Maybe Not Forgotten

In "One in Three Americans Paying Bills Late: Survey," the Herald-News brings us the latest news from the front lines of the so-called recovery.

More than half of adults nationwide — 56 percent — have no budget and one-third don’t pay all of their bills on time, a financial literacy survey shows.

The survey, released Tuesday to recognize Financial Literacy Month, also revealed that 39 percent carry over credit card debt from month to month; two in five are saving less than they were a year ago and 39 percent have no day-to-day savings.

The results show that the painful financial lessons of the recession and high unemployment “are quickly being forgotten,” said Susan C. Keating, president and CEO of the National Foundation for Credit Counseling, which sponsored the survey.

Then again, maybe there is no loss of memory involved. Maybe Americans are returning to old bad habits because they've been brainwashed into thinking that things are returning to "normal" by constant propagandizing from the powers-that-be. Or maybe they are in such dire straits that they've essentially given up hope on turning their financial lives around in any sort of meaningful way.

Comments

[Rocky]

I have noticed on Huffington Post that articles written to help make readers more financially literate attract very few comments. I guess most HP readers are either poor, are not interested in educating themselves about investing, or are just plain spendthrifts. Or maybe they are just not interested in finance unless it is an article attacking Goldman Sachs. There is nothing like blaming others for your misfortune.

[Walter Wit Man]

How much more difficult is it to make payments today than it was 30 years ago? The average household probably has twice as many bills to pay, and things are more complicated. Think about how difficult it is to manage the Health Savings Accounts and the Child Care Accounts and the two phone bills and the cable and internet bill, not to mention the multiple credit cards?

We were tricked into thinking doing all these things online is more efficient. I recently closed an account and I forgot the number of automatic payments I had set up, some only recurring once a year, so I forgot about them, and it was hard to close my account.

Anyway, one has to be a PHD to successfully navigate home economics nowadays.

[Walter Wit Man]

And the internet does make things easier, like setting up automatic payments, but it lulls us into a false sense of security so that we take on way more than we would have otherwise done.

For instance, I don't make accounts at places anymore because I have too many online accounts to manage. Many of them are marketing tricks, where they hope to trick you into paying a yearly fee or whatnot later (like the credit monitoring sites, etc.).

Simply having all these gift cards is difficult too. I've got a few hundred dollars of these things from probably 3 different places and its a hassle to manage these. I would prefer cash or the items themselves.

Managing our music is much more complicated. How many times have we switched systems the last 30 years? We went from records, to tapes, to CDs, to digital.

Same thing with phone numbers. I like the days where I had a little book where I wrote numbers down. I've had about 10 different systems the last 20 years and don't like any of them. They all promised more efficiency but actually made things more complicated.

The system was set up to harvest money from us by confusing us. We are a domesticated animal and our masters have figured out how to confuse us and separate us from our money.

[Can't spend what you don't have]

@Rocky writes "There is nothing like blaming others for your misfortune."

OR IS IT, There is nothing like tapping others to retain your fortune?

Resistance, Revolution, Liberation: A Model for Positive Change

"Those benefitting from our sociopathological, neofeudal Status Quo (as well as those who have been persuaded that their participation benefits them) will see no need for revolution. Indeed, they will view any transformation as a threat to their personal share of the Status Quo perquisites. But fundamental transformation is no longer a choice, whether you believe the Status Quo serves your self-interest or not. The unsustainable will crumble and another arrangement will take its place.

We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced or written down; we only know the debts and obligations will be renounced in one fashion or another. "

http://www.oftwominds.com/blogapril12/RLL-intro1-4-12.html

Wonder who benefits from this?

Pension obligation bonds are a type of derivative.

Struggling to pay employee pensions, local governments are increasingly borrowing money to cover their obligations — exploiting a loophole in federal law that allows them to issue taxable bonds without seeking voter approval.

Oakland took a bet on its pension fund that ended up costing the city an estimated $245 million — nearly a quarter of its annual budget. That hasn’t stopped the city from looking to try its luck one more time.

http://totallygroovygirlfriday.wordpress.com/2012/04/04/pension-obligation-bonds/

[How many politicians cutting back on their budgets?]

Italy politician says Monti has suicides on conscience

(Reuters) - An Italian man shot himself dead on Wednesday because his company was going bust, following a wave of economy-related suicides in the country which one opposition politician blamed on Prime Minister Mario Monti's reforms.

