Wednesday, July 4, 2012

Bernanke – My Goal is to Wreck Social Security

In June of each year the Social Security Trust Fund (SSTF) reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities. The interest rates on these bonds is set by a formula that was established in 1960. The formula was designed to insulate the SSTF from transitory changes in interest rates by averaging market based bond yields over a three-year period.

Bernanke’s Fed has set interest rates at zero the past four years. In 2012 the 1960’s formula has finally caught up with the SSTF. It got murdered on this year’s rollover.

The following is from the SSA (link). It shows what has matured this year and what new investments have been made. I will be breaking down sections of this report, so don’t get eye strain looking at this:

Consider the bonds that matured in 2012:

$135 billion of old bonds matured this year. This money was rolled over into new bonds with a yield of only 1.375%. The average yield on the maturing securities was 5.64%. The drop in yield on the new securities lowers SSA’s income by $5.7B annually. Over the fifteen year term of the investments, that comes to a lumpy $86 billion. It gets worse.

Bernanke has pledged that he will keep interest at zero for a minimum of another two years. The formula used to set interest rates for SSA looks back over the prior three years. Therefore, SSA will be stuck with a terrible return on its investments until at least 2017.

I anticipate that the formula will result in still lower investment returns for the next five years, but I’ll conservatively use the rates set this year to evaluate the consequences to SSA. The following looks at what is maturing at SSA:

A total of $543 billion of securities with an average yield of 5.6% is coming due in the existing ZIRP window. The reduction in income from the 4.2% drop in yield translates to a nifty $23 billion a year, for fifteen years ($350b). It gets worse.

As a result of the Fed’s extended ZIRP policy, and the SSA’s interest rate setting formula, it is now a certainty that interest income at SSA is going to substantially drop over the coming decade. The problem is that SSA has provided projections for its interest income over this time period that don’t jive with this reality. From the 2012 SSA report to Congress:

The SSTF believes it will earn an average of 4% over this period. That is not possible any longer. I calculate that the most SSA could earn is an average of 2.3% (it could be significantly lower). The drop in yield translates to a reduction in income of $535B over the forecast period. That’s a lot of dollars.

Consider again the base case provided by SSA in April. The following compares the size of the trust fund based on SSA’s estimates and my adjustments for what interest income will be (everything else is constant).

Based on a realistic assessment of interest income at SSA, the trust fund tops out in 2015, its peak value will be ~$2.823B. The SSTF has reported that the TF will top out at $3,061B, and that milestone will not be reached until 2021. Essentially, the train wreck will happen six years earlier then assumed, and the TF will be $250B short. It gets worse.

The other key ingredients in the SS “pie” are tax receipts from workers and the amount of monthly benefit payments (the assumptions used is that GDP growth will average 4%, and unemployment falls to 5.5% –  no recessions over the ten-year horizon). These are not realistic assumptions. This means that once the SSTF hits its peak in 2015, the run off in assets will happen very quickly.

The SSTF has stated that the date in which the TF falls to zero will be 2033. The actual termination date of the TF is much closer than that. It could come as early as 2023.

Anyone who is 55 or older should be worried about this. Based on current law, all SS benefit payments must be cut by (approximately) 25% when the TF is exhausted. This will affect 72 million people. The economic consequences will be severe. The drop in SS transfers translates into a permanent drag on GDP of 2%. In other words, when this happens, the country will be unable to have any significant positive growth for a long time to come.

I know I will get comments from readers who have worked 40 years and paid into SS and now want it back. I tell those folks in advance that I’m sorry, but they will have to accept a cut in benefits. It will happen it about ten-years. Make your plans accordingly. If you don’t like these conclusions, write a letter to Bernanke. It’s well past time that the true consequences of his monetary policies are understood. He’s not just breaking the backs of small savers; he’s killing Social Security.



Enjoy the fireworks!



  1. “write a letter to Bernanke”

    Ha ha. It’s not his fault. The system was inherently flawed from day one.

    • And then ;he screwed it up ; much more ‘ .

    • NOT TRUE, Jeff!! The one thing that FDR did not plan on was Roe v. Wade; that ruling has removed 56,000,000 people from supporting Social Security. If those people were in the system (not including those that would still be too young to be working), we would have had a fighting chance to continue paying the bill – at least until year 2020, and beyond. The SSA put out a leaflet to recipients in 1972 detailing their financial profile until year 2020, showing how they would have in excess of $2.2 TRILLION in the bank in that year, but Rowe v. Wade spoiled their plans. My mother received it and I remember that I thought that I would be safe – but now: maybe not.

