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How bad is the social security shortfall?

Discussion in 'Economics, Business, and Taxes' started by American Patriot, Aug 12, 2012.

  1. gabriel

    gabriel Governor

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    i already did
     
  2. Days

    Days Governor

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    do you always have to get the last word
     
  3. gabriel

    gabriel Governor

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    its in my contract
     
  4. trapdoor

    trapdoor Governor

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  5. trapdoor

    trapdoor Governor

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  6. degsme

    degsme Council Member

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    You are conflating three different things. :
    1. Purchasing power of a single dollar
    2. Purchasing power of the Typical hourly wage
    3. Purchasing power of the US Economy vs. ROW

    Yes the Snickers bar was $0.10 but the average hourly wage in 1965 (which is when you started to remember) was $2.60 So a Snicker's bar was 3.8% of an hours worth of work. OR 2.3 minutes of work

    By 1979 Average hourly wage was $6.50 And the snickers Bar was up to 7.7% of an hourly wage or 4.6 minutes of work (now this is assuming you recollect correctly)

    Today the Average Hourly wage is $19.77 http://www.data360.org/dsg.aspx?Data_Set_Group_Id=773&page=2&count=500 and at a dollar which is 5% of the hourly wage or 3 mins of work.

    So your claim that Purchasing power has gone down presumes that there is an inherent value in a dollar rather than the dollar simply being a storage unit of promised FUTURE work.

    Now its true that the AVERAGE WAGE has not kept pace with inflation.... SINCE THE SUPPLY SIDE POLICIES WENT INTO EFFECT UNDER REAGAN. and yes median household purchasing power has dropped. Another reason why YOU voting for Reagan in 1984, voted against your own best interests.

    Simply not true as your own Snickers bar example demonstrates.

    Again, then what you are saying is you don't believe in Arithmetic.

    Consider a government that takes in 20% of GDP Spends 21% of GDP and has a growth rate of 3% of GDP. and pays 1% interest on its debt

    • In year 1 it taxes in 0.2X, spends 0.21X,
    • In year GDP is 1.03X revenue is 0.206X, Spending is 0.2163 Debt is 0.1X Interest costs are 0.001X
    • o o o
    • In year 10 GDP is 1.344X Revenu is 0.2688X Spending is .2822X Debt is 1.104X and interest costs are 0.1104X.
    • in year 11 GDP is 1.384 Revenue is 0.2768X Spending is .2806X Debt is 1.104X and interst costs are 0.1104X

    Notice how in year 11 Interest costs are LESS THAN the growth rate of Revenue by significant factors. IOW this is 100% sustainable indefinately.

    So your statement is provably wrong AS A GENERALIZATION. Yes different interest rates, different growth rates and different deficit rates GIVE YOU DIFFERENT OUTCOMES.

    But as a GENERAL STATEMENT, your claim is provably WRONG. So go ahead, try and sell me that bridge. I'll ask for the deed first. the FACTUAL Deed.



    Now as to "investing in its own bonds" - that WOULD BE a problem if there was no external market for those bonds. Because then - as you seem to logically (but wrongly) infer, there would be no outside valuation to those bonds and thus you could make them be worth whatever you want them to be worth. BUT THAT IS NOT THE CASE.

    Scenario 1
    Lets say that instead of buying US Bonds, the SS funds were used to buy land in Kazahkstan. Then when funds were necessary, land was sold back to RE investors in Kazakstan. OK there is "real valuation" there, but it is subject to "market pricing risks" based on a host of world economic factors as well as the exchange rate between the Ruble and the Dollar

    Scenario 2
    OK so what is the difference if FIRST the SS funds were used to buy US Tbills, and then those T Bills were traded directly for land in Kazahkstan. And when funds were necessary T bills were again traded directly for land in Kazahkstan and then the T bills were sold on the market and the $$ used to pay SS. - well all the risks we had before are still there, and there is a slight added transaction cost for going through the T Bill intermediary step

    Scenario 3
    So now, instead of swapping the TBills for their fair market equivilent in Kazahk land, we simply hold the Tbills. And when cash is needed, instead of swapping land for T Bills and then selling the TBills, we simply sell the TBills?

    Well we eliminate the secondary risks of Kazahk property valuations and Ruble/Dollar fluctuations, but we still have market risk since efficient markets still tie that TBill value - albeit indirectly - to the Kazahk property. However by staying in T Bills, which have a worldwide valuation, we dilute our risk across ALL the ecnomies of the world.

