Truth, BS, SS And Ponzi Schemes | RedState

Governor Rick Perry has been known to unleash some fairly flamboyant rhetoric at times. If you like a guy who puts the teleprompter away and actual says what he believes in non-calibrated English, Governor Perry offers us excitement. If people don’t like what he’s saying, he scares the BahhhJeebus out of them. Calling Social Security a Ponzi Scheme is just the sort of thing that fulfills both of the two sentences written above. Thus, we should approach Governor Perry’s rhetorical flourish with the care and perspicacity of a good EOD team. Let’s find out if calling Social Security a Ponzi Scheme is really all that germane.

We begin by actually defining what constitutes a Ponzi Scheme. The SEC offers the following legal definition which it uses for regulatory compliance enforcement.

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

So Perry claims SS is a Ponzi Scheme. The program depends on new revenues to pay current investors. Check. The investment activity consists of the government writing itself IOME’s, as the revenues from the payroll taxes supporting Social Security go directly The US Treasury’s General Fund. Once this money goes there, it is then fungible. It could just as easily be spent on new Tomahawk Missiles or highway construction. The mythical Social Security Lock-Box, of Al Gore fame; exists in the same room as Puff the Magic Dragon.

Social Security is also significantly different form Ponzi Schemes in several ways. The government makes people pay into it. They recruit you in the same way British press gangs recruited sailors for Her Majesty’s Royal Navy. At least with Social Security, they limit themselves to shanghaiing a portion of your paycheck. So unlike Bernie Madoff’s iniquitous scheme, there really is another sucker born every minute. Once any US citizen or worker employed legally in the US gets to payday; they will enjoy their dhimmitude.

The IOME’s supporting the mythical Social Security Puff the Magic Dragon Trust Fund, are government debt obligations that must be redeemed before other bills can be paid. In 2005, President George W. Bush described the Social Security Trust Fund as he saw it.

 
Read more here: Truth, BS, SS And Ponzi Schemes | RedState

Economist Calls Entitlements A Massive Ponzi Scheme And Says US Is Actually $211 Trillion In Debt

When Standard & Poor's reduced the nation's credit rating from AAA to AA-plus, the United States suffered the first downgrade to its credit rating ever. S&P took this action despite the plan Congress passed this past week to raise the debt limit.

The downgrade, S&P said, "reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

It's those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan's Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.

"We have all these unofficial debts that are massive compared to the official debt," Kotlikoff tells David Greene, guest host of weekends on All Things Considered. "We're focused just on the official debt, so we're trying to balance the wrong books."

Kotlikoff explains that America's "unofficial" payment obligations — like Social Security, Medicare and Medicaid benefits — jack up the debt figure substantially.

Economist Calls Entitlements A Massive Ponzi Scheme And Says US Is Actually $211 Trillion In Debt

AARP says some Social Security cuts could be acceptable - The Hill's Healthwatch

How bad is the entitlement situation if AARP is now doing a 180 with regards to its policy about Social Security. Sounds like someone showed them the books and said you can either compromise or the whole system will default, its your choice either way.

AARP insisted Friday it has not changed its position on Social Security, but acknowledged it could back some benefits cuts for future seniors to preserve the program.

In a statement, the nation’s largest lobbying group for seniors said it could only do so as part of a balanced deal to ensure Social Security’s solvency. 

It also said any changes, such as increasing the age at which one is eligible for Social Security, would have to be phased in slowly and should not affect current beneficiaries.

“It has long been AARP’s policy that Social Security should be strengthened to provide adequate benefits and that it is sufficiently financed to ensure solvency with a stable trust fund for the next 75 years,” AARP CEO A. Barry Rand said. “It has also been a long held position that any changes would be phased in slowly, over time, and would not affect any current or near term beneficiaries.” 

The group released the statement after a report in The Wall Street Journal that said the AARP board had approved a new policy of backing benefit cuts. AARP decried the report as inaccurate, but also said it could agree to changes in the program.

AARP says some Social Security cuts could be acceptable - The Hill's Healthwatch

WSJ - Warning: Retirement Disaster Ahead

Best advice for a good retirement: 1. cash is always king, and 2. being debt free allows you the flexability to do what you want when you please.

Also don't buy into the inflation numbers put out by the government as they are designed so that the government can pay less to retirees under social security in order to keep the ponzi scheme running at little longer.

Warning: Retirement Disaster Ahead

By BRETT ARENDS

Don't let the rally in the stock and bond markets fool you. Many Americans are still hurtling towards a retirement disaster. Few realize it. Even many of those running the big pension funds don't know.

That's the conclusion of John West and Rob Arnott at Research Affiliates, an investment management firm, in Newport Beach, Calif. In their latest report, "Hope Is Not A Strategy," they have some numbers to back it up.

"I worry a lot about people reaching their golden years and discovering, 'Oh, I should've saved more,' and 'Oh, I don't qualify for Social Security any more because it's means tested'," says Mr. Arnott, a widely respected market strategist. "We're headed for a retirement train wreck," he adds, "and it's going to get really ugly over the next 15 years."

Alarmist? Perhaps. But follow the math.

The returns you will get from your stock funds can only come from four things, they note: Dividends, earnings growth, inflation and changes in valuation.

Right now the dividend yield on U.S. stocks is about 2.2%, they note. Historically, earnings have only grown by a surprisingly low 1% a year in real, inflation-adjusted terms. Mr. Arnott tells me the average since 1900 is only about 1.2%, and in the last half century just 0.6%. Will we get more in the future? With the U.S. population ageing and heavily in debt? It's hard to imagine.

Throw in a 2% inflation forecast–more on this later–and Research Affiliates forecasts a long-term return of 5.2%.

What about changes in valuation? Some generations are lucky. They invest in the stock market when it's depressed and shares are cheap in relation to earnings. This was the case in the 1930s and the 1970s. Then they retire and cash out when the market is booming and shares are expensive in relation to earnings–such as in the 1960s and 1990s.

People today are not so lucky. The stock market's latest rally has lifted shares already to pretty high levels in relation to average cyclically-adjusted earnings. This so-called "Shiller PE" (named after Yale professor Robert Shiller, who popularized the notion) has been an excellent indicator of market value. Right now it's at about 22–well above its historic average of 16. The only time the market has boomed from these levels, was in the late 1990s bubble–an atypical moment unlikely to be repeated any time soon.

You can read the rest of the story here.

Social Security reaches tipping point | detnews.com | The Detroit News

Social Security reaches tipping point detnews.com The Detroit News

Social Security to start cashing Uncle Sam's IOUs

PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.
It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

http://news.yahoo.com/s/ap/20100314/ap_on_bi_ge/us_social_security_ious