  2. This is the way to align all classes for QE. QE for the poor “lets print what is missing” and QE for the rich, which sit in real assets to make them even richer (nominally) …while the “elites” sit in between and pocket the difference between currency debasement and the real assets (see private equity, hedge funds, … bain capital?)

  3. The Fed is not wrecking Social Security. The “trust fund” is really pieces of paper that say “We owe ourselves $3 Trillion”. It is a complete farce. The “interest” is simply more pieces of paper.

    Since Social Security is now in deficit, the government must sell bonds to pay the checks. Therefore by lowering interest rates, the Fed is helping Social Security. Of course this destroys the rest of the economy, but there is only one goal: keep the checks flowing and the votes coming in.

    • I find myself, as a skeptic in an unusually uncomfortable position of defending the Fed, the Govt and the System. However, before you all slit your wrists and go Kaczynski on us, lets look at it slightly differently. The SSTF owns ~$3trn of bonds (and growing). They are claims. Claims, the cynic says, against a government that will never repay them. Does this make them worthless or useless or a farce? Of course not. Few descriptions could be further from the truth. Using rough back-of-envelope numbers (since its only a thought, experiment), the US has Govt debt-to-GDP ratio of call it 65% (and growing). On a GDP of ~$14trn that surplus is equal to 22% of current GDP. Since most governments – excepting Norway, Singapore and the Gulf States – operate “pay-as-you-go systems”, the $3trn socked away is quite an accomplishment, and lowers effective debt–to-gdp to forty-something percent which is one of the best amongst adv industr econs. In other words, the SSTF gives the US HUGE headroom.

      Also if you go to the US Govs OMB website, and start fiddling with the variables (retirement age, contribution levels, etc.) you realize you can swing the future projection curve anyway you want by tweaking any of them ever so slightly – not life changing alterations, but 0.5% or 1% change in the contribution rates, and so forth. And US demographics are actually attractive – at least relative to the demographic cliffs faced in most of the other large economies.

      Finally, when you consider that the so-called shitty worthless paper in the SSTF is backed by the taxing power of a nation as immense and powerful as the US, and that current tax rates are unusually low and hardly at onerous levels (despite the whinge-ing to contrary), along with the headroom of the SSTF, it is not a wildly unsustainable situation – at least from the Federal Govt’s (and thus the taxpayers) perspective.

      So yeah, I wouldn’t be counting on SS Benefits (in real terms) rising anytime soon, and it also likely that with longer life-spans and careers some actuarial changers in benefits will be required along with some means-testing and such. But even as a skeptic, the system is hardly broken and worthy of the derision, cynicism and despondency heaped upon it.

    • “the $3trn socked away is quite an accomplishment,” The $3trn was not “socked away”. It was spent on actual wars, and wars on poverty. The money was spent and the government wrote on little pieces of paper “We owe ourselves $3 Trillion”.

    • Socked away? Socked away? Everything else you said is worthless, nollified after you said ‘3 trillion socked away’. As though it’s an asset sitting in a bank somewhere, it’s a LIABILITY.

    • @Cassandra,

      Social Security isn’t important to you, but it is important to many retirees. To causally say that the system is hardly broken – really means that it is completely broken but you don’t think the brokeness will affect you.

      According to the Trustees the system is short 20.5.

      The system is already means-tested with a test that reaches up to 1/3rd of retirees.

      The system is already subsidied by the govt – not the other way around. The subsidy was more than 100 billion in 2011.

      All of the Trustees’ figures assume that future workers will be willing to contribute as much as today when they will get less and have more parental support to cover.

      Instead of saying here is the debt to GDP, just say you don’t care because you think the failure of the system will not affect you.

  4. Anonymous youre math is done Obama style: 0+0=100 trillion. Its idiotic. Bruce just illustrated that the interest income received which is a large part of SS fund is going to be cut in 2/3rd. With less people working, contributing less, it means that combined with massively reduced interest income the fund will run out of $ way before it was even thought possible a year ago. So Bruce is right-Bernanke is one of the murderers of SS.