    From a purely mathematical perspective ALL THREE SCENARIOS ARE THE SAME. And if you want to substitute NASDAQ Market Index Funds for Kazak land, THE OUTCOME IS THE SAME. As it is if you put it in gold, or oil or any other commodity.


    So sorry, there is no problem inherent with the government buying its own bonds. NONE. And that you have not sorted this out in your head means you don't really understand the issue.
     
  7. trapdoor

    trapdoor Governor

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  8. trapdoor

    trapdoor Governor

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  9. degsme

    degsme Council Member

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    That's a particularly apt way to describe your Snicker's bar cherry pick.
    1) a Snickers Bar price is driven more by sugar and cocoa import policy than by purchasing power of the dollar
    2) it is a single product and not really representative of purchasing power or anything else
    3) you basically are running on memory of what it cost, not actual pricing
    4) And when the results don't come out to what you wanted, you complain that the results are wrongly figured

    Sorry Trap, you are just wrong

    Wrong trap. They are essentially the same bonds that go on auction EVERY MONTH. And at any point in time can be sold as such.

    Wrong on BOTH trap. The USA has been in debt to creditors SINCE BEFORE ITS CREATION. That's about as "indefinately" as it gets. Nations have no life span nor terminus of earnings. As a result they CAN and DO receive indefinate credit.

    Secondly, YOUR CLAIM was that it is impossible to run a deficit Year On Year and not go bankrupt. Clearly you did not do the arithmetic because fairly simple arithmetic of the compounding of various variables involved says your claim is simply bullSh!t.

    Really? So what has magically changed about the nature of time?

    And gold has no inherent value. And is largely driven by irrational Gold Buggery.

    Liars figure and figures lie.

    And by cherry picking your commodities you are doing just that.

    Lets try it this way. Lets pretend for the moment that every year the currency is changed to something else. So in 1965 it was called The Dollar
    then by 1979 it was called the Ooobly and today it is called the Yawbly.

    How would you compare the "purchasing power" of the Dollar to the Ooobly and the Yawbly? Well since they don't have a set conversion rate you'd have to figure something out. Here's a couple of Alternatives

    1. Compare the 1965 Dollar with the 1966 Yowza. Then compare the 1966 Yowza to the 1967 Yerba etc on a year to year basis
    2. Look at what a cross section of goods cost in dollars in 1965 then compare that same basket of goods in 1979 and 2012
    3. Look at the exchange rate between the Dollar and other currencies, then the Ooobly and the Yawbly and those same currencies
    4. Look at how many hours the TYPICAL person has to work to have a mid quintile lifestyle in 1965 vs. 1979 vs. 2012
    5. Look at how many hours the TYPICAL person has to work to buy the same basket goods in 1965, 1979 vs 2012

    Now EACH of those approaches has strenghts and weaknesses.

    #1
    is essentially the ingrated sum of inflation calculated year on Year. The problem with this approach is that it does not reflect changes in income distribution, changes in the quality of life, nor changes relative to other natiosn

    #2
    is essentially the CPI approach. The problem here is that the same basket of goods does not have the same qualities year to year. in 1965 the typical TV was Black and White - Color was a luxoury. Today you'd be hardpressed to FIND a CRT TV, much less a Black and White one. And the PC you could buy for $500 in 1979 has way less ABSOLUTE capabilities than the one you can buy for $500 today but in 1979 a business that used a PC was WAY AHEAD of a business that today has 10 PCs.

    #3
    Is essentially the "world Currency" measure. And it is a reasonable proxy for purchasing power in a globalized economy. But the problem is that Exchange rates are often driven by more than economics. Politics drives them as well. For example the Dollar to Ruble or Dollar to RMB rates are drive by politics more than economics.

    #4
    Is essentially a modified version of the CPI, in that it converts the actual commodity being offered (labor) for a mid quintile lifestyle. But this has the problem that it does not account for the impact on say "fixed income" or "fixed asset" individuals, and it also suffers from the "expectation" inflation of what is a "mid quintile" lifestyle. After all, what a mid-quintile earner expects in the USA as say healthcare today is unbelievably better than anything even Royalty could expect in say 1929

    It DOES have the Advantage that it measures the real impact on typical lives though. Because how long you work to accomplish X is a compartive measure in terms of what percent of your life you spend doing X. And since lifespan is the true commodity underlying all this. This approach is one that aligns well with the EXPERIENCE of purchasing power.

    #5
    This is a different modification of the CPI approach where you are going on a particular basket of goods, but here the TV (and other comparitve goods) problem still exists. In 1979 you could do business without being on the web. Today that is almost impossible at any scale.