The 59-year-old Rome-based construction firm owner left a note apologising to family members and explaining that his business had failed, police said.

A day earlier, a 78-year-old woman in Sicily jumped to her death because her monthly pension payments had been reduced. On Monday, a picture frame maker hanged himself because of economic difficulties.

And last week, two men set themselves on fire in northern Italy due to financial woes. Both survived, one with severe burns.

Opposition politician Antonio Di Pietro, leader of the Italy of Values (IDV) party, criticised the government's reform agenda in parliament, and said Monti had the suicides of people who can't make it to the end of the month "on his conscience".

http://in.reuters.com/article/2012/04/04/italy-suicide-idINDEE8330JC20120404

Americans Cutting Back on Drugs and Doctor Visits

Patients cut back on prescription drugs and doctor visits last year, a sign that many Americans are still struggling to pay for health care, according to a study released Wednesday by a health industry research group.

http://www.nytimes.com/2012/04/05/business/americans-struggle-with-medical-care-despite-economic-recovery.html

[Bernanke runs barter town]

Hey Rocky you mean like this?

Art Cashin On Bernanke’s Secret Banker Meeting To Keep EUROPE Afloat…!

Last week Mario Monti, like a good (ex) Goldmanite, did his best to buy what Goldman is selling, namely telling anyone gullible enough to believe that the “European crisis is almost over.” Funny then that we learn that just as this was happening, Ben Bernanke held a secret meeting with the entire banker cartel, in which discussed was not American jobs (seasonally adjusted or otherwise), nor $5 gas, but… helping European with its debt crisis. But, but… Mario said. In the meantime, European spreads are back to late 2011 levels.

http://sgtreport.com/2012/04/art-cashin-on-bernankes-secret-banker-meeting-to-keep-europe-afloat/

[Walter Wit Man]

Worrying about public debt to pay average people their pensions, etc., is foolish. It is a trick by the elite to rob us. The American public has been indoctrinated over the last few decades with neoliberal scare tactics.

Why do we pay bankers for the privilege of creating our money? Why does the U.S., which is sovereign, have to pay someone to create its currency? It's a trick! Just like the debt is a trick.

We are better off using the people's money to simply pay off the debt. The president has the power currently to issue a platinum coin in any denomination and he could erase the debt in one fell swoop.

I would prefer a more gradual approach. I would have the government simply pay all Social Security payments in dollars created by the gov., not bankers. Forget raising taxes or selling bonds.

Also, we should institute a national health system and pay doctors and medical professionals directly using the peoples' money, not printed by banksters.

Same thing with all pensions. The government should guarantee all pensions, private and public, and spend the people's money directly. The private crooks that reneged on their pension promises should be put in jail.

I really do like many of the right-wing, er, libertarian, blogs like this one or Charles Hughes Smith or Jesse's Cafe or Zero Hedge. But they get this basic fact about money wrong.

And it's hurting real people. If you really want to oppose the banksters and and stand up for average people you will oppose neoliberal austerity as the huge propaganda screw job it is, and instead demand our government print the peoples' money for the benefit of the people.

[sharonsj]

I usually pay bills on line but a virus paralyzed my computer for three weeks. I missed one credit card payment. About 10 days later, Citibank began calling me four and five times a day. Now they've already charged me a $39 late payment, so there's no reason for me to rush them some money. In fact, the more they phone me the less I want to send them anything.

However, if they start carrying on about one payment just ten days after it's due, I wonder why they are so crazed? Makes me wonder how many other people didn't pay either....

[Can't spend what you don't have]

@Walter Wit Man..you're right up to a point...some people gamed the pension system by padding their last years with hours or in the case of some cities used crony politics to up the payouts, etc...there are a million scams. The cutting should come from top down..not bottom up. What you are proposing is raising new funds to pay old debts that really aren't serviceable. You are proposing guaranteeing lofty annuities while new workers are being pulverized economically by austerity measures whereby their incomes are often half of what the retiree is being guaranteed. Some people I know retire from a state job and then get right back into the work force offering their services willingly without health benefits because they now have them for life. The new worker raising a family can't make ends meet but the retiree with full benefits and exorbitant pension is flourishing. That's unsustainable. I'm all for a pension system but this duality of outcomes will crack the social balance. This whole scenario was well thought out...it has created a divide and conquer setup which immediately puts those getting by great against those struggling within the same system. Some want more and other don't want to give up an inch....meanwhile the banksters and politicians are content feeding their appetites for money and power. Those bonds only serve delaying the real change you want.