    • The first anonymous is right. Set the SITS interest rate at anything you want and it doesn’t change the underlying economics. All future SS payments will be paid, directly or indirectly, by future tax revenues. The specific path the revenues travel through the government’s accounting systems is irrelevant.

    • The trust fund doesn’t receive any interest. It just gets more bonds. There is no trust fund.

  5. The following refers to the Social Security Trust Fund, but applies equally to all Treasury trust funds. The name “trust fund” has a particular, misleading, political meaning. There are no assets in these “funds” other than a promise from the treasury.

    CBO:  What Are Trust Funds?

    The bonds in the Social Security Trust Fund are promises, not assets. They are as good as other government bonds, which are also promises but not assets. The taxing power of the government is in doubt. The promises of the government are so large that it may not be able to pay back the debts which the bonds represent, including the bonds in the Social Security and other “funds”. The bonds are a promise, but they don’t help to pay for themselves.

    Don’t take my word for it. Here is a statement by the Congressional Budget Office – October 2002 [edited from the Summary]:
    == ==
    The money that the government owes to itself has no impact on the economy because it represents debt owed from one Treasury account to another, mostly held in federal trust funds.

    Trust fund holdings are not assets of the government and do not represent money owed to program recipients individually. Payments to Social Security recipients (like other social insurance programs) are based on rules set by law unrelated to trust fund holdings.

    A federal trust fund is an accounting device that measures the difference between the income designated for a program and the expenditures made to its beneficiaries. The accumulated balance often represents the future “spending authority” for the program, but it is not a reserve of money for making payments.
    == ==

    So, it is just as hard to meet the promises of Social Security as any other promise made by our government. Those promises are backed only by current tax revenue. There are no savings. The amounts represented by the social security trust fund “surplus” were collected and spent long ago. The trust fund bonds are only a note from the government to itself, to find the money somewhere in the future.

    Also, the future promises of Social Security far exceed the notations of the trust fund bonds. Those promises total about $15 trillion (net present value), above the value of Social Security taxes at current levels.

    • Thanks for this. I agree with everything you say.

      I think what happens with the TFs is important, however we live in a make believe world (DC) where TF actually do exist.

      The game of mirrors with the TF will continue until about 5 years before the blow out date. Then a “fix” of some sort will have to be considered.

      Is this an example of Occams Law? If enough people believe in a lie, it can’t be a lie?

    • Make this guy a trustee. At least Andrew Garland knows what is going on.

    • Yes, POLITICALLY it matters. But lets try this thought experiment. Suppose the Gov “gifts” the “trust fund” $100 TRILLION in bonds with a coupon of 10%. Then it gives the “trust fund” $10 TRILLION in bonds per year to cover the “interest”. It is all a farce. At the end of the day, the government has to go to the market and sell bonds to pay the checks. But politically, you are correct, the trust fund matters. It gives the boomers sanction to call for taxing the crap out of their kids and grand kids, and sucking the capital out of our companies in corporate taxes.

    • As Adolph and others have said, The bigger the lie, the more people are suckered into believing.
      Everything here (including the article and responses) is missing the elephant in the middle of the room.
      Bernanke is not the problem. He’s just a hired hand who gets his orders from elsewhere.
      The problem/elephant is the central banking system itself.
      If you’d like to pull the wool from your eyes, go to YouTube and watch “The Money Masters”.
      The solution to our problems, while perhaps painful, are actually very simple.

    • There are some factual problems here, and it misses the larger point. You want to argue about the merits of the Trust Fund when it is little more than economic parsley when compared to the outflow of the system.

      “The bonds in the Social Security Trust Fund are promises, not assets.”

      This is a tired argument. When you hold US government obligations, they can be cash-equivalents. Held by the SS Trust Fund, they are not even assets? That is over-reaching hyperbole. These assets may be higher risk than the market preceives – but to say that they aren’t assets is just silly.

      The problem with Social Security is not the assets in the Trust Fund it is the promises that it creates. According to the Trustees, the system has a present value shortfall of 20.5 trillion.

      “The money that the government owes to itself has no impact on the economy because it represents debt owed from one Treasury account to another, mostly held in federal trust funds.”