    So the reality is that your "purchasing power" question is far more complex than you sought to make it out. YOUR BELIEF system of course drives you to a pre-determined conclusion and hence you cherry picked something from memory that SEEMED to you to reinforce your beliefs. But in reality you were picking a measure to meet your BELIEF rather than actually seeking an answer.
     
  10. degsme

    degsme Council Member

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    Neither is true. We've had steady job increases month on month for 22 months in a row - http://data.bls.gov/timeseries/CES0000000001?output_view=net_1mth

    And consumer confidence has been on a steady growth for the last year http://en.wikipedia.org/wiki/File:U.S._Consumer_Confidence_Index.png

    Sorry wrong.

    No the data is pretty clear, even Intrade Money says he will win. As for Coat-tails - BEFORE the Ryan pick I would have agreed with you. WITH RYAN its too close to call.

    The Ryan Plan is completely off the mark politically. And in terms of voter priorities, the Romney Campaign is LEADING WITH #3 or #4 now http://pollingreport.com/prioriti.htm That's a way to lose DOWN TICKET.

    BY HOW MUCH? Come on - lets see your numeric analysis.

    Not really http://pollingreport.com/prioriti.htm it is #2 on the list. And what's more, THE RYAN PLAN DOES NOT ACCOMPLISH CONTROLLING EITHER.
    Even the CBO scoring says that. So there is no arguement to be made by Romney and Ryan on that front.
     
  11. degsme

    degsme Council Member

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    I thought I did.... did I screw up my post?
     
  12. trapdoor

    trapdoor Governor

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  13. trapdoor

    trapdoor Governor

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  14. degsme

    degsme Council Member

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    OK I'll pick a commodity.

    A computer with 128k of memory. and a 2.5 GByte hard drive. The hard drive cost about $90,000 in 1965 roughly $35/Mb. Today I can buy a a 1,000 Gb hard drive for $50 or 5 cents/Mb. Clearly purchasing power has gone up by a factor of 700...... But of course EVERYONE NEEDED a computer in 1970 like they do today right?

    Sorry its just not that easy.

    See the problem is that you are making the FALSE equivilence that a "dollar" IS INTENDED to represent the same thing today as 40 years ago. IT IS NOT> 40 years ago $1 represented roughly 20 minutes of an average working life. So something that cost $1 was the same as 20 minutes of your life

    TODAY $1 represents 3 minutes of an average working life. So something that costs $1 is the same as 3 minutes of your life

    And under that rubrick, the purchasing power for things like computers, TVs, Cars HAS GONE UP DRAMATICALLY. That the name in which you store your PROMISE OF LABOR (because that's what currency is) has not changed HAS NO BEARING ON THIS.

    As for gold. Gold valuation has not had a significant factor on currency purchasing power for about 100 years now. And no, the Gold/Dollar exchange rate does not show a "steady devaluation of the dollar". In January of 1980 Gold was at $850/oz It then fell, and did not recover that price point for TWENTY EIGHT YEARS. IOW there was a 28 year STEADY INCREASE in "dollar/Gold" purchasing price. http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx (this is in non-adjusted dollars. If you inflation adjust there is a dramatic FALL in gold princes. Inflation Adjusted, the 1980 gold price is $2193/oz. About 20% higher than today's prices.

    Another way to analyze this is to recognize that it took 136 hours of work for the average worker to buy a troy ounce of gold in 1980. IN 2008 it took 41 hours.


    So not only are you cherry picking commodities, you are not accurately representing what "purchasing power" really means. and no you are NOT "lookng at things in the real world". Because you are LEAVING OUT RELEVANT FACTS. You are in fact fundamentally misunderstanding what currency even represents. It does not -AND NEVER HAS represented any tangible fixed amount of value - regardless of whether there was or was not a "gold standard".
     
  15. trapdoor

    trapdoor Governor

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  16. degsme

    degsme Council Member

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    Computers are commodities. It doesn't matter really if I buy a Dell, Lenovo, or HP laptop. I buy on quality, service and delivery.... the hallmarks of a commodity.

    No. And if you believe that, you fundamentally do not understand monetary policy in any way shape or form.


    Irrelevant - becuase that $35 took 13.5 hours of work to accumulate. And in 2008 it took about the same aoumt of work to get the $1600.

    No the question at hand is whether the PURCHASING POWER of the USA has been changed.

    Ahh but WHY do you prefer that? Again this issue of "purchasing power" is not as simplistic as you would PREFER to make it.
     
  17. trapdoor

    trapdoor Governor

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