Who owns our debt? Well, we do! The FED is now the largest holder of our debt....

[galileoreloaded]

Talk about incestuous relationships....

Now consider the implications to Social Security in regards to their worthless treasury holdings. I am sooooo glad I'm not a Boomer right now, I would be freaking out. There is no time to recover.

[geckosfeet]

1. So they buy federal bonds. So what. Better the fed than China.

If the government can't raise taxes to generate operating capital they they are going to print money (via selling bonds).

What, in your mind, are the options?

Federal bonds are considered very safe investments.

[muriel_volestrangler]

2. That's comparing the Fed to overseas holdings; the Social Security Trust Fund is still far larger

over $2.5 trillion ant the end of 2009. Why are you calling the $2.5 trillion 'worthless'?

[notesdev]

5. unmarketable bonds = worthless

There's a reason SS doesn't hold regular T-bills. If it had them it could sell them on the market. Having only the special bonds, SS is 100% dependent on direct Treasury funding to make up its deficits.

[muriel_volestrangler]

7. No, bonds are not just a market value

They give a right to regular income, and a right to redemption when their period is finished. Unless you want the SS trust fund to start speculating in the market by trying to get a good price now due to market fluctuations, you don't need 'regular T-bills' in the trust fund.

"SS is 100% dependent on direct Treasury funding to make up its deficits" in the same way that a Certificate of Deposit owner is 100% on direct bank funding to make up his deficits. Both have a right to a regular payment, and their money back after an agreed period. Would you call a CD worthless?

[notesdev]

8. There is no right to redemption

it is simply a promise by a government that has done nothing but lie to us for decades.

Regarding your example, that CD would absolutely be worthless if the bank's financial position was similar to our government's financial position - even more so as a bank cannot print its own currency.

Face it, SS has been embezzled by our own representatives, both parties, over the course of decades. There's nothing there but liars' promises, and they will adhere to those promises only as long as they must to keep up the charade. The unique feature of embezzlement is that the theft and the discovery of the theft can be many years apart, and in the time intervening that money is counted in both the pockets of the victim and the pockets of the thieves.

[muriel_volestrangler]

10. OK, you don't trust the government to keep to the laws

Do you think, then, that Social Security should have remained 'pay as you go' - with far less payroll taxes taken for it in the past, and far more payroll taxes taken for it in the future? Since you don't trust the government, should Americans actually pay anything to it at all?

[galileoreloaded]

13. If I may....No we shouldnt pay anything at all.

because there is no "there" there. Its a shared idea, nothing more.

Just like a 1000 SF house in California wasn't really worth $900,000. I mean, it was, as long as we all believed it was, but once the paradigm shifted, reversion to the mean reared it's ugly head.

Another failed human construct, like religion.

IMHO.

[muriel_volestrangler]

15. You want to abolish income taxes and payroll taxes, then?

Wow.

[galileoreloaded]

18. Look, the system counts on revenue reciepts...

SOLELY AS A CONDITION OF FUTURE BORROWING.

Your taxes pay the interest, the real money gets borrowed or printed.

Its not my world, I'm just living in it.

[muriel_volestrangler]

19. 2010 Federal Interest: $414 billion; Federal Individual Income Tax Revenue: $951 billion

http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/tables.pdf

So, no, your taxes (which are more than just income tax anyway) pay far more than the interest. Check the figures of the world you live in a bit.

[galileoreloaded]

20. Sigh. Reciepts are the method of repayment, the guarantee the coupon will be paid.

The ONLY practical method of repayment, short of selling the Grand Canyon or Yosemite.

I think I am speaking to the bigger picture and a bit more holistically, and that is causing our disagreement.

[muriel_volestrangler]

25. So why did you say "the real money gets borrowed or printed"

when that is clearly untrue?

No, if you are now just saying "income tax will be used to repay the bonds as well as for other things", then you're not being 'holistic' - you're looking at just the repayment, and not how the whole system works (because you had claimed actual government spending was funded with just more borrowing or money printing). You are actually being atomistic.