      Well, you should stop listening to CBO. The money held in Trust is trapped capital on which the Treasury has enjoyed lower financing costs which have been used to finance tax-cuts. We contribute to SS which then lends money back to the government so that 50% of the country has no tax bill.

  6. Bernanke’s real goal is not only to engineer lower nominal rates, but to ensure that these continue in perpetuity.

    The Fed – and the government – cannot afford coupon payouts in the 4, 5 or 7% range any longer. The Ponzi could not continue with those costs. The Fed knows that, with the dollar as reserve currency, bond buyers have no choice but to continue buying. THERE WILL NEVER BE BOND VIGILANTES AGAIN. The Fed would dearly love to have 1 ~ 1.5% rates locked in forever. SS is just one example of an unsustainable payout rate…

    Isn’t that why “operation twist” will be continued a lot longer than anyone thinks?

  7. ZIRP is a burden to many people of modest means trying to live in retirement with dignity.

  8. What an incredible post. This is why we need the Main Stream Media to narcotize us each day. So when the truth comes, we’re ready to ignore it.

  9. So what would you do sir? Would you increase rates? How about debt? From what I read US cannot afford to pay interest even if only slightly higher. Whole country would go bust, so what would you do? Dont forget Bernanke is not responsible for politics, not that I back him especially in regard to QE1,2 but right now, I dont think he alone can do anything else much.

    • I have advocated that the Fed normalize interest rates two years ago. I’m not advocating high interest rates. But I don’t think “Zero” is the right number. I think the Fed Funds rates should be at 2% (equal to inflation). I think the Fed should stop intervening in the bond market. No more Twisting or QE.

      There was a time when zero rates may have been appropriate. That time passed a long time ago. The “emergency” in the economy has ended, so should the emergency monetary measures.

    • I agree with Bruce on normalizing interest rates. It is also true that the U.S. cannot afford to pay higher interest rates. Heck, it cannot afford to pay 0% interest rates.

      The real benefit of the SS “Trust” Fund running out and with higher normalized interest rates is that it would force the politicians to act sooner to face our problems.

      The house is fully engulfed in fire right now but the illusions of the Trust fund and Bernanke’s low rates make it seem that the only thing burning is a candle in the kitchen.

    • Raising interest rates is stupidity. You would cut off your nose to spite your face. Who cares what the trust fund “earns”? As others have pointed out it’s all a mirage. Keeping interest rates low screws over foreign bond holders. Raising them screws over ourselves. The $ will be devalued regardless as the government must print $ to cover its debts.

  10. Simple question: Do the people who develop these projections consider demographic change? I ask because the US is becoming increasingly Hispanic (consult census data), especially amongst the younger, working age population, and Hispanics create significantly less wealth per capita (“, e.g. regarding educational attainment).

    • I have seen some commentary about Social Security and immigration. The immigrants do not enjoy the biggest benefit of the system – parental support. They participate purely on a future cash flow of the system.

      As you might guess the author’s point was that immigrants get screwed by the system because it will not be there in 20 years.

  11. But What do I Know? says:

    I’m glad to see that the majority of commenters have affirmed that the SSTF is a fiction–and I also understand what Bruce is saying about it being important as a matter of perception. But IMHO, the corrosive effects of low interest rates are already apparent in the public pension plans, where the foregone income actually means something. Because the states and locals are required to make larger and larger contributions to their pension plans due to the lack of current cash flow, they are laying off or restricting new hires. Since local and state governments are very large employers, this is keeping unemployment elevated and depressing the economy. So in this instance, ZIRP is directly hurting the economy.

    There is no free lunch. As my old boss used to say, “If low interest rates are such a great idea, why don’t we don’t have them all the time?”

  12. More to the point about the TF: it represents obligations of taxpayers. So not only will working taxpayers pay benefits to SS recipients via their FICA withholding, they will also pay via the income tax. So that’s the main problem with the ridiculous TF: all the money supposedly there/represented by its ‘assets’ has already been spent, and any future income from the TF ‘assets’ can come only via yet more money taken from the pockets of taxpayers.

    And if SS benefit levels are a matter of law, and the law can be changed, tell me again why a nation increasingly composed of less well-off Hispanics would submit to onerous taxation in order to pay SS benefits to significantly better-off, mostly white recipients?