[Walter Wit Man]

Can't spend what you don't have,

What's unsustainable is a race to the bottom, which is what you propose when you worry about the few employees that seem to be getting a good deal.

Sure, gaming the system, like police do, to retire at a higher level and therefore get higher payments is not *fair*. But it is exaggerated. The vast majority have not gamed the system. Indeed, more people got screwed out of their pensions in bankruptcy than have gamed the system.

Plus, a national health care system would provide health care benefits for life for everyone. It takes away the ability of capital to hold a sword over labor's head because they have to hustle to provide medical care for their family. The rest of the developed world has figured out its better to get rid of insurance companies and simply provide basic medical care to everyone and spread the cost around to society fairly. Using dollars printed by the government is the fairest way to do it.

The cracks in the social balance are because of this neoliberal propaganda, it's not that some people are actually getting a pension. That's the trick. We are being tricked into resenting a those with pensions or those that receive meager benefits, like food stamps under $300/month.

The true party that is responsible are the elite. They are the guilty parties. Not the middle class pensioners or the poor on food stamps or unemployment insurance.

Also . . .

You're wrong that new funds need to be "raised" to fund old debts that aren't "serviceable." You're missing the point. This is entirely unnecessary. Why does a sovereign entity, like the U.S. need to "raise" funds? It printed greenbacks during the Civil War without raising funds.

It's a trick to enrich the elite.

Therefore, the debts are totally serviceable. As you note, it is counterproductive to have so much of our current productive value go to servicing debt. I agree! So let's get rid of it! Let's simply pay off the debt with money created by the government.

For those that worry about inflation, my gradual approach deals with this pretty well. After all, the best type of inflation is when the money is spent to benefit the vast majority of Americans (like printing money to give them Social Security payments). Plus, this money will be recycled in the community much better than bailing out the rich.

[Can't spend what you don't have]

@Walter I think there is more fraud than you're willing to admit but I can see your point. If you think that the system will change on its own though, without some catalyst, I tend to disagree. I wish it was not so...but I would not give you 3 cents for our political leadership when it comes to acting in the best interest of all the citizenry.

[Don Levit]

Walter:
Could you provide a specific example of printing money to give people Social Security benefits.
Currently, the cash outgo exceeds the cash income of the SS trust fund. Treasury interest is redeemed by general revenues AS IF THE TRUST FUND DID NOT EXIST!
How would your plan be different, specifically for that part of Social Security which is not pay-as-you-go? How do we make up the annual cash shortfall for benefits paid?
Don Levit

[Walter Wit Man]

Don,

From my memory, I think your statement about the Social Security trust is false. It still earns interest on the T-bills it holds, so it is still taking in more money than it is sending out.

Ideally, I would get rid of the trust fund entirely and give people the money the paid into it back. Then I would lock all the benefits in, maybe even increase benefits because they are so meager, and set a fair cost of living adjustment. So basically everyone gets the same deal. The benefits are paid via an electronic credit to the bank of one's choice. All banks shall be required to accept this payment and can't charge a fee. If a beneficiary wishes, the money will be mailed by check, or cash (sweet greenbacks), etc. No debit cards allowed unless it has zero fees.

So then basically the government would be printing whatever money is going out in Social Security payments. This could also be done for any shortfall from the trust when that occurs a few decades from now.

Oh, and now that I think about it, the benefits shouldn't be limited to those that worked. Even those that didn't work and reach old age should get a minimum payment. This is the democratic use of our money that's in the best interest of all. It's bad to have elderly paupers.

Same thing with health care. We should go to a hybrid single payer/socialized system. We should have a corps of general docs that earn the government salary in exchange for free education (also directly provided by the gov.--let's go back to the land grant school that provides basic college for next to nothing).

Nationalizing/Democratizing these sectors from the bottom up would help average people and any "debasement" of currency would be worth it for the vast majority of people:

1. Social Security
2. Health Care
3. Education. We already socialized education a century ago but neoliberal attacks are now under way. Primary education is being privatized and public secondary education is becoming less subsidized for the student.
4. Major Transportation Systems--not just highways, but rail, and mass transit.
5. Post Office. Hell, figured I'd throw it in because people love it and it is good for a democratic republic to have a people's post office.

These bottom up efforts can all be done via money created by the government without raising revenue via taxes or bonds. Many of them involve payments to people, like Social Security. Other 'printing' involves payments to people for services provided, like a doc's salary (and we can have them go back to decent hours--a 40 hour work week), or a postal worker salary, or to run a transportation system.

