America's Race to the Bottom

[quadraphonics]

I know you intend the last quoted sentence sarcastically, but it is literally true

No, it is not. You are behaving like a petulant teenager, by baiting me and appealing to the mob.

- I don´t and you don´t know how much faith people have that they will, on average in purchasing power, get back from Social Security during their retirement years what they paid in

The issue I was responding to there was whether the IOUs will be repaid, without any considerations about purchasing power and comparisons of paying in to paying out. That latter stuff was all added by you later with your poll baiting tactic. And as I've already remarked there, that consideration is stilted because it depends on life expectancy, and moreover misconstrues a welfare transfer payment system as an investment vehicle. The subject we are discussing is the solvency of Social Security, not the question of whether it makes a good investment vehicle for retirement savings.

You often think your views such as: "Said expectations are indeed very high." is 100% correct and only fools question them. A poll with provide a better answer.

You seriously think that a poll at SciForums amounts to a legitimate scientific sample of public opinion on the solvency of Social Security? That's preposterous.

Meanwhile, the basis for my observation that expectations of repayment of the SSTF vehicles is high, is the fact that such is the widespread opinion of experts on the subject. This, in turn, is based on the fact that the government is legally obliged to repay them, and that they are backed by the full faith and credit of the US government. The question is what the government will do to cover the costs - cut spending elsewhere, raise taxes, and/or borrow money from elsewhere.

As usual, you are refusing outright to seriously analyze the financial situation and likely policy outcomes, and instead simply invoked your doomsday prophesy wherein the US has totally collapsed in the meantime. Which is to say that you have nothing to say here about Social Security. You're just exploiting the subject to repackage your moldy old fantasies of US economic ruin, apparently with the hope that some kind of ignorant popular fear of the future of Social Security will manifest itself and so validate your Chicken Little schtick. This is highly childish.

If you want to see an example of a retirement benefit system that is rushing towards a brick wall, you should be looking at China. Especially the rural areas, which have been emptied of younger workers who would have traditionally supported the elderly. But the legacy of the one-child policy is going to have them upside-down on workers-to-retirees in short order, overall.

We can not ask a valid cross section of the US population here in a sciforms poll, but after 20 or so have replied (poll is open "forever") we will get an indication that is better than your or my opinion.

No, it won't. That poll won't tell you anything of relevance to the issue, nor will it be scientific and statistically significant in the first place.

I'll continue to listen to what the reputable experts have to say, and I suppose you'll continue with your inane antics and dishonorable tactics. Just understand that you aren't going to prove anything to me this way. Well, other than that you are not serious or intelligent, that is.

 

[Billy T]

... The issue I was responding to there was whether the IOUs will be repaid, without any considerations about purchasing power and comparisons of paying in to paying out.

I´m not much interested in the accounting games the Treasury can and has played to pay intra-governmental IOUs, bills from contractors or it bonds (For example to avoid the debt ceiling taking effect for months last time and probably will begin to play late this December to "quasi-legally" pay US debts). What I am interested in, as most are, is: will Social Security paid me back and in not too badly depreciated dollars. I have often heard younger people express doubt it will. Sure it is possible government / SS will pay with the right hand and then via higher taxes take back with left hand.

But Social Security is the world´s greatest Ponsi scheme. Old people who got out before the pyramid collapsed did well and those near the end get screwed. I have collected about 125% of my paid in purchasing power for three main reasons: (1) the SS tax was much lower when I was paying;(2) the annual maximum collected was much lower; (3) I had a high salary and the full 40 quarters so got the max pay out. (2) and (3) acting together made my SS tax go to zero by late March each year (as I recall)!

You seem to frequently switch horses: At times saying SS is an "income transfer scheme" and at other times deny it is a Ponsi scheme of robbing younger Peter to pay older Paul. With historically greatest percent of young living with their parents now or delaying marriage, the US birth rate is declining while the percentage of people collecting SS is rapidly rising - this Ponsi scheme will thus collapse and debt growing at 10% per year doesn´t help.

... You seriously think that a poll at SciForums amounts to a legitimate scientific sample of public opinion on the solvency of Social Security?

