Ponzi meets Security
The treasury department announced Friday that our budget deficit increased by $192.3 billion in the month of March.
That means that after collecting all taxes (revenue) , they spent all those taxes, and put $192.3 billion on our nation's credit card.
When Bush finished his last term in office he ended his final year with a total deficit of $454.8 billion. This was a new annual record and considered catastrophic for the direction our country was headed.
Bush ran a $454.8 billion deficit for the entire year.
We just ran a $192.3 billion deficit in a single month.
The deficit right now stands at $956.8 billion for the first six months of this year. The Obama administration predicts we will finish the year at $1.75 trillion in the hole.
It is important to remember that as we progress through the year, taxes (revenue) are falling across the board and spending (expenses) is escalating fast.
There is already talk of a second stimulus program and it is being worked on as we speak.
As the banks continue on with their stress tests, it will become clear that the money needed to save them is going to be a lot larger than anyone thought. The original TARP program of $800 billion this fall is just going to be the overture. Without full nationalization of the banks, you can expect to see TARP 2 and 3 before this year is over. (Nationalization would cost even more)
Also, these deficits we are talking about do not factor in "off balance sheet" costs such as the war, social security, or medicare.
Speaking of social security, we keep hearing in the news that it may be running out of money in the near future. What does that mean?
Every month when people pay taxes they pay toward the social security fund. This means you put in money now that you will receive at some point in the future. To make it simple lets pretend that 100 people put $1 into the fund every month. The government then takes that $100 and pays out $75 to 75 people currently retired.
That means that after paying out that $75 every month, the fund should be saving $25 for the workers currently paying, right? Wrong. The government takes that $25 every month, spends it, then replaces it with an IOU. It is similar to the scene in the movie Dumb and Dumber.
This is what you call a ponzi scheme. You may be familiar with that term and its correlation with Bernie Madoff. The plan works fine as long as there is enough new money coming in to pay out the old investors.
In the year 2012 social security is going to take in less than it gives out. That means out of those 100 workers, lets say that 25 of them retire. This means that the remaining 75 put in their $75 every month, and social security now needs to pay out $100 per month. ($25 for the new people who retired, plus the old $75 that still needs to be paid)
Fortunately, most people think that the money to cover the difference is going to be from the savings the program has aquired over the years. The general public does not yet realize that the government has already spent this money.
The point is, if we were ever able to con the rest of the world into buying our worthless treasury bonds until 2012, then at that point we can then begin the real nightmare.
It is estimated by some that the social security bailout is going to cost $100 trillion.
That means that after collecting all taxes (revenue) , they spent all those taxes, and put $192.3 billion on our nation's credit card.
When Bush finished his last term in office he ended his final year with a total deficit of $454.8 billion. This was a new annual record and considered catastrophic for the direction our country was headed.
Bush ran a $454.8 billion deficit for the entire year.
We just ran a $192.3 billion deficit in a single month.
The deficit right now stands at $956.8 billion for the first six months of this year. The Obama administration predicts we will finish the year at $1.75 trillion in the hole.
It is important to remember that as we progress through the year, taxes (revenue) are falling across the board and spending (expenses) is escalating fast.
There is already talk of a second stimulus program and it is being worked on as we speak.
As the banks continue on with their stress tests, it will become clear that the money needed to save them is going to be a lot larger than anyone thought. The original TARP program of $800 billion this fall is just going to be the overture. Without full nationalization of the banks, you can expect to see TARP 2 and 3 before this year is over. (Nationalization would cost even more)
Also, these deficits we are talking about do not factor in "off balance sheet" costs such as the war, social security, or medicare.
Speaking of social security, we keep hearing in the news that it may be running out of money in the near future. What does that mean?
Every month when people pay taxes they pay toward the social security fund. This means you put in money now that you will receive at some point in the future. To make it simple lets pretend that 100 people put $1 into the fund every month. The government then takes that $100 and pays out $75 to 75 people currently retired.
That means that after paying out that $75 every month, the fund should be saving $25 for the workers currently paying, right? Wrong. The government takes that $25 every month, spends it, then replaces it with an IOU. It is similar to the scene in the movie Dumb and Dumber.
This is what you call a ponzi scheme. You may be familiar with that term and its correlation with Bernie Madoff. The plan works fine as long as there is enough new money coming in to pay out the old investors.
In the year 2012 social security is going to take in less than it gives out. That means out of those 100 workers, lets say that 25 of them retire. This means that the remaining 75 put in their $75 every month, and social security now needs to pay out $100 per month. ($25 for the new people who retired, plus the old $75 that still needs to be paid)
Fortunately, most people think that the money to cover the difference is going to be from the savings the program has aquired over the years. The general public does not yet realize that the government has already spent this money.
The point is, if we were ever able to con the rest of the world into buying our worthless treasury bonds until 2012, then at that point we can then begin the real nightmare.
It is estimated by some that the social security bailout is going to cost $100 trillion.
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