The major area where our government is "bloated", and needs to be reduced is the military and subsidies to large corporations. That is the vast majority of the fat that needs to be cut.

That and by cutting out interest payments on debt we are saving. We are also saving by not letting these banksters print our money. We are also saving by getting rid of health insurance companies.

This is huge.

[Walter Wit Man]

And Don, to clarify, the U.S. gov. simply waves it's magic wand, (i.e. a computer sends signals), and credits a bank account with money out of thin air. No need to have the money come from anywhere else. I guess the government would keep a ledger, and it would be publicly available so the currency can be accurately traded.

Jon Q. Public gets $1,200 put into his account every month for his social security benefit and the government need collect no taxes.

If Bernake really wanted to do a helicopter drop, he would have erased the SS Trust fund and returned the money to everyone who paid into it who is still alive, based on some sort of proportional distribution.

Then going forward, everyone gets the basic deal, and neither business nor individuals need to pay payroll taxes (think how sweet it will be for sole proprietors not to have to pay the full payroll tax and not have to worry about medical care).

Let say something like this:

$3,500/month for those that worked 30 years.
then a it would vary based on years worked.
$1,500/month for those that worked 1-5 years.
1,250/month pension after age 65 those that never worked.

[Walter Wit Man]

Maye $3,500 is too high. $2,500 maybe. What is the highest payment currently? Around $2K?

[Ministry of finesse]

Look Out Below (make sure you watch the video below)

Just a quick one today. Contrary to the public backscratching campaign over the supposed relative strength of the economy being conducted by the media, the real economy data continues to belie the lies being propagated by the financial journalists, Fed officials and politicians.

First, housing is tanking and now more proof to back up my thesis that foreclosures this year will swamp the market and push prices down even more.

Bloomberg: Home Prices Seen Dropping 10% in U.S. on Foreclosures: Mortgages LINK
Reuters: Americans brace for next foreclosure wave LINK
Zerohedge: LINK

In a previous post, I linked the actual, unadjusted housing data from the Census Bureau and NAHB - the stuff that neither gets published by the media nor does makes any headlines - and it shows that the actual number of homes being started and sold, plus the actual number of existing home sales that actually close, is still probing historical lows. Moreover, an increasingly large number of homes are being purchased by investors who aspire to turn around and rent out these properties. This will put pressure on rental rates and we'll back into the downward spiral in prices again.

http://truthingold.blogspot.com/2012/04/look-out-below.html

[Bernanke runs barter town]

Mike Krieger Explains Central Planning for Dummies

The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations.

Each central bank... sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.
- Carroll Quigley (Bill Clinton’s mentor at Georgetown) from his 1964 book Tragedy and Hope

People have awoken to the Fed and how criminal and deceitful this organization is and the existential threat it poses to economic freedom and hence human liberty. The arguments against the Fed are blistering and the only rebuttal the Fed has is to spout the same old nonsense like “we saved the world” or some trite derivative of this fallacy. The only thing they saved are untalented speculators from their bad bets. What the Fed has systematically done is literally transfer all of the bad debts and bets from the banks to the taxpayer. We are living this reality to this day.

http://www.zerohedge.com/news/mike-krieger-explains-central-planning-dummies?

Benny blanco doesn't print for the masses, he prints for the elite.

[Don Levit]

Walter:
The interest credited to the trust fund is not in cash, but in Treasury securities.
The entire trust fund (principal and interest) have been loaned to the Treasury over the years to pay for real expenses and lower real deficits.
Instead of keeping the trust fund intact, with nonmarketable Treasuries, to be used exclusively for Social Security beneficiaries, the entire fund, principal and interest, was spent.
Why do you think that about half of the intragovernmental debt (which partly comprises our total debt, along with debt held by the public) is due to the SS trust fund?
It certainly isn't because the fund is intact.
So, it takes general revenues to tap the trust fund, including the interest, because the interest has been used up over the years.
By the way, when you mention magic wand, and creating money out of thin air, I get turned off.
I thought only God could do such a thing!
Don Levit

[Walter Wit Man]

Well I can see why you got turned off . . . you had no real rebuttal to what I wrote so you had to pretend the whole idea was so preposterous you won't even consider it.

