeeming a lower rate interest rate security, in order to get a higher rate because market rates today are higher than they were when the securities were issued.

So these are the four principles that have guided the investment policies up to now and that we expect would guide any future changes to those that may come out of this dialogue or anything coming to the future.
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Sounds like an argument at cross purposes.

Whether SS holds Treasuries is a different question from whether or not holding those Treasuries has any tangible meaning or benefit.
 
Translation: The ponzi scheme will collapse without more money being pumped into the system to pay the bonds coming due.

Madoff goes to prison for swindling several hundred people in his ponzi scheme, congress gets applauded in the media for swindling 300 million people in their ponzi scheme.

Even the drastic spending cuts that TB mentioned would not close a $202 TRILLION gap.
 
I'm up now, and just to put the final nail in the coffin of this absurdity that the Treasury isn't recording a liability for the SS investments, we can mosey on over to the Bureau of the Public Debt, where, as we all know I'm sure, the debt is recorded to the penny.
Current info here.
Notice the breakout: debt held by the public vs intragovernmental holdings. Intragovernmental holdings are where the SS holdings are. Obviously, somebody knows there's a liability.
As to the further issues of who pays for what when and why, that's all politics, not the legal stuff. Politically, if any of you think the Treasury would ever be allowed to default on securities held by SS for the purpose of paying out benefits, you can forget it. It will snow in San Juan PR in July before that ever happens.
That will segue nicely into my next post coming later on today, when all of you will discover, to your horror I'm sure, that the Obama Admin has already cornered the right on this, in a very clever way. Working folks are not going to pay for future SS deficits. He's already made sure the folks getting the lion's share of the tax cuts - the plutocratic class - today will pay for SS in the future, regardless of how loudly they whine, moan, and squeal about it.
 
Quote from trefoil:


That will segue nicely into my next post coming later on today, when all of you will discover, to your horror I'm sure, that the Obama Admin has already cornered the right on this, in a very clever way. Working folks are not going to pay for future SS deficits. He's already made sure the folks getting the lion's share of the tax cuts - the plutocratic class - today will pay for SS in the future, regardless of how loudly they whine, moan, and squeal about it.
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Please link it here when you post it.
 
Looking at just the money/debt angle confuses things.

If we are to pay off the social security, pensions, etc, the real issue is not salting away fiat money/cyber money but rather boosting REAL FUTURE WEALTH in the real economy. If in the future the goods and services are radically more plentiful and (in real terms) cheeper than currently, providing for the elderly and retired will not be so difficult.

Current savings are valuable for the future in so far as delayed consumption is INVESTED in things that will increase real future productivity.

However, if consumption is simply offset in one area and then spend on things that do not boost future wealth or output (most government spending) We will NOT have the future wealth to easily pay all the obligations. It is the difference between debt taken out to consume vs. debt taken out to produce. It is the difference between the poor and the rich.

The paper money economy confuses things so bady!

The real issue is the CREATION OF REAL WEALTH not accounting entries at the treasury and fed.

We could salt away all the "accounting entity" wealth in the world, and if real wealth does not increase, it will amount to nothing.
 
Just like California.

The bosses are not poor just mean.

Great wealth has been the downfall of many people in the past
 
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