  13. How about a class action law suit for mis applicalation of funds. It worked for the Indian tribes in America.

  14. We pay SS every week and have been doing so always, this is OUR money the gov is using for their political agendas and we the people let them do it, the income of SS is far greter than the expences in paying the checks.
    Everyone is asuming that the money is coming from the gov to pay pension checks, NO they are repaying what they have taken for their wars and other big corporations greed, mostly republicans gov have put us in war, commercial wars, we are sacrificing our young for the corporate world benefit, is sickening.
    The Gov has to pay back the money they took illigally from SS.

    • The gov has no money other than that it takes from tax payers. You are stealing from the children and their children. Stop the thievery now.

    • I’m not stealing the goverment stole our hard earned money deposited in trust with them thru SS and they who are stealing from your and my children, why did we allow this? because the powerful make tha laws for their own benefit and for the benefit of the people.
      If the Gov does not have the money is because we did not our deposits to SS or is because THEY TOOK IT not to benefit us but for wars and such.

    • “I’m not stealing the government stole our hard earned money deposited in trust with them through SS and they who are stealing from your and my children, why did we allow this?”

      You naive, ignorant, fool.

      They lied. They lied to you, they lied to me, they lied to all of us.

      our hard earned money deposited in trust with’ is nothing of the sort. I know that you BELIEVE that it is, but it is not. It is nothing more than digits on a piece of paper or data in an excel spreadsheet.

      Your ‘hard earned money’ was no longer yours the instant your withholding was taken out of your paychecks.

      FICA, OASDI, SSI and SSDI are all bundled together and placed on one deposit slip when a business pays that tax. Another one is for Federal Unemployment Insurance.

      There is, and never was, a separate deposit account for SocSec, that should have given you a hint.

      All SS taxes were pooled into the General Fund, and it was all spent within 2 weeks of your paycheck being cut and given to you.

      The money is gone, it’s not there.

      If you childishly insist that the government give you back ‘your money’ (and all taxes are not your money once you pay them), then the only way to do so is via liquidation of assets [selling the US of A piecemeal] or via inflation.

      If inflation occurs, you are paid with lower effective dollars and your paycheck shrinks.

      The money is gone, it’s not ‘yours’ you do not have an ‘account’ or a ‘balance’.

      The money is gone.

  15. The system had a chance to be stable until the government started using these funds for themselves and putting IOU slips in the place of funds…Reminds me of Dumb and Dumber when they kept spending the money they found and writing IOUs….they said they were going to pay it all back…

    • Why do we allow this to happen if we knew then and now that is incorrect and should not have been done.The Gov is the politician that are in and their agendas are the reflection of the greed of the corporate world that is protected by the Republicans.

    • We are ALL a bunch of sheepeople!
      With no recourse but to take all the lies the governmentment shoves down our throats. It is a sad place that the politicians are leading us to.
      Change their pay and benefits to ours.
      Maybe something will change.

    • Mr. Buffet idea is a great way to change their thinking.

  16. This is a repeat of an earlier reply with the hope that more will see it.

    As Adolph and others have said, The bigger the lie, the more people are suckered into believing.
    Everything here (including the article and responses) is missing the elephant in the middle of the room.
    Bernanke is not the problem. He’s just a hired hand who gets his orders from elsewhere.
    The problem/elephant is the central banking system itself.
    If you’d like to pull the wool from your eyes, go to YouTube and watch “The Money Masters”.
    The solution to our problems, while perhaps painful, are actually very simple.

  17. But What do I Know? says:

    >>>>As the passage above implies, most savings in financially repressed countries, like most of the countries that followed the Asian development model, are in the form of bank deposits. The banks, furthermore, are controlled by the policymaking elite, and they determine the direction of credit, socialize the risks, and set interest rates. Financial repression is a way of describing a system in which the rates of return and the direction of investment of domestic savings are not determined by market conditions and individual preferences but rather are heavily controlled and directed by financial or political authorities.< <<

    The quote is from a recent post by Michael Pettis regarding China’s banking system, but the distinction between the PRC’s banking policies and ZIRP is elusive. . .

  18. Lets face it folks, the bottom line is that creative accounting by the politicians got us in this mess. No matter which way you argue it, the debt is now high enough it is eating everything. Screwing our foreign creditors will only work so long before it backfires too. Basics: We have sat on our thumbs arguing with each other about semantics and let our politicians eat our lunch. Both parties! Now the question is how do we fix it without more and worse pain.