No I said exactly the opposite but this question shows you did not read or understand that. In post 234 I said:

... "We can not ask a valid cross section of the US population here in a sciforms poll, but after 20 or so have replied (poll is open "forever") we will get an indication that is better than your or my opinion."

If interested in the poll, it is here: http://www.sciforums.com/showthread...-expect-back&p=2989075&viewfull=1#post2989075 Feel free to comment but don´t vote if 48 or older.

 

[quadraphonics]

... So long as you admit that your poll is unscientific, I am comfortable dismissing it out of hand as irrelevant.

but I don´t admit that. I stick by my statement and AGAIN note that 20 people responding is a better view of public expectations than your or my opinion alone. - that is what I said and it is true.

All polls have errors, some more than others - none is scientific in the sense it is perfectly repeatable like scientifically measuring the melting point of lead.

I´m very sorry but it appears I hit the edit button instead of the reply with quote. I think you can recover your post by editing again and use the auto save feature. That will I kill my reply but that is OK.

 

[eyeswideshut]

I'll continue to listen to what the reputable experts have to say...

Whom are the reputable experts ?

 

[Billy T]

Whom are the reputable experts ?

Why, Quadraphonics of course, certainly not Billy T and his referenced or quoted economic facts. They only come from well known gloom and doom prophets and the CBO, etc. for other government sources, the Economist, or Bloomberg for his most recent quote, post 238, that generated Quadraphonics "correcting reply" in post 239 and most of the thread to this point, such as:

Post 241´s start: .... You are behaving like a petulant teenager, by baiting me and appealing to the mob. ...

That on-topic logic really put me in my place.

BTW Quadraphonisc, we were discussing peoples´s expectations for Social Security, not the mechanisms or probability that Treasury will pay the bonds held in SS´s trust fund, when US debt is much greater than now. To explore people´s expectations, polls are normally used despite not being "scientifically perfect."
Hell ~95% of the population does not even know these bonds exist in a SS trust fund.

 

[quadraphonics]

Whom are the reputable experts ?

Well, the professional government agencies staffed by experts and tasked with assessing exactly these issues would be the place to start. This would be organizations like the Congressional Budget Office, the Office of Budget and Management, or the Social Security Administration itself. My main source for when this issue comes up has always been to start with the relevant Wikipedia pages:

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

 

[quadraphonics]

They only come from well known gloom and doom prophets and the CBO, etc. for other government sources, the Economist, or Bloomberg

Your assertions are at variance with the consensus views of those groups. It is dishonest for you to claim support from them.

BTW Quadraphonisc, we were discussing peoples´s expectations for Social Security,

No, that is a derail that you are attempting to pursue, and that I have repeatedly declined to engage. Stop your attempts to browbeat me with your arbitrary, self-serving redefinitions of the topic.

To explore people´s expectations, polls are normally used despite not being "scientifically perfect."

I never demanded "scientific perfection," and so you are lieing when you attribute such a quote to me. I defy you to find any place where I used the phrase "scientifically perfect," and furthermore demand that you retract this misattribution and apologize to me for willfully, maliciously misrepresenting my statements. And for defacing my previous response.

I invoked only scientific validity - i.e., statistical significance and absense of bias. You are not going to reach such a bar with an informal SciForums user poll. Your claim that such a poll would have scientific validity is absurd, and clearly indicates that you have no grasp on statistics or public opinion surveys, nor any particular allegiance to scientific legitimacy in the first place.

Likewise, it is highly dishonorable for you to continue directing this sort of hectoring at me after you have abused your mod powers to edit over my response. It is becoming very clear that you are incapable of comporting yourself with honor and respect.

 

[Billy T]

... My main source for when this issue comes up has always been to start with the relevant Wikipedia pages:
http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

Good source. Here is how that article ends:

"... Under current law, the securities in the fund represent a legal obligation the government must honor when program revenues are no longer sufficient to fully fund benefit payments. However, when the trust fund is used to cover program deficits in a given year, the Trust Fund balance is reduced. By 2033, the fund is expected to be exhausted. Thereafter, payroll taxes are projected to only cover approximately 75% of program obligations. There is controversy regarding whether the U.S. government will be able to borrow sufficient amounts to honor its obligations fully to recipients or whether program modifications are required. This is a challenge for the Federal government overall, not just the Social Security program. ..."

