The Glade 4.0

A defining characteristic of a financial instrument colloquially known as a "treasury" is that it is negotiable. These notes are not negotiable. If everything created under the auspices of the Treasury is a "treasury", guess that dollars are "treasuries" as well. I just believe it's disingenuous to call it such. The "special interest rate" is determined by a formula that may, or may not take into consideration the market conditions. It is not determined by the market.



People aren't forced to enter into a mortgage, and a mortgage cannot be changed by the issuer at any time, unlike the "special non-marketable securities of the U.S. Government " held in the SS "trust fund.



I guess my illustration of a big pile of money was lost on you. When all the money is held in the same place without discrete accounts, new investor money is being used to pay off old investors. There is no way around it, if a mutual fund used the same accounting practices as SS does, it would be shut down by the SEC - for using new money to pay off old money.


I have no such belief. The reasons I don't believe there is a "trust fund" are explained well, above, by both Kaffis and Stathol.


No, you made the assertion that the money was there because the early "investors" weren't allowed to claim their investment due to the pay out schedule which used actuarial tables to assure that the majority of "investors" would be unable to claim their money, and I don't disagree.



I didn't doubt it. You've already shown numerous times that you trust the Gov't implicitly to handle other people's money. I don't.

That still leaves us where we started, regardless of what conditions people choose to place on the concept of a Ponzi Scheme, the reality is that a Ponzi Scheme uses new money to pay off old; that methodology is inherent in the structure of SS - since its inception.

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"Dress cops up as soldiers, give them military equipment, train them in military tactics, tell them they’re fighting a ‘war,’ and the consequences are predictable." —Radley Balko

The word "enrich" is not limited to finances. Ex: "Studying music history has enriched my appreciation of modern music". There are more things in life that people desire than just money. Personal enrichment is very much the goal of most politicians, in my estimation.


You're reading way more into this that what I've actually said. I never claimed that they are all into power purely for power's sake, although I do think that's a larger part of the equation than you think. Regardless, being egomaniacal and/or having a Jesus complex is really no better. The bottom line is that, whatever their reasons, the highest priority for the vast majority of politicians in Washington (again, IMHO) is getting re-elected. Even those who want to "make a difference" will gladly sacrifice any of those ideals for the sake of winning the next election. We wouldn't have so many career politicians if they didn't. And the phenomenon of the career politician is only become more pronounced over time.


And a question for Xequecal:

Suppose that Social Security were shut down tomorrow. No more people paying in, no more payments going out. Where would the money supposedly invested in treasury bills for SS go? Who would collect on it?

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Sail forth! steer for the deep waters only!
Reckless, O soul, exploring, I with thee, and thou with me;
For we are bound where mariner has not yet dared to go,
And we will risk the ship, ourselves and all.

If it's just a matter of personal estimation then there's no point in continuing. This is a discussion about a financial problem, if it means "enrichment in any way I suspect politicians might find attractive" then its far too mutable for further disucssion.



Clearly. However, I take issue with this as being "Social Security enriches politicians" in any meaningful way; enrichment from a financial system should be.. well financial or it becomes so broad that its undisproveable and undisproveable hypothesis are...

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

I don't know if you believe the crap you spew, but I think SS SHOULD die today, right now, before anyone else is ripped off. I'm against wealth re-distribution in any form.

Also, if there is any SS benefits coming to me at all, it won't be me living "off of your money". Consider what I've been forced to pay in, compounded over 40 years....

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In time, this too shall pass.

I have no problem with this as long as I get a check for the amount I paid into the system. Write me a check and close SS, for all I care. But the gov't should not be robbing people by forcing them to pay into a system then reneging on the promise to pay it back.

A Ponzi Scheme is paying off old money with new money, nothing further need be done for it to be a Ponzi Scheme. SS was conceived as a Ponzi Scheme. How were the first retirees paid?


As I said there is no rebuttal to someone who uses the argument that "Gov't says it's legal, so it's legal." I didn't address whether or not its unconstitutional because I never made that argument, and don't care to make it, not in an attempt to "get Statism in there".