  19. Social Security is OUR money, as an earlier commenter wrote.
    No, it is not.
    It was deemed a tax by the Supreme Court years ago, a tax for the general welfare. You cannot tie your benefits to your contributions, as also ruled by the Supreme Court, for it is for the general welfare.
    What I am trying to understand is why the ACA passed consitutional muster as a tax?
    This money, as far as I can understand, builds little or no phony rust fund. With the payments going to insurers to pay for their pricey insurance, in the form of sibsidies, this is a tax for the insurers.
    Since when did for-profit insurers equate with the general welfare?
    Don Levit

  20. All this to do about Social Security benefits, will the money be there or not? Do we ask the same question of entitlement programs such as food stamps or welfare? Of course not, the money WILL be there even though the recipients, unlike SS recipients pay NOTHING into the fund.

    • “Of course not, the money WILL be there even though the recipients, unlike SS recipients pay NOTHING into the fund.”

      This is very dangerous thinking. The Trustees have already told Congress that the money will not be there for people as old as 63.

  21. Why in the world did they give everyone a tax break? Why would you use SS? You have a program in trouble so that is the program you want to use for a tax break. To me that is like skimming the interest rate monies off SS.
    Had I been given the chance I would have gladly paid a bigger percentage of my pay into SS. Is it just me or was this a horrible idea? I beat into my kids head that they need to find the highest paid job they can get so they will have a higher income when they retire and it will be there when they retire. One last thing not related to this, go after the cheats on SS, just like the guy who collected his dead mothers checks for almost 40 years. Get the people who collect SSDI yet are well enough to work very physical jobs, off the books of course, that is lost money to the system

    • “Why would you use SS?” Politics! The person making the decision(BHO), knew that the best way(politically) to structure a tax break which would benefit primarily his supporters was through a SS tax cut. In DC all decisions are based on politics.

    • Also, the tiny tax cut contributes to destroying SS by design. We are not a priority. Exactly the opposite is the case. Nothing is benign or constructive. The agenda now is more and more openly seeable as entirely destructive, of the family, of norms accepted for generations, of entrepreneurial possibilities, natural food instead of sterilant food/vaccines, clean air instead of barium and aluminum salts, and sulphur, weather instead of weather warfare, private property, individual and national sovereignty, private self-defense, of individual responsibility or hope, of reasoning, reading, and thinking. I have not watched The Hunger Games, but from what I understand of it, it is predictive programming.

      So: the tiny tax cut pandering to people who receive a paycheck was always a way speed the destruction of a program, of the elderly – of people considered useless. There is no humanity anywhere in this picture. There are “solutions” but they are “local” and require people to wake up to the light in which they are REALLY held by those who have remained in control for centuries and who have no intention of changing anything they are doing since it has worked. We the people are considered a separate species, and the effort is ongoing to change DNA to make the gulf between, as a small example, the Monsanto employees and scientists who will never be served, as they have REFUSED, GMO in their cafeteria, and the rest of us…. even wider. It’s all about eugenics. Remove the barrier to abortion, bring on euthenasia.

      Recommended website: http://www.cuttingthroughthematrix.com by reclusive, brilliant Scotsman now living in remote Canada.

  22. Hey Bruce,
    What vehicle do you use to trade the EUR via options?


  23. Mr. Krasting’s articles on the SSTF only add to the confusion associated with government arcounting. That one branch of government loans “money” to another branch while a third branch spends every dime plus a dime that the entire government collects can be accounted for in the terms Mr. Krasing employs gives credence to the whole scheme. And in defense of his analysis he tells us about a “make believe world” where he has ideas about where the interest rate should be set by the criminals in charge. Nice.

  24. Forget the details, folks.
    Depending “someone else” or “they” are the ones who will NOT take care of your future.
    Rich or Poor, my suggestion: very early in life set up your future success Plan If you’re not very intelligent, then, get smarts from wherever you can. Sitting around comfortably and watching TV will NOT DO IT!!
    All that will do is insure your future poverty, All you can be certain is that you will spend a lot of misery asking yourself,”How I never had any breaks like other people??” So Sorry Sucker!!!
    Mother Nature has a lot of easy lessons to teach if you have the willingness to pay attention, friend.
    In the Fall, if the squirrel doesn’t hide away enough nuts to feed him through a hard Winter, he starves and dies, Is that a clear enough message for you!!??
    Governments are NOT your savior!! (Even if they lie about that all the time to try to bribe you your votes!)
    Good Luck!!