Main reasons why my poll on people´s expectations was limited to voters 57 or less years old is they are going to try to collect when the trust fund is exhausted, even if the full retirement age remains 67 until 2033, 20 years from now, but very likely the full retirement age will be about 70 then so they will wait more that 20 years to begin full collections, probably after 2035.

Clearly this "challenge for the Federal government overall, not just the Social Security program." also reflects doubt about the US government even surviving, much less paying any social security to the 57 and younger crowd. The poll is designed to let them express THEIR expectation, not your post 239 assurances that:
" Said expectations are indeed very high. " You may think your POV is infallible, and should not be questioned, but it is is not.

See poll at: http://www.sciforums.com/showthread...-expect-back&p=2989075&viewfull=1#post2989075 and express your expectation of collecting from SS if not yet 58 years old.

BTW, one of the reasons, a minor one, why I chose Halloween 2014 as date when dollar run would occur by, is that by then the SS pay outs will be significantly greater than SS tax collections for three years, especially if the fraction of the labor force that can not find a job or has had to accept a "Big Mac" job or only part time work keeps growing as that means SS tax collections keep shrinking. I.e. in addition to no longer being able to borrow from SS to pay Treasury´s bills, the Treasury will have a new and growing every year* bill to pay what the trust fund cannot. I.e. pay 100% of everyone´s SS payments after 2033, if not sooner, if nothing is changed and both Romney and Obama frequently are pledging to make no reductions in those promised SS payments.

* as the ranks of the retired "baby boomers" collecting SS keep growing.

 

[Billy T]

Your assertions are at variance with the consensus views of those groups. It is dishonest for you to claim support from them. ...

replying to your first post 247 error only: I don´t claim support from the sources I use or quote - I only quote from them.

Try to find even one post of mine making that claim of support. You are again putting words in my mouth. Stop that.

 

[Billy T]

367K is slightly less bad than the 371K expected by "experts" but still very bad and growing worse by 4000:

"..Initial Claims for Unemployment Insurance for the week ending 9/29 rose 4,000 and were reported at 367K.

 

[Billy T]

I no longer have the reference* to the extensive study going back more than two centuries and covering almost all non-oriental economies that showed there were only two exceptions to the rule than no nation has recovered when its debt was greater than 90% of it GDP. Those two exceptions were: (1) England at the start of the industrial revolution (It had borrowed heavily for steam powered looms and cargo ships.) to export to its large captive empire and could deliver textiles at about 1/3 or less of the price of local production AND (2) the US at the end of WWII when its industrial production facilities had greatly increased, women were well represented in the labor force, and all other once advanced countries were partially or totally with destroyed industrial capacity.

Graph is ~6 month old as now the debt is ~16,000 billion and the GDP is less than 15,750 billion.

* I found it at: http://www.economics.harvard.edu/files/faculty/51_Growth_in_Time_Debt.pdf published in 2010 by Harvard and U. of MD professors. Here is part of the abstract of their April 2012 paper speaking of the durations of very depressed growth:

"Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we
identify, 20 lasted more than a decade. ... Across all 26 cases, the average duration in years is about 23 years. The long duration
belies the view that the correlation is caused mainly by debt buildups during business cycle recessions.
The long duration also implies that cumulative shortfall in output from debt overhang is potentially
massive. We find that growth effects are significant even in the many episodes where debtor countries
were able to secure continual access to capital markets at relatively low real interest rates. That is,
growth‐reducing effects of high public debt are apparently not transmitted exclusively through high real
interest rates. " from: http://www.economics.harvard.edu/faculty/rogoff/files/Debt_Overhangs_Abstract.pdf

I have done a few Xcel spread sheet models and agree there is no way in the foreseeable future the US economy can recover healthy growth. Now with debt to GDP = 102% there is too much debt even if interest rates could remain as low as they currently are, and certain depression if they return to normal levels.

 

[quadraphonics]

replying to your first post 247 error only: I don´t claim support from the sources I use or quote - I only quote from them.

Try to find even one post of mine making that claim of support. You are again putting words in my mouth. Stop that.

That's bullshit. I quoted exactly such a claim of support directly above the material of mine that you quoted there.