The underlying concept of a Ponzi Scheme is to pay off old money with new money, that is exactly how SS was conceived and implemented. Obviously it's not "physically impossible", because that's the basis of SS. Are you saying that people put money into SS without concern for a return? I find that hard to fathom. Obviously it's not "investment seeking" in any common use of the term, because participation is mandated by law. If you're saying it's not a Ponzi Scheme because people have no choice but to enter into it, you got me there, I guess.


SS was explicitly set up so that money from new investors paid off old investors. Participation was mandated so that it would continue, otherwise it would fail, as any Ponzi Scheme will when faced with less investment than needed to pay off the old investors.

I never claimed it did.


No, it's like I'm saying that dogs are of the order Carnivora, and you're saying that bears are of the order Carnivora, and because dogs don't have the additional characteristics of bears, they aren't dogs. Alternatively, you're saying that because the Gov't says that itsdogs aren't carnivores, they aren't.


It is the only express characteristic of the investment fraud known as a Ponzi Scheme as defined by the SEC, a pretty knowledgeable source for what is considered investment fraud.


It would be a circular argument if all I stated was the first sentence. The subsequent sentences were the argument, while the initial statement was, just that, a statement expanded upon by those coming later.


I believe the label is wholly accurate, you can speculate why you believe the argument is being made but that has no bearing on the argument itself.

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"Dress cops up as soldiers, give them military equipment, train them in military tactics, tell them they’re fighting a ‘war,’ and the consequences are predictable." —Radley Balko

Diamondeye:

All I'm saying is:

1) Social Security is portrayed by Washington as an retirement investment. But in reality, it is literally an empty fund that generates no profit (nor has it ever). "Returns" are paid out purely from new investments, whether by new loans granted to the government via treasury bills, or through new SS taxation. Whether or not you want to call it a Ponzi scheme, it has the crucial properties of a Ponzi scheme. They might not be completely interchangable, but the system is wrong just like a Ponzi scheme is wrong because it shares all of those properties of a Ponzi scheme which make a Ponzi scheme wrong. If you want to say that it's technically not a Ponzi scheme...okay. I think the distinction is purely academic at that point, though.

And if you want to point out that the way it operates is just part of a larger, similar pattern -- you're preaching to the choir as far as I'm concerned. The circle-jerk of government debt finance is also (in the same sense) a Ponzi scheme, just on a much larger scale, both in terms of magnitude and geographical scope/complexity. It can only sustain itself by being a never-ending and ever-increasing cycle of borrowing from Peter to pay Paul because, like Social Security, it is bankrupt. Total US federal government liabilities exceed the value of all US assets. It is literally impossible to clear our federal debt at present. You could liquidate the entire country and it still wouldn't be enough.

2) I'm offering my opinion on why this system exists/why it perpetuates. That is, politicians exploit the social security system as a more politically convenient means of raising revenue to support pork. They do this because pork gets them re-elected, and because this is generally more important to them than anything else.

I don't think that's some vague, unproveable hypothesis. I guess wasn't aware that pork politics was such a controversial idea. I also appreciate that it isn't a rigorously provable empircal theory. If that's the only kind of thing you're interested in discussing, well...have fun with that, I guess. But by definition, there is always going to be an element of unprovability in any controversial topic -- otherwise they wouldn't be controversial. Everyone would agree because the matter could simply be proven.

_________________
Sail forth! steer for the deep waters only!
Reckless, O soul, exploring, I with thee, and thou with me;
For we are bound where mariner has not yet dared to go,
And we will risk the ship, ourselves and all.

What would be fraudulent is taking money from people with the promise that they'd get the money back then not giving them the money back. What is fraudulent is taking money from a system meant to be paid back to those who paid into it and using that money to pay for programs that are popular with folks but unrelated to the program the money was taken from. Folks might howl if their taxes went up to pay for those programs, but they're fine with stealing from people who have serious investments in that program.

Your problem is you are conflating the SSA with everything else as "the government" and assume that every part is responsible for the actions as a whole. This is just completely wrong. Social Security, itself, has made tons of profit. It invested money it received into Treasuries and got back what it paid in, plus interest. What is that, if it's not profit? It has over >$2 trillion in Treasury securities that it has bought with its profits. The government as a whole has not made profit, of course, but this is irrelevant. Social Security by itself has profited. The fact that Social Security is profiting off the financial ineptitude of the rest of the government does not magically change things so that profit suddenly doesn't count anymore. When Enron was making profit off routing electricity in circles because the government was dumb enough to pay them for that, that didn't mean Enron somehow wasn't profiting.