    • The squirrels that do not save nuts for winter starve or learned to rob the nut savers. The survivors do not know why they stored the nuts away. The smart squirrels watch lots of dumb squirrels bury nuts and then steal them, overeat, build up lots of body fat, lie around watching TV and survive. When the industrious savers underestimate the severity of winter or trust their neighbors honesty, they starve. Only the fat thieves survive really bad winters.

  25. What rate of inflation is assumed? And how is it measured?

  26. When it comes to the Social Security Trust Fund, assume there is no “fund” and certainly no “trust”!

  27. The US Govt. has put itself in a position where it has only 2 options: default (not really an option), or big inflation. Warning to all – Get ready for inflation that will make 1979/1980 look tame.

  28. The numbers can take us down many roads, Bruce. The answer, however, lies in history and human nature, these two “factors” show us that we will support the aging population and maintain our social security levels for them, while printing money for the younger generations who may have to receive less, but who will be able to take advantage of new social(ist) programs. Except for inflation and elitest control over banking systems, the future looks rosy. So why not just ignore the numbers, they won’t do anything but raise your blood pressure when dealing with opposing viewpoints!

  29. Hi!, Patrons Of Bruce Krasting Et Al:

    Someone much more intelligent than me needs to let us know how SS will pan out; sense it’s a proven fact that the largest geographical population occupying the United States is the group of adults who NEVER had children? These unborn people will never hold a job requiring them to pay one thin dime of taxes and there’s no make-up time left to fill this emense gap. The question here is who is going to pay into SS as we move forward in time, so that latter day recipients see their SS checks? I just don’t believe that there will be a larger section of our population that will desire to work until they’re 120 years old, in order to acrue taxable incomes that will support those alrady on SS? Even if that were possible who will be there to pay their SS; certainly not the unborn huh? It’s going to be interesting for those still alive in those days, to see how the government authorities manage this geographic anomoly regards those people who are suppose to qualify in those days for their SS payments but without workers there to tax. It’s difficult to know which group needs to prepare first? Anyone got any insights into this situation that has a built-in positive bottom line?


  30. One of you said the tax levels of income tax in the U.S. are not onerous or excesive. Until 1916 we did not have an income tax. It was the Federal reserve that created that to enable a long term plan to shift from the original founders design of state centered power to centralized power which means a large Federal Military which requires a national tax to sustain. .
    Since Lyndon Johnson became President after JFK’s untimely assasination by the elite, our SSN contributions have been going into the General fund, not a SSN investmnet fund buying bonds or anything else. Any Congress, Senate, or President/Vice President who would allow our SSN money to go into the General fund (essentially making our SSN contributions a secret or not so secret tax is a thief, plain and simple. I am sure it had the Federal Reserve’s backing which is niether Federal or has any reserves. They create money out of thin air and are running we the people into the ground with debt with their ingenious scam.
    They got rid of gold and silver backing and have gone from paper to computer entries and want to RFID chip us or we won’t be able to play the rubes in their obvious scams. RFID chips will give you cancer over time. The Federal reserve has boomed and busted us and cares not for our lives or welfare as they have financed both sides in every war we have had which they have created for power and the profit needed to aquire it). Zietgeist is a great documentary to show you their modus operendi. Why are all the non payers in the SSN system. That is another problem. It has become a welfare machine. We payers and our eemployers actually paid into it. We are owed, the rest of the so called beneficieries did not so should not collect. I am still working and yes I am one of those 47 year contributers that wants my money back. You have already stolen a year away from me from 65 to 66 and now in ten years 25 percent.
    You will do anything for re-election including selling out the citizens that elected you. Your pensions and salaries are too high and your terms should be limited. You are not above the law but what law. The Supreme court makes whatever law they are told to make by the cartel. The job description for our elected officials seems to include being a sociopath, a fiscal and economic illiterate and a willingness to turn your back on those you represent and pledge your alligience to
    the richest doner no matter what the cost to our future or our survival as a nation.)
    It is time for this nations citizens to act and a great start weould be to vote out ALL incumbents. Vote in term limits and corporations are not human. Come on!
    Time to allow other parties in the vote as the two party system has become a one party system.
    True conservatives would not allow a debt based private national bank composed of the richest banking families in the world to own their currency and as follows the nation. I advocate declaring bankruptcy along with a declaration on non payment on any and all debt to the federal reserve and it’s immediate ouster as our National bank. Our country needs real commodity based currency based on real productive output. A resource based money system with a true national bank and a democratization of banking so it holds at it’s highest value the welfare of the people it serves. Not the self serving cartels that incluede wall street, corporations and the multinational banks that only care for their power and the formation of a global dictatorship. Talk to your reps and elect new ones and stay involved in your political syswtem. We need the Constitution restored and these dangerous acts repealed and a restoration of the following acts:
    1st: The Glass-Stegal Act
    2nd: The Clayton Anti-Trust Act
    3rd: The Sherman Anti-Trust Act
    4th: The Robinson-Patman Act