As usual, you are simply trying to bullshit your way out of another mess you've made, apparently thinking that you can simply redefine the whole interaction by fiat (backed with some hysterical, false allegations of misdeeds on my part, of course).

And - again, as usual - using that manufactured outrage as a cover to avoid responding to the substance of my comments to you. You should consider developing some honor.

 

[quadraphonics]

I no longer have the reference to the extensive study

Well, then, until you find such you cannot expect anyone here to be accountable to your characterizations of it.

Perhaps some one skilled at searching can find that study again.

In the meantime, SciForums will thank you to stop using references that you refuse to even attempt to identify as the basis for your argumentation. Such being a blatant violation of good-faith, scientific discourse, after all.

 

[Billy T]

Well, then, until you find such you cannot expect anyone here to be accountable to your characterizations of it.
In the meantime, SciForums will thank you to stop using references that you refuse to even attempt to identify as the basis for your argumentation. Such being a blatant violation of good-faith, scientific discourse, after all.

You forced me to search. See link to the 200 year, 44 countries study by Harvard and U of MD professors now added to my post 251 via edit.

Also while searching I found their recent April 2012 paper which states the average slow growth duration of economies with greater debt to GDP ratio than 90% is 23 years.

 

[Billy T]

Quadraphonics You should not have forced me to search. Here is a synopsis giving more of the same Harvard & U of MD professor´s gloom and doom (academically stated of course):

".. Public indebtedness in advanced economies is historically high and rising after the recent financial crisis. In Debt Overhangs: Past and Present (NBER Working Paper No. 18015), co-authors Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff address some of the potential economic consequences of high debt loads. Specifically, they use cross-country historical data on public debt levels to examine the long-term growth consequences of prolonged periods of exceptionally high public debt.

The authors define "public debt overhang episodes" as periods when public debt-to-GDP ratios exceeded 90 percent for more than five years. That five-year minimum was chosen to exclude normal business-cycle-frequency slowdowns, although in fact there turn out to be only a handful of such short episodes in this two-century dataset. The 90 percent threshold is based on a growing body of research, including work by the authors, demonstrating that there may be significant nonlinearities in the relationship between debt and growth – so that the effect of an increase in the debt-to-GDP ratio from 60 to 70 percent may differ from the effect of an increase from 90 to 100 percent. The three authors find 26 such episodes in 22 advanced economies since 1800. This does not include the unfolding post-crisis cases in Belgium, Iceland, Ireland, Portugal, and the United States, which do not yet meet the five-year minimum criterion, although it seems nearly certain they will ultimately do so. Ongoing debt overhangs in Greece, Italy, and Japan started before the financial crisis, have already cleared the five-year mark, and are included.

The authors find that on average, debt levels above 90 percent are associated with growth that is 1.2 percent lower than in other periods (2.3 percent versus 3.5 percent). Importantly, 20 of the 26 episodes lasted more than a decade, and the average duration of debt overhang episodes in the sample is 23 years. The authors explain that the consequences of this long duration are two-fold. First, it suggests that the association of debt and growth is not just a cyclical phenomenon, which contradicts the view that the correlation is caused mainly by debt buildups during recessions. Second, it implies that the cumulative shortfall in output from debt overhang is potentially large. By the end of the median episode, the level of output is nearly a quarter below that predicted by the trend in lower-debt periods. .."

The US is not now doing even the typical 2.3% depressed period growth! After the US meets the five year worse than 90% Debt to GDP ratio requirement to be a debt overhang episode, which they say "it seems nearly certain they will" if we are average, we have 23 years more of depressed growth, but we already are well below the 2.3% GDP growth so only 23 years more depressed growth is optimistic.

BTW, Never have I searched for any of the Gloom and Doom quotes I have posted - they have just been Emails I got. You have turned me on to searching now.

 

[Billy T]

Quadraphonics Thanks for encouraging me to search. Here is the first Google hit of my first search on "Depression coming to US"

The U.S. economic and systemic-solvency crises of the last four years only have been precursors to the coming Great Collapse: a hyperinflationary great depression. Outside timing on the hyperinflation remains 2014, but there is strong risk of a currency catastrophe beginning to unfold in the months ahead…moving into a full blown hyperinflation [in a few] months to a year… depending on the developing global view of the dollar and reactions of the U.S. government and the Federal Reserve.