Letting the banksters print our money is a gift to them that provides no benefit to we the people. Why can't Austerians acknowledge this basic fact? Why does a sovereign, the most powerful sovereign ever to kick ass and take names, need to pay bankers to print its money or why borrow this money? The most democratic way to create money is for the government to print it it directly.

And btw, I was being facetious about a "magic wand" and creating money "out of thin air." But surely you can comprehend how this works, no? The credits would simply be deposited with the beneficiary's bank. What's so hard to understand about that? The government keeps records and makes them publicly available.

Nah, you understand, you're just clinging to Austrian dogma. Printing money is baaaad. Austerity is the answer.

Bullshit. We just printed tens of trillions of dollars to give to banksters. My proposed printing isn't even as much, at least in the short term, and anyway the vast majority of Americans would be better off for it. The people that would suffer the most from these policies would be the elite.

Austerians claim they want fair capitalism but they seem to focus on the relatively powerless. They are enforcers for the fascists. They demand average people follow a harsh code, while the rich get away with murder.

[Walter Wit Man]

Don,

On your Social Security silliness.

The federal government has issued bonds. Some of these are held in trust for the American people to pay their social security benefits. People have paid into this fund out of wages.

You are basically saying the federal government should renege on these bonds, should default. Why would you choose these bonds on to default? First off, its there is no reason for any country that is sovereign in its own currency to default on a bond held in its currency. The only reason a country would default is if it chooses to default. The U.S. has come up with one humdinger of a whopper to explain their possible default. But there is no good reason to default--the U.S. could easily "print" this money to pay off any debt.

But most importantly, why shouldn't we first default on foreign held debt. Why do you insist on defaulting on average American people's bonds that they hold? Why would you take a meager payment away from an old person, when you didn't first insist on defaulting on Chinese T-bills?

The way you're looking at this whole thing is a con. You're perpetuating a con.

The T-Bills done disappeared did they? Or, I know, now that we opened the vault and try to redeem the T-Bills Uncle Sam just laughs maniacally and says, "you didn't think that was a real legal instrument, did you? Nah, it was a huge joke. You've been punked!"

Did you hear that talking point in the Wall Street Journal?

Let's try that one on the Chinese. "No, you don't understand Mr. Lee, this is an intra-governmental T-bill and we only honor inter-governmental T-bills. Plus, this is not on the official paper. It doesn't have the free mason watermark. You're out of luck. Sorry. Caveat emptor."

[Don Levit]

Walter:
I am not saying that the U.S. should renege or default on their bonds.
I am saying that not all bonds are equal, in the level of their obligation to be repaid.
This is not my opinion.
See a paper entitled "Federal Debt, Answers to Frequently Asked Quwstions, An Update," published by the GAO.
Look on pages 65 and 66.
Debt held by the public is an explicit liability, the strongest obligation to fulfill.
Future Social Security and Medicare benefits are Exposures implied by current policies or the public's expectations, the fourth and lowest level of obligation to fulfill.
http://www.gao.gov/new.items/d04485sp.pdf.
As far as the U.S. going bankrupt, let's assume you are correct - it is impossible.
What I am saying is that there is a difference between a Treasury security whose principal and interest have been spent versus a Treasury security whose principal and interest have been left intact.
The latter simply converts into cash, for it represents a store of wealth. The former requires new general revenues to redeem.
Don Levit

[Walter Wit Man]

Don,

1. That paper does not prove that "Not all bonds are equal in the . . . obligation to be repaid." The paper talks about the accounting treatment of these bonds. The paper assumes the U.S. will stay in the straight jacket the fascists want to impose on this country; it assumes we can't simply 'print' the interest rather than raising taxes or selling more bond to 'raise' the money in the general funds. No general revenues are required to redeem Treasury securities whose principal and interest have "been spent."

Plus, isn't money fungible? Why haven't the Chinese T-Bills claims similarly been spent? Isn't money fungible? Where's the pot of money that is sitting aside unmolested for the Chinese to redeem?

Also, you claim Chinese T-Bills are convertible to cash and the SS Fund bills aren't? Uh, I don't think so. Isn't that the whole concept of a T bill? One presents it for payment in the denominated currency? In this case U.S. dollars? In this case we are going to present it and you would ave the government say no, we will not honor that for full cash value, and then you will spew your bullshit reason. That's default.

[Walter Wit Man]

I flubbed that last comment.