    Google these and you will see why the restoration and vigorous enforcement of these acts without conflicts of interest would enormously benefit us all in restoring a level playing field for the 99 percent.

    • “Since Lyndon Johnson became President after JFK’s untimely assasination by the elite, our SSN contributions have been going into the General fund, not a SSN investmnet fund “

      This is comically inaccurate. The operations around the payroll taxes and the Trust Fund haven’t changed since the inception of the system. (source SSA).

      What makes it comically, is that at the time of LBJ the Trust Fund was very small. The Trust Fund has little economic significance until 1984 when payroll taxes were raised such that there was excess cash to invest.

  31. “Isn’t that why “operation twist” will be continued a lot longer than anyone thinks?”

    Operation Twist(ed) will continue because The Fed’s ultimate purpose, multiple myths to the contrary notwithstanding, is to see to it that Uncle Sugar’s lifestyle does not crash, at least not of its own accord. The Fed must buy U.S. debt because the rest of the world’s appetite for dollar denominated emissions is terminally waning. Bond vigilantes should be the least of anyone’s worries. The structural debt of the U.S. is not going to be supported at all going forward. Hyperinflation will be the result, with all the concomitant effects, including multiple zeros dissapearing from so-called government obligations.

  32. The ‘Social Security Trust Fund’ is just a 5-foot tall, 4-drawer filing cabinet in an office in Pakersburg, WVa. The papers in it are special issue bonds, only redeemable to the US Treasury.

    These bonds are worthless on the open market.

    In order to ‘cut a cheque’ from those ‘Trust Funds’, they must be remitted to Treasury.

    Treasury then issues new debt into the market to cover the price of the bonds, and then the checks are cut from the SS Admin.

    The $3Tn is nothing more than an indication of the amount of future debt that Treasury will have to issue to pay for that portion of SS benefits.

    If Bruce’s maths check out, then the ‘bleed rate’ of the TF will be such that by the mid-20’s the USA’s Social Security System will have to go to a pay-as-you-go model utilising existing tax revenues.

    This will, as has been noted, cause a permanent notch down of -25% in your current SS cheque.

  33. when you start your working life and fill out your w-2s,you pay into ss,medicare,etc…you made a deal with the gov.that you would at a certain age collect a certain amount of $$$.now they are telling you that the deal you made will not be fullfilled!!!! BS !!!!!

  34. Maybe I’ll be lucky, die an early death and beat the whole system.

  35. nice posting.. thanks for sharing.

  36. Bruce, I am curious about the formula for setting the interest rates. I thought that it was weighted average of all outstanding debt with a maturity of more than 5 years. What is the formula and how does it incorporate a 4 year lag.


    • I believe the formula is something like: to maintain the expansion of the money supply (forget about productivity increases – haven’t heard about those for years, because the bulk of the jobs created seem to be government ‘jobs’) plus reduce the cost of paying interest on the bonds (SS included) that the government has issued plus somehow encourage people to borrow money to buy houses to clear the foreclosure backlog, plus how long is it to the next election.
      Answer: zero percent.


  37. The fact remains, the feds have used the reserves in the SSA to fund their “un”worthwhile projects for years and years! To think anyone under the age of 50 will ever see a dime of SS are gone! Thanks Uncle Sam!!! Always wanted a rich uncle I could look up to- as I drag my ass to the street corner to ask for more food!