He also expects a currency collapse come first and sets date for in depression in 2014, but not as specifically as I did ~7 years ago. ("on or by Halloween 2014")

BTW, munknee.com is just quoting from John Williams (www.shadowstats.com/) article that also states:

" Prerequisites to the crisis unfolding include:
... the Federal Reserve moving to monetize U.S. Treasury debt;
... the U.S. dollar losing its traditional safe-haven status;
... the U.S. dollar losing its reserve status;
... the federal budget deficit and Treasury funding needs spiraling out of control.

The Fed moved to monetize Treasury debt in November 2010. A much-diminished U.S. dollar safe-haven status became evident in early March 2011, along with serious calls for a new global reserve currency. The economy is not in recovery and should display significant new weakness in the months ahead, with severely expansive implications for the federal deficit, Treasury funding needs and requisite Fed monetization of debt. "

There are many pages of those Google hits. I don´t have time to look at more than a few.

 

[quadraphonics]

Quadraphonics You should not have forced me to search.

Why not? Do you hear me complaining about you doing your homework?

One thing I'd be interested to know about this analysis is whether it examines the impact of private debt, or only government debt. The reason I bring this up is because most of the examples they cite there (Greece, Italy, etc.) are characterized not only by high public debt, but also by high levels of private debt amongst the population. This is relevant to the recent uptick in US public debt because it coincides with a comparable decline in private debt - basically, debt obligations are being transferred from the private sector to the government, without any net increase in the total debt owed collectively by the population and the government of the USA, as seen below:

Do those analyses consider total debt, or how private debt factors into their conclusions? Or just government debt? One reason I ask is that they assert that the hypothesized mechanism does not work through increased interest rates, which would be the normal, expected path for big government debts to make themselves felt on the larger economy. So I wonder if it is not a matter of a confounding third variable - private debt - that happens to usually correlate with public debt. Otherwise, what is the mechanism by which high public debts place a drag on the economy? Crowding out of other, important government spending in favor of interest payments? In the case of a straightforward bond revolt that spikes interest rates, the mechanism would be clear and obvious enough, but they state explicitly that they have controlled for that and that they still observe some effect even when the government in question still has access to low-interest borrowing.

 

[quadraphonics]

Quadraphonics Thanks for encouraging me to search. Here is the first Google hit of my first search on "Depression coming to US"

An obvious crank writing a blog for a goldbug website? Good for you, I guess.

 

[Billy T]

... One thing I'd be interested to know about this analysis is whether it examines the impact of private debt, or only government debt. ...

Only government debt I´m nearly sure. Here is why: They call it government debt and do not mention private debt, but it may, and IMHO should, include state and local debt as that is "government debt" too. Private debt is not an obligation of the tax payers. It can default with no governmental consequences, except any taxes once paid by the bankrupt person or corporation will cease. The Harvard & U of MD professors were mainly concerned with government policies, especially government´s ability to borrow and the associated impact on interest rates, as I recall. I read study some years ago, not recently, and do not plan to read again.

Another support for this POV is the graph you posted (which has 2008 as its last date). Now the debt to GDP ratio is 102% and much of that growth has taken place during Obama´s four years. I have heard it said, in the recent presidential debate by Romney, no doubt if that is where I heard it, that Obama has increased the federal debt by more than all the previous president combined did. Thus, if true, back in 2008, that ratio should be about 50%, which is what the green curve band (federal part) of your graph shows for 2008. Thus your graph also implies that the debt to GDP ratio the Professors speak of does not include the private and other debts. However, the state debts are relative small and might be included in the debt they speak of.

As far as your post 257 comment is concerned, John Williams owner and/or developer of www.shadowstats.com may be a crank (I don´t know, but his shadow stats are widely quoted and I think are identical in methodology to that US government used until a decade or so ago when the government changed it methodology. I believe they are called "shadow stats" as they shadow the government´s prior methodology.) but he certainly was not "writing a blog for a goldbug website." He is not responsible for them quoting him any more than he is responsible for me quoting him. I know nothing about that website except it was the first Google hit of my search on "Depression coming to US."