Don,

In short, the paper discusses the accounting treatment of the T-Bills in the SS fund (and it misses the major point I've been raising above, so it doesn't even do this well). It does not discuss the obligation of repayment. It DOES NOT suggest that the U.S. can default on these obligations . . . it simply points out that under the current operating rules, the U.S. government will have to raise funds besides payroll taxes to pay these obligations.

The current operating rules are unnecessary and imposed by the fascists to enrich the elite at the expense of average citizens.

Btw, your link is bad. Here's the paper: http://www.gao.gov/new.items/d04485sp.pdf

[Walter Wit Man]

One last crack Don. Sorry.

Even according to the paper, the T-Bills in the trust fund are "explicit liabilities." They claim Social Security benefits are "implied", which I disagree with, but we aren't talking about the benefits here. We are talking about T-Bills that are being held in Trust and are to be used to pay benefits. Got it?

So according to the very paper you cited, there is no distinction between Chinese T-Bills and the T-Bills held in trust by the SS fund--they are both "explicit" liabilities of the federal government and must be paid in full or else it is a default.

[Don Levit]

Walter:
You wrote that no general revenues are required to redeem Treasury securities whose principal and interest have been spent.
The FASAB is the accounting advisor for the federal government.
From a paper entitled "Revisions to Identifying and Reporting Earmarked Funds: Amending Statement of Federal Financial Accounting Standards 27:"
Pages 35-36 "When the (component entity) (here, it is speaking of a trust fund, such as the Social Security trust fund), requires redemption of these securities to make expenditures, the Government finances those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from the public or repaying less debt,or by curtailing other expenditures. This is the same way that the Government finances all other expenditures."
http://www.fasab.gov/pdffiles/exposure_ef_2011.pdf.
You wrotplicit liabilities. No, publicly held debt is listed as an explicit liability, not intragovernmnetal debt.
Intragovernmental debt, such as future Social Security and Medicare payments, are listed as exposures implied by current policies or the public's expectations about the role of government.
And, this is not merely an accounting interpretation.
As it states on page 65, "The federal government undertakes a wide range of programs, responsibilities, and activities that may explicitly or implicitly expose it to future spending. These 'fiscal exposures' vary widely as to source, extent of the government's legal obligation, likelihood of occurrence, and magnitude. Given this variety, it is useful to think of fiscal exposures as a spectrum extending from explicit liabilities to the implicit promises embedded in current policy or public expectations. For example, the current liability figures for the U.S. government do not include the difference between scheduled and funded benefits in connection with the Social Security and Medicare programs."
Don Levit

[Walter Wit Man]

No Don. You're wrong. You're obfuscating.

Look at Table 2 on page 66 of the first paper you cite.

There is no category of "intra-governmental debt." The Table describes liabilities of the federal government in the future. It describes Explicit Liabilities, like loan guarantees, environmental disposal liabilities, and most importantly, "public debts." The T-Bills held by the Social Security Trust Fund fall into the "public debt" category, as I will show below.

The sub category that most closely resembles your "intra-governmental debt" distinction is found in footnote b, which refers to military pension funds which will offset the "explicit" liabilities of military pensions. This is a confusing footnote, because it is obfuscating the fact that military veterans have defined benefits, which are an explicit liability, which are funded via the pension funds and by funding the DoD. So my interpretation of this footnote is that if the pension fund comes up short the DoD budget will be reduced because it will be accounted as a DoD liability, even though it is a U.S. gov. liability and must be paid.

As far as the Social Security Trust Fund T-Bills being "implied" liabilities . . . you're totally wrong.

While these are indeed unique T-Bills from the T-Bills released to the American public or the Chinese, for e.g., they are indeed public debts. They are T-Bills. Think of them as using the Social Security Trust Fund to fund the government and in exchange the government paid interest. You know, kind of how we view it when the Chinese hold T-Bills.

If you look at page 66 of the first paper you cited, it lists the different categories, and if you look at footnote c, you see that the "implicit liabilities" of social security are "net" of the trust fund. Therefore, only the spending that comes after the trust fund is extinguished is "implicit." Of course this document is meant to be a scare tactic so they have to obscure this fact and put this in a footnote and make it hard to understand.

But notice the fascists have yet to explicitly say they will default on these T-Bills. We've been treated to the propaganda in the Wall Street Journal and the obfuscation we see here, which is common, but the perps haven't taken that final step yet. I can read. It says trust fund. It says T-Bill redeemable for cash with interest paid. I have been paying payroll taxes into this trust fund. A trust and a bond used to mean something. I can tell when I'm being suckered and when fascists want to default on bonds that pay my retirement but want to honor Chinese bonds and bonds to Solyndra, etc. I can tell what fascism looks like.

