The Social Security “Trust” Fund
From a New York Times article about how the social security system is running a deficit for the first time:
Mr. Goss, the actuary, emphasized that even the $29 billion shortfall projected for this year was small, relative to the roughly $700 billion that would flow in and out of the system. The system, he added, has a balance of about $2.5 trillion that will take decades to deplete. Mr. Goss said that large cushion could start to grow again if the economy recovers briskly.
http://www.nytimes.com/2010/03/25/business/economy/25social.html?hp
The thing that’s so shocking about this is the concept that Social Security “has a balance of about 2.5 trillion that will take decades to deplete.” Of course, what they don’t tell you is what the implications are for Social Security holding that balance in U.S. Treasuries. In other words, if a dollar goes in to the social security trust fund it is immediately used by the government to buy its own debt. Thank goodness the Social Security trust fund has 2.5 trillion dollars of IOUs it wrote to itself. I personally owe myself a full 3.7 trillion dollars, so that should likewise take quite a few decades to deplete–glad I saved up.
Elsewhere, the AP has this covered.
Hayek v. Keynes Rap
Very well done:
Stock Valuations 3x Higher than Any Point in Human History
If this headline is not true, it is only because I cannot find data on the S&P index prior to the 1920s. Behold a scary chart:
A chart of of the S&P index divided by earnings from 1923 to the present. This chart seems to be a rather good indication that the recent rally in the stock market is the result of people buying a trend rather than anything of underlying value. Prudence seems to dictate that if you have recouped any losses holding index or Dow-performing equities, it’s time to bank those gains before the bottom drops out.
Perhaps even more obnoxious/comical is the forecasting done by Standard & Poors for the P/E ratio through 2011. Either earnings need to sextuple in the next two months or the S&P needs to tank for this to come true. You be the judge:
I’m a Federal Reserve Chairman, Get Me Out of Here!
What You Don’t Know Can’t Hurt You: The Case for Federal Reserve Independence
“THE FEDERAL Reserve Board’s independence is a bit like the judiciary’s independence.” Anonymous Editorial, Washington Post, “Focus on the Fed” July 24, 2009. This central premise, it is suggested by one yellow journalist, justifies the Federal Reserve being exempt from audits - more particularly that Congress should decline to pass H.R. 1207. Consider the analogy.
The Constitution sets forth three separate branches of government. In Article III, the Constitution states: “The judicial Power of the United States, shall be vested in one supreme Court.” The independence of the Courts from the Legislative Branch is undisputed. In contrast, the terms “Federal Reserve” and “central bank” appear nowhere in the constitution. In fact, the so-called Constitutional justification for the Federal Reserve appears in Article I - “The Legislative Branch,” Section 8 “Powers of Congress” where the following power is enumerated: “To coin Money, [and] regulate the Value thereof . . . .” The Federal Reserve has no independence from Congress unless Congress voluntarily chooses ignorance as to the activities of the Federal Reserve (which is has done for the last 90 years, albeit in total violation of the principle that legislative power cannot be delegated). The Federal Reserve is about as independent from Congress as Federal District Courts are from the Supreme Court: not independent whatsoever.
The flawed central premise of “independence” is further rebutted by the article itself. “Mr. Bernanke has done more than any other chairman in recent memory to explain his actions and his institution to Congress and the public.” Given that the Federal Reserve has nearly tripled the money supply in the last six months and is complicit in bailing out Wall Street insiders, Ben has had much to “explain.” That said, has anyone ever heard of a Supreme Court Justice being called to testify before Congress on their recent decisions? Of course not.
The Federal Reserve has taken to changing the discussion of a simple audit into a full-blown “second guessing” of monetary policy. No form of logic could bridge the gap between what constitutes an “audit” and what constitutes a “takeover of monetary policy.” When the IRS audits someone’s tax returns, is that person worried that the IRS is going to “second guess” their financial decisions - or are they worried that the IRS is going to uncover gross violations of the tax code?
If audits are good enough for taxpayers, they’re good enough for the Federal Reserve.