[quote=SK in CV][quote=Allan from Fallbrook]
SK: Well, my post was simply pointing out the fact that the SS trust fund was essentially stuffed with IOUs and headed for insolvency.
We’re basically hosed. As I pointed out in a previous post, this is a Balance Sheet recession and the debt overhang will have to be dealt with before any serious positive motion begins.
This is why all the various central banks moves have been smacked in the face with the Law of Diminishing Returns and repeated Keynesian “pump-priming” has proved ineffectual at best (we’ve “spent” trillions and barely moved the needle.) Our politicians not only lack the will, they lack the right answers, too.[/quote]
Couple things.
I just think the IOU issue is not material to the discussion of solvency. The solvency issue is fixable relatively easily. Whether there is the political will to do so, remains to be seen.
If you’re talking about stimulus being the pump priming…i’m reasonably sure that the fiscal stimulus didn’t meet what Keynes would have suggested. I’m going back pretty far, but i’m pretty sure that expansion of money supply isn’t a primary stimulus in keynesian economics, and suggests that it will be mostly ineffective during depression and deep recession. If I remember correctly, then it certainly hasn’t been proved wrong.[/quote]
SK: Yup, agree on solvency versus IOUs being two separate issues. My point on the IOUs was simply that the government has been dipping into the SS trust fund for years and not “repaying” the money (quotes used to denote that the amounts represent an “intracompany payable” in accounting parlance.)
The solvency issue is more serious, and I used it to show that the government has been kicking the can down the road on SS, Medicare, Medicaid for years (decades) now, while fully realizing that they’re running out of road. Last CBO report I saw forecasted a tremendous crowding effect taking place by 2035: http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook wherein entitlement spending would essentially swallow the US economy. There have been bi-partisan plans floated that contain excellent reform measures (same with reforming the US tax code), but the lack of political will has prevented any serious, substantive measures from taking place.
I’m not attempting to debunk Keynes, in that I don’t believe true Keynesian policies are at work here. Again, using accounting parlance, this is a Balance Sheet issue, in that we (the US, the Euro, China, etc) are choking on an excess of debt. Continued printing of money isn’t doing anything to truly alleviate the situation, it’s merely masking the problem and preventing a true solution from taking place. And we know why. No politician in his/her right mind is going to come forward and advocate necessary policy, because doing so is a sure-fire way to guarantee not getting re-elected.
And for politicians, that’s all that really matters. So, they keep kicking the can down the road and making up fanciful tales about “plans” and blaming the other guy/gal and hoping to hell no one is really paying attention.