The whole point is there is nothing wrong with Social Security on its own. The problem is the federal government's overspending. If the federal government wasn't running huge deficits, there would be no problem with SS. On average, it pays out more than it takes in, for every individual. Even if nothing is changed it will STILL pay out on average more than it takes in. The cut to 75% of the currently promised payouts is still paying out more dollars on average than it collected from the payees. The money collected is invested, and then paid back after retirement. The fact that the dollars paid back aren't exactly the same "physical" dollars that were paid in is pretty much the definition of semantics.



The returns from those T-bills would go wherever the law that abolished SS says they will go. I suspect that in this case the government would credit it to themselves and be able to write down a lot of debt, but I'm not sure what the point you're trying to make is.

I don't really buy that it has all the necessary characteristics of a Ponzi scheme; in fact I don't beleive it would be possible for any social fund to have them. That isn't to say it's not wrong, ill-advised, confiscatory, whatever; I just do not like the implicationt aht it is a form of intentional fraud.

As to it being sold as an investment, it is true that it's billed as one, but that's a very thin veneer, and any once decieved by it is willfully ignorant, as its pretty much impossible to miss that you don't own the money in it, and only get it back A) if you're alive and B) meet the conditions.

You can castigate it up, down, and sideways if you want, and I'll most likely agree. What I disagree with is the label Ponzi scheme, and not just because of its technical accuracy but because it represents what I see as an attempt to make "politicians" and "lobbyists" responsible for everything wrong in such matters, excusing the people who have demanded endless largess from the government. You alluded to this in your analogy of Greece, but then seemingly went right back to blaming faceless "lobbyists" and "corrupt politicians". I'd say that every old man or woman that gets on an AARP add to scream about "that wasn't the agreement!" (regarding SS) is just as much to blame.



Again, I think you're trying to call general fiscal irresponsibility a Ponzi scheme. The government in general isn't billed as an investment you get returns on. Oh sure, people talk about "investing" in education, "investing" in roads, or whatever, but no one seriously thinks money spent on bombers is going to somehow generate a return on one's taxes; one understands they're there to drop nukes on Russians if that becomes necessary.

As to the liabilities, the reason is that total government liability is infinite; there will always be spending in future years, indefinitely (not literally infinite but as in, there will always be an arbitrarily large amount of future spending). In fact, trying to pay that off would be silly because a lot of that "debt" is stuff that can't be paid for many years anyhow. I won't reach SS age for another 25 years or so, and so trying to pay off that debt now would be.. pointless. What matters is whether there is enough cash flowing in to meet the obligations as they come due. Right now, we don't have anywhere close to that, and that is the real problem and why we are in debt.



Yes, but they do not want to get elected just to say "woohoo, I got elected!" They generally have goals they want to accomplish.



Pork is hardly uncontroversial. However, politicians are complex human beings like everyone else, and trying to reduce them to a faceless mass that simply slops at the trough because of a desire for election for its own sake is A) oversimplification B) does nothing to advance anyone's understanding of the underlying issues and C) does nothing to solve them. Obviously we are not going to solve the country's problems on this board, but the fact of the matter is that it's become all to easy to sit in one's easy chair drinking Miller Lite, and blaming "corrupt politicians" while conveniently forgetting the Pell Grant one's son or daughter is using for college (for example).

If we want to talk about circle-jerks, how about the fact that both the left and the right have become circle jerks of agreeing with each other about the evils of the other side, or the circle-jerk discussion right here has become. We all (well almost all) agree the government has vastly overspent in pursuit of misguided policies. Instead of a competition to see who can come up with the most ire-provoking term for it, how about we talk about how we might realistically address it? We've had more than our share of pointlessly unrealistic solutions as well.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Incorrect. By definition, the treasuries our government "invests" these monies in are securities.

Your entire argument boils down to "it isn't fraud because our government says it isn't fraud." which is an empty arguement because it asserts a government must exist inorder for acts described as fraud to be commited.

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Ezekiel 23:19-20 

I'd be OK if the national government just said "You've paid so much in and you'll not get anything out 'cause we're stopping the SS program, so ... well, you don't have to pay any more federal income tax".

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In time, this too shall pass.