[Walter Wit Man]

I'm sorry. Not footnote b itself. Don's "intra-governmental debt" category most closely resembles the "Debt Held by Government Account" subcategory of the "Implicit Liability" category.

Confusing, I know.

Footnote helps explains what "debt held by government account" is though. It's not referring to the military pension obligations themselves, because that is listed directly under the "explicit liability" category. So the only "debt" it can be referring to is some sort of requirement for the DoD to pay any shortfall, although this is not a legal obligation like the defined benefit pension itself is--so it is an implied liability. Uncle Sam must pay the vet, but the DoD may not be on the hook for it.

[Walter Wit Man]

This article goes along nicely with our discussion about democratizing the creation of money: http://www.aljazeera.com/indepth/opinion/2012/04/20124395428374962.html

[sharonsj]

Sen. Bernie Sanders, just about the only politician I trust, says that the Social Security trust fund has enough money to pay 100% of benefits for the next 25 years. After that, the money will pay only for 80% of benefits.

The simple answer is to raise the cap, currently around $110,000, so that people earning more than that pay into the SS system. If we do not preserve the social safety net, I guarantee you'll see another revolution.

[Don Levit]

Sharon:
Sanders is saying the same thing that Stephen Goss, the chief actuary of Medicare is saying. They both imply there are no financial repercussions to the SS trust fund until it is exhausted.
That is simply not true, as I pointed out before.
The same financial dynamics occur when cash outgo exceeds cash income, as has occurred since 2010: general revenues must be raised.
What are the financial dynamics when the trust fund is exhausted: new general revenues must be raised.
Walter:
You wrote that there is no category of intragovernmental debt.
In the paper cited earlier, it says on page8 ""Debt held by government accounts (intragovernmental debt) - about $2.9 trillion at the end of fiscal year 2003 - represents balances in the federal accounts, primarily trust funds.
You then stated that T-bills held by the SS trust fund fall into the "public debt" category.
This is not true.
There are 2 types of debt - debt held by the public and intragovernmental debt.
On page 6 it says "Debt held by the public is federal debt held by all investors outside of the federal government.
Debt held by government accounts (intragovenmental debt)is federal debt held by the federal government itself. Most of this debt is held by trust funds, such as Social Security and Medicare."
Pages 10-11 "What is the difference between the two types of federal debt?
Debt held by the public approximates current federal demand on credit markets. It represents a burden on today's economy, and the interest paid on this debt represents a burden on current taxpayers."
"In contrast, debt held by federal accounts (intragovernmental debt) and the interest on it represents a claim on future resources. This debt performs largely an internal accounting function. Special federal securities credited to government accounts (primarily trust funds) represent the cumulative surpluses of these accounts that have been lent to the general fund."
"Debt held by government accounts reflects a future burden on taxpayers and the economy. When a government account needs to pay expenditures exceeding its receipts from the public, the Treasury must provide cash to redeem debt held by the government account (not only when the trust fund is exhausted). The trust funds will begin drawing on the Treasury to cover the cash deficit, first relying on interest income and eventually drawing down accumulated trust fund assets. The government must obtain cash to finance this spending in excess of earmarked tax receipts either through increased taxes,spending cuts, increased borrowing from the public,retiring less debt (if the unified budget is in surplus), or some combination thereof."
Don Levit

[Walter Wit Man]

Don,

To the extent your papers repeat the error of your reasoning--they are wrong. The T-Bills are government bonds that explicitly promise cash payments with interest and are thus public obligations like the loan guarantees to Solyndra or GSA mortgages or defined benefit pensions to military and civil workers. It says so on the face of the instrument.

But your papers don't even claim what you claim they do. They even admit all this hocus pocus with intragovernmental debt is "largely an internal accounting function", as you quote above, and as I first noted above. If you look closely and read the footnotes, you see that my interpretation is not wrong.

Frankly, those papers are such a mess they are worthless. They are mixing up concepts and are totally confusing. Plus, they are extrapolating out 75 years so that's always dicey. It's intentionally done in a confusing way, I'm guessing, to cover up the theft that you advocate.

Make no mistake about it. You, and your fascist brethren, aim to rob the American people. You are holding guns to the American people's head and it will not be forgotten.

You perpetuate a fraud.