I will admit that more than half of the website and direct Emails I receive telling "Depression coming to US" or Gloom and Doom are probably just pushing scare stories (usually to sell their newsletter) with little that could pass as your "scientific analysis" validity test. (But really there is no such thing as "scientific analysis" of future predictions - they are tested or evaluated by time - seeing if they were or were not correct. No amount of your careful "scientific analysis" telling that my prediction of a coming run on the dollar is just my “ foolish fantasy" will be worth a hill of beans if the run on the dollar does occur.) It is quite arrogant and pretension of you to think you can accurately foretell what will happen in the future by your "scientific analysis" of the present facts available to you and call all who disagree, even Nobel Prize winning economist like Samuelson cranks and crackpots, etc. Back in 2005 he predicted essentially the same as I did in 2005 - ~7 years ago and also blamed GWB for the coming disaster. Read his words in the quote below.

How would you feel if I were arrogant enough to call you a “Pollyanna crackpot” living foolishly in fantasy land who foresaw only a rosy future ahead without any serious black clouds approaching as the Harvard and U of MD professors do for any nation with more than 90% debt to GDP ratio?

Here is part of what Samuelson published back in 2005:

“.."In the short run the dollar appreciates relative to the Euro and Yen. That can last for as long as those countries eagerly recycle their trade surpluses with the US into dollar assets (such as low-yielding American Treasury bonds). Be not misled. So strong and irreversible are America's balance of payments deficits, we must accept that at some future date there will be a run against the dollar. Probably the kind of disorderly run that precipitates a global financial crisis.

President Bush is a reckless economist, leading a reckless crew of subordinates. Spending on a hopeless imperialist caper in Iraq, plus Bush's giving away to the rich much of America's tax base, will eventually depreciate the American dollar. Those abroad who now gladly hold dollar assets will then reap the capital losses that they are not now expecting."

... The next collapse in home and office prices will be unlikely to cause mass bankruptcies. Why not? It is because banks and other lenders have shifted their loans onto the shoulders of pension funds and risk-taking investors. The real and genuine future toll from our current real estate binge will fall on the millions of homeowners who were tempted by low interest rates to enlarge their mortgages and to spend on current consumption the proceeds from that enlargement. As baby-boomers now of age 50 to 60, just when they ought to have been saving mightily to support their retirement years, they were actually dis-saving mightily. Who?s to blame? Mostly the team of President Bush which reversed the prudent financial policies of President William Clinton's team. ..."

If I´m a foolish crackpot living in fantasy land, so is Nobel winner Samuelson as we both independently predicted a run on the dollar was inevitable due to GWB´s foolish policies back in 2005 at almost exactly the same time using the same data, but I think I was ~two months earlier!

I also went further telling a limiting date* for the run, based mainly on the then certainly known date the baby boomers would switch from US´s largest ever group of tax payers to collectors of Social Security (and net sellers of stocks, big houses, etc. they had privately saved for their retirement). Also I did some projections of when the Federal debt would so large that US would need to borrow, even just to pay the interest on the growing dept, but I did not foresee it would be growing by more than a trillion annually in only three years after I made my predictions. The effect of that oversight was cancelled by my underestimation of how well politicians could kick the debt can down the road so there has been no need yet to change my "on or by Halloween 2014" date.

* Samuelson followed the "predictor´s rule" - never tell both what and when precisely, but I did not.

 

[Billy T]

Quadraphonics: Many do not hold your negative view on Shadowstats.
This one from large widely quoted organization thinks your POV is more accurately applied to the US government:

"..The Bureau of Labor Statistics—a government organization—states that consumer price inflation is running at 1.7% annually. That's simply wrong, as any consumer can confirm by a visit to any retail outlet. Trust your eyes. They aren't lying. Inflation is running much higher than 1.7%.

I rely on private, unbiased sources like Shadowstats to confirm inflation reality. And the reality is that consumer price inflation is running at a much higher rate than the government says. In fact, Shadowstats data show consumer price inflation (blue line below) running three percentage points higher than the official CPI.

There is another reason I don't trust the CPI: the government is free to change the CPI's composition. When the recent debt-ceiling impasse was threatening the country with “austerity,” both Republicans and Democrats discussed changing the CPI so that it would live up to inflation-linked entitlement promises in name, but in practice would erode the purchasing power of TIPS.