Government and Bankers looting the social security trust fund

How does one decrease the cost of labor in America? Well first, you have to bust the unions. Check.

Then you have to create a pressing need for people to work - perhaps give them easy access to credit and then get them to go so deeply into debt that they will have to work until they die to pay them off. Check.

It also helps if you push up the cost of living by manipulating commodity prices. Check.

http://www.counterpunch.org/floyd07272010.html

http://www.activistpost.com/2010/07/10-ways-youre-being-fleeced-by-banks.html

http://www.countercurrents.org/woodward030610.htm

Then, take away people’s retirement savings. Check.

Lower interest rates to make savings futile and interest income inadequate. Check.

And finally, threaten to take away the 12% a year that people have been saving for retirement by labeling Social Security an "entitlement" program - as if it wasn’t money Americans worked their whole lives to save and gave to the government in good faith. Check.


The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.

That is how the largest theft in the history of the world was carried out. 300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today - enough money to give 100M workers $84,000 each in cash! The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.

Now that it is time to repay those special bonds in the Trust Fund, we are inundated in opinion pieces in the leading newspapers and magazines complaining about Social Security and its horrible impact on the budget. Government finances have been trashed by foolish tax cuts, unpaid wars, tax loopholes for corporations and the very wealthy, the failures of economists, the greedy search for greater returns in financial markets and the collapse of moral values in giant businesses but Social Security is supposed to be the problem that needs fixing…

Social Security is not "broken" the money is in the Trust Fund. But the people who manage the finances of the United States don’t want to repay the bonds held by the Trust Fund. They want to default selectively against average people, their fellow citizens, who paid their taxes expecting to be protected in their retirement.

more at Phil's Stock World

Preface: If you've been too busy to pay attention to the details, and if you're hoping that the financial reform bill which has just been passed will fix the economy, this essay will bring you up to date.

Congress, Federal Reserve chairman Ben Bernanke, Treasury Secretary Timothy Geithner and the rest of the folks who run the economy are patting themselves on the back for passing the financial "reform" legislation.

Obama says it was "my policies that got us out of this mess."

The new bill is widely described as the biggest change in how the economy is regulated since the Great Depression.

Is it true?

Unfortunately, as discussed below, none of our real economics problems have been addressed.

Consumer confidence is plunging again, and yet little in the legislation really restores trust in the system.

The poker game started breaking down because the wealthiest took all of the chips, and most people have no money to play with ... but the bill does nothing to address the ever-widening gap in wealth.

The bill does little to restore the rule of law, which - as PhD economist James Galbraith notes - is a necessary ingredient in economic recovery.

Unemployment continues to plague the economy, because - even with the new bill- the government is feeding the parasite and killing the patient.

Main street continues to bleed because - instead of breaking up the too big to fails so that their dead weight stops suffocating the real economy (virtually all leading independent economists have said that the too big to fails must be broken up, or the economy won't be able to recover, and see this) - the government has allowed them to get even bigger (and see this and this).

Indeed, just as BIS warned years ago, bailing out the banks has simply spread their problems into sovereign crises ... and now the banks and governments are broke, and the global strategy of printing obscene quantities of money ("quantitative easing") is debasing currencies worldwide.

"Deficit hawks" like top economic historian Niall Ferguson says that America's debt will drive it into a debt crisis, and that any more quantitative easing will lead our creditors to pull the plug. See this, this and this. Indeed, PhD economist Michael Hudson says (starting around 4:00 into video):

If the problem that is grinding the economy to a halt is oo much debt, and if no one in the government - in either party - is looking at solving the debt problem, then ... we're going to go into a depression as far as the eye can see.

Yet the U.S. hasn't reined in its profligate spending. While modern economic theory shows that debts do matter (and see this), the U.S. is spending on guns and butter.

As PhD economist Dean Baker points out, the IMF is cracking down on the once-proud America like a naughty third world developing country. (As I've repeatedly noted, the IMF performed a complete audit of the whole US financial system during Bush's last term in office - something which they have only previously done to broke third world nations.)

On the other hand, "deficit doves" - i.e. Keynesians like Paul Krugman - say that unless we spend much more on stimulus, we'll slide into a depression. And yet the government isn't spending money on the types of stimulus that will have the most bang for the buck: like giving money to the states, extending unemployment benefits or buying more food stamps - let alone rebuilding America's manufacturing base. See this, this and this.

Nobel prize winning economist George Akerlof predicted in 1993 that credit default swaps would lead to a major crash, and that future crashes were guaranteed unless the government stopped letting big financial players loot by placing bets they could never pay off when things started to go wrong, and by continuing to bail out the gamblers. (Not only has the government rewarded the gamblers, bailed them out and let them engage in a new round of risky betting, but it hasn't even meaningfully reined in credit default swaps.)

Paul Volcker is warning that the watered-down Volcker rule (which won't even kick in for some time) won't prevent the next crisis. Similarly, one of the primary authors of the legislation - Chris Dodd - long ago said the bill wouldn't prevent future crises.

Shady accounting is part of what got us into this mess ... but as Citigroup Inc. analyst Keith Horowitz notes, banks are making huge amounts of money from an accounting rule that allows banks to book profits when the value of their own bonds falls.

High frequency trading is wrecking the markets ... but isn't addressed in the new legislation.

Neither is reforming money pits like Fannie and Freddie

The Fed is now warning that it could be 5 to 6 years before the economy recovers, and that there is a "significant downside risks" and a possible slide into deflation. That's not a big surprise ... Ben Bernanke doesn't understand that liquidity was never the problem, and he has continued the same behavior which got us into this mess in the first place. Bernanke and the Fed have caused widespread destruction to the economy (see this, this, this and this). And yet the financial reform bill gives the Fed has more - instead of less - power.

Timothy Geithner was largely responsible for the crash and prolonging the crisis (see this, this, this, this, this, this, this, this, this and this) ... and yet Geithner is being given more - instead of less - power by the new legislation.

Instead of becoming more democratic and more of a free market capitalist economy, the U.S. has become a a kleptocracy, an oligarchy, a banana republic, a socialist or fascist state ... which acts without the consent of the governed.

No wonder the American and world economies are falling back into the double dip of a very nasty downturn.

And see this......