There is no logical distinction between the general Treasury bonds held by the public on one hand, like the Chinese and American citizens hold, and the T-Bills held in the trust fund on the other hand. The U.S. government is simply holding the T-bills in the SS fund as a trustee would. The U.S. government is not the beneficiary, so this whole "intra-governmental" distinction is bullshit.

It's no different than if my child had 20 year T-Bills in his piggy bank. The U.S. government has promised him to pay cash plus interest. It's on the face of the instrument. That is not "intra-governmental" debt.

Furthermore, the U.S. has not "implicitly" reneged on the promise of the SS trust fund T-Bills simply because it has spent money collected in payroll taxes. That's the original buying of the bill! It's like when Grandpa bought my child his 20 year treasury bill. Grandpa paid the money and Uncle Sam "spent" the money on blowing up brown people in the Middle East and putting black people in prison. Does that mean that Uncle Sam has reneged on the promise to pay the 20 year T-Bill Grandpa gave him? It's already spent, like you say. The beneficiary is the same, some random citizen (or a Chinese or other foreigner in the case of public T-bills).

The government has to raise money to pay off all bonds, not just intra-governmental bonds. Where's the pot of money for the Chinese bonds that is sitting aside untouched? When it comes time to redeem either a standard 20 year T-Bill or the SS T-Bills, the government has to come up with money (not really, but that is the straight jacket the fascists have imposed on us).

That's the bullshit you're peddling. Along with your other fascist enablers, like Zero Hedge, Jesse's Americain Cafe, especially Mish, etc., etc.

It's sick.

This is so silly no wonder the Austerians like yourself have no substantive rebuttal other than to repeat the same mantras over and over. Please address the danger of honoring U.S. bonds to the American people.

Even if we have to "print" a few trillion decades in the future, what is the harm? Please compare to the trillions we just printed for the rich bankers.

[Don Levit]

Walter:
If all of the Treasuries are redeemed solely on a pay-as-you-go basis, because all the principal and interest have been spent, then we may have a confidence problem.
The T-Bills have value only because the public has faith in the government to operate and to pay its bills.
If that faith is lost among most of the population, bye-bye any redemptions, or at least redemptions that have monetary value.
Or, is The U.S. an exception to this basic rule of economics?
Don Levit

[Walter Wit Man]

Don. You're just repeating a mantra. A conventional wisdom that is far from wise--it's destructive.

We don't need to tax or sell bonds to pay off obligations of the federal government. The government doesn't need to "raise" money--it's sovereign and can create its own currency and pay obligations directly.

You have consistently failed to address that point.

I agree "printing" money can be dangerous. The trillions we just printed to give to bankers was extremely reckless and prevents real recovery.

But, printing a few trillion for average people, from the bottom up, is not very harmful. At least average people get to enjoy the inflation on the way up! They aren't just as poor as they were before but everything is more expensive. We all should enjoy the fruits of the American dollar.

Plus, it's morally right. If we must "print", why not do it by following through on obligations like bonds? We just turned on the printing press--without obligation to do so--for the bankers. Now when the government is obliged to print based on bonds average people hold you want to default? Sick.

[Bankster's rule, the masses drool]

JP Morgan (And Others) Need To Be Neutered

We have not learned. And if we don't learn soon, we will pay once again for our idiocy.

JPMorgan Chase & Co. (JPM) trader Bruno Iksil’s outsized bets in credit derivatives are drawing attention to a little-known division that invests the company’s reserves and fueling a debate over whether banks are taking excessive risks with federally insured and subsidized money.

Debate? There is no debate: They are.

This is effectively counterfeiting of the nation's currency, and no amount of arm-waving and apologists screaming about "competitiveness" changes what it is.

We have commercial banks, operating with the explicit permission of our federal government, who are creating monetary units in the form of spendable funds that have a debt on the other side of the balance sheet, with exactly nothing behind it in terms of actual assets representing prior economic surplus (that is, previous production.)

http://market-ticker.org/akcs-www?post=204502

[Walter Wit Man]

Yes Bankster's rule,

When we allow banks to "print" via such speculative and leveraged bets, it leads to disaster because it's a top down printing, and not the bottom up printing I would like to see.

We are printing derivatives now. Supposedly this top down printing will piss down on us common folk.

We devote an inefficient amount of our collective resources to financial speculation. How much of our economy is finance? This enriches very few people at the expense of many.

We should heavily regulate and outlaw this speculation, and start printing for the common man to erase the unsustainable debt. This is the most obvious democratic solution.