[notesdev]

14. I don't see why we should

There's no way the promises made in exchange for that money can be kept, therefore to take that money is to commit fraud, and to pay it to be defrauded.

It's happening right now in everyone's pensions, in all these AAA-rated mortgage-backed securities that the portfolios got loaded up with. Now we know that the AAA ratings were purchased and not objectively valid ratings; that the mortgages were known to be defective at the time they were being issued; and that at least some and possibly all mortgage-backed securities never actually had any mortgages assigned to the securities. In other words, pension plans everywhere are now stuffed with empty boxes labeled "MBS" where real money used to be.

Oh, and the banks can't make restitution, as if they did so on any significant portion of these things they would all be immediately bankrupted.

That's the same scenario that is going on with SS. We got loaded up with a different defective security, called Special Treasury Bonds - 100% allocation, we got zero diversification in our national retirement portfolio even though every person who has ever even looked into investing is told of its importance. But there was no actual money set aside in any account to pay off the bonds, those are paid from cash flow out of the general treasury. So in order to pay those off, the government will have to print it out of thin air - but that's debasing the currency.

Debasing the currency doesn't create any wealth at all; it simply steals part of the value of the current dollar and puts that into new pieces of paper. There are more dollars but each one is worth proportionally less. (Your salary, by the way, won't go up to compensate, in case you were wondering - not in this economy, and we don't recover from this until the fiscal nonsense is sorted out, a catch-22.) So if they promise a payout of X dollars, and by the time the payout comes X dollars can buy only a fraction of what it could at the time of the promise, the difference between that and actual partial default on the promise is entirely semantic.

The money is gone. It was stolen by Goldmans and Morgans and Lehmans and Chertoffs and the thousands like them, through the buying of your representatives while you were asleep at the wheel or distracted by some other issue. Until this situation is corrected this country is stuck on the express superhighway to third-world status.

[muriel_volestrangler]

16. So you're saying Social Security should be abolished, then?

No-one should pay into it, so no-one should get anything out. Social Security was a bad idea, you're saying ...

[notesdev]

17. Yes

Social Security is not a sustainable scheme, it requires continuous exponential population and economic growth in a finite country on a finite planet. Throw in medical advances and longer lifespans, and the only question left is when it blows up. The boomer demographic is more than large enough to make it top heavy enough to fall over, so it's going to happen relatively soon.

[Hannah Bell]

22. it doesn't require economic growth *or* population growth.

[galileoreloaded]

9. And the FED is backstopping the Treasury but at the cost of dilution...

once the vigilantes get in this (and they will), COLA will have to be adjusted WEEKLY.

Glad somebody here is paying attention.

[Hannah Bell]

24. absolute garbage.

first, SS has never HAD a "deficit".

it's prevented by law from running "deficits".

[dixiegrrrrl]

3. Will you please link to source of your graph?

The information jibes with other sources I have read, btw, but a link is helpful when posting things like this.

The graph shows what "quantitative easing" really means.
The Ben Bernank is printing money because Treasuries are not selling, our debt is considered too toxic.
We are in a debt trap, which many sane economists have warned about for YEARS now.
Interest ON the debt, plus the debt is climbing, and income is falling.

We seem to have passed the point of no return.

[galileoreloaded]

12. Sure. Sorry. I guess I assume everybody reads ZeroHedge.

It does for financial news what DU does for "regular" news.

http://www.zerohedge.com/article/today-biggest-holder-us-debt-united-states-america

[Hannah Bell]

23. hardly. it spins financial news for libertarian types.

[notesdev]

4. There is no "we" in Federal Reserve

The Federal Reserve is not a "we" unless you work for them directly or own a bank.

(Had to put the word "directly" in the sentence above since you work for them whether you like it or not.)

[WinkyDink]

6. The Federal Reserve is a private banking consortium. Yes, they like the confusion.

[roamer65]

21. Bingo.

[astral]

11. As was said above, the Fed isn't "us."

We don't own the debt. We are owned. And it's not by "us."

I don't think the federal government is "us" either, and I don't think they have the best interest of our nation in mind. But the Federal Reserve is not the federal government.