Monday, July 6, 2009

How Do We Know Social Security Is A Ponzi Scheme?

“How do you know it is not a Ponzi scheme?”is the better question in my mind nowadays.

Do you trust anything anyone says about financial or government matters anymore? Why should you?

The ‘proof’ we are willing to submit to you as judge and jury is highlighted in Exhibit A, the so-called Social Security “Trust Fund”. The ‘Trust Fund’ was immortalized in Darrell Hammond’s SNL portrayal of VP Al Gore in the 2000 election when he defined his campaign in one word, “Lockbox’. The ‘lockbox’ was supposed to be building up large reserves since 1983 and is now ‘estimated’ to be over $2.3 trillion according to reputable sources such as OMB, CBO and the Social Security Trust Fund board members.

Wait a minute! How can $2.3 trillion in ‘reserves’ be ‘estimated’? It either ‘is’ or it ‘isn’t’.

There are no bond holdings in Social Security in the fiduciary sense where we can go redeem $2.3 trillion today if we wanted to and get cash in return. None, nada, zero. There are no trading floors dealing in Social Security bond offerings. There are no investment houses underwriting “SS Trust Fund Bonds Series XYZ”. You can’t buy one anywhere and see what its true value is on the open market.

You can go to Washington yourself, march up to the US Treasury building and ask to see the trust fund but they can’t show it to you. Nor can they open up the drawers in the vault where $2.3 trillion in crisp $100,000 Woodrow Wilson bills rest in peace. (We used to have such denominations in our US currency, believe it or not.) All they can do is point to a computer screen where you will see the electronic digits “$2.3 trillion in Trust Fund Balance” appear on the screen. And the bureaucrat will then announce: “That, ladies and gentlemen, is your vaunted “Social Security Trust Fund!”

The Social Security Trust Funds are identified in a special type of ‘treasury designation’ on paper and in a computer program, that is for sure, but they can not be redeemed until and unless taxes are raised on your kids when they mature and start working. Or we cut out all spending in virtually every other program of the budget other than Medicare, Medicaid and interest on the national debt. The ‘trust’ in 'trust funds' means ‘we hope your kids will be dumb and docile enough just to accept the higher taxes and pay them when the majority of the Boomers will be retiring’.

Sorry to be so blunt but that is the truth about the way your federal government looks at you when it comes to dancing around the issue of Social Security and retirement security.

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