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Nov. 16, 2003 Last update: September 29, 2007 The truth IS out there.

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A NEXIALIST N+E+W+S Feature: Your Secure Retirement

from L. Reichard White

"An unchallenged lie becomes an unquestioned truth." -lrw

New "feature" -- to save time, read only bolded text. If you remember, it is designed to make sense when read that way. To save even more time (and see the really important parts only), read just the blue text.
Federal Reserve Chairman Alan Greenspan: What we have found over the years in the market place is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so. Prior to the advent of derivatives on a large scale, we did not have that capability. And we often had, for example, financial institutions like banks taking on undue risk and running into real serious problems. From 1998 to 2001 we had a trillion dollars increase in debt in telecommunications world wide. A significant amount of that debt went into bankruptcy and yet no financial institution of any significance was caught in that and the reason was that -- in this case credit derivatives -- were employed to transfer the risk from these highly leveraged financial institutions to other institutions and pension funds -- ah, insurance companies, pension funds mostly -- which had much more equity and could absorb the costs of defaults. -to Senate Banking Committee, July 16, 2003, 10:43:52 510_clip1
Documents recently filed in federal bankruptcy court held a nasty surprise for United Airlines workers. The papers showed that the airlines' four main domestic pension plans had a combined deficit of $7.5 billion -- The shortfall means that if the pension plans were terminated, assets wouldn't cover benefits already promised to workers. ... at a time when the nation's 32,000 pension plans are in their worst shape in more than a generation, employees are being denied important information that could affect their financial future. An April survey by the consulting firm Watson Wyatt estimates that 63% of all plans lack sufficient funds to meet their obligations to workers. Workers deserve to know when pensions are at risk Wed Jul 16, 6:19 AM ETAdd Op/Ed - USA TODAY 510_clip2
"Think of the federal government as a gigantic insurance company with a sideline business in national defense and homeland security. This particular insurance company, it turns out, has made personal promises to its policyholders that have a current value of $20 trillion or so in excess of the revenues it expects to receive. An insurance company with cash accounting is not really an insurance company at all," he added, "it's an accident waiting to happen." -Peter Fisher, U.S. under secretary of the Treasury for domestic finance, Russell On Gold, $20 trillion in the hole... Gold anyone?, Richard Russell, Dow Theory Letters, 22 November, 2002 510_clip3
Sen. Chuck Hagel (R-Neb): "There was a piece in the Financial Times yesterday, and I don't know if you saw it, the headline was "The Fiscal Over-stretch that Will Undermine an Empire." ... And it talks about the unfunded entitlement liabilities that are out there for this country, and you know the numbers very well on this Mr. Chairman, 77 million baby-boomers start collecting Social Security benefits in eight years. ... And what they found was a 44 trillion dollar short-fall in revenues. And a great amount of that was due to the Medicare and Social Security liabilities that are unfunded.
Federal Reserve Chairman Alan Greenspan: ..."in recent years, it's been my impression that the statutes we have now currently in place, granted the demographics that will emerge in the years ahead, will create a level of spending in excess of our capability to finance it. ... in order to finance what is required by law for retirees, would require a significant reduction in the real earnings of the working people over and above what otherwise would be the case. In other words, a disproportionate amount of the GDP would have to be diverted and it is not clear under those conditions whether we create a very major problem between generations in that regard." -to Senate Banking Committee, July 16, 2003, 10:43:52 510_clip4
According to Clinton's Office of Management and Budget (OMB), if the growth of the ["official $6 trillion] federal deficit isn't stopped, children born after 1992 will pay between 84% and 94% of their income for local, state and Federal taxes. -Rep. Donald Manzullo, R-Illinois, C-SPAN, 17 May 1995 ~3:57:40 PM [This figure has been repeated by many others, including John Kasich, R-Ohio, Ross Perot, etc. and is attributed to page 24 or 25 of the Clinton 1994 budget in a section entitled "The Prospects for Inter-generational Warfare"] 510_clip5
NEW YORK (CNN/Money) - Many economists worry that the U.S. federal budget deficit could approach a record $500 billion this year. Few, however, have grasped that the fiscal problems facing the United States could make an itty bitty $500 billion deficit look like pocket change.
Try $44.2 trillion on for size.
... What the number represents is the difference between all the government's future obligations -- mostly Medicare and Social Security payouts, which will explode when Baby Boomers start retiring in large numbers -- and its future revenue. ... If the problems aren't corrected, the study shows, the already huge projected shortfall could grow to $54 trillion by 2008 and keep getting larger every year thereafter.
... Gokhale asserts that fixing the massive shortfall he projects -- assuming the government chooses not to cut Social Security and Medicare benefits -- soon will force the government to pick from an array of even nastier poisons, including:
* boosting individual and corporate taxes 69 percent
* raising payroll taxes 95 percent
* cutting non-Social Security and non-Medicare spending 56 percent
* eliminating all other federal government spending
* or some combination of each of these four measures
The Financial Times reported Thursday that the Gokhale-Smetters study was commissioned by Paul O'Neill when he was treasury secretary [1] ... the Social Security Administration has started using the Gokhale-Smetters accounting method to project future deficits The $44 trillion hole?, Recent study says Social Security, Medicare shortfalls could be far bigger than previously thought, May 29, 2003: 3:46 PM EDT, By Mark Gongloff, CNN/Money Staff Writer 510_clip6
An array of government and private analysts put the actual U.S. "fiscal gap," which means all future receipts minus all future obligations, at $40 trillion (Government Accountability Office) to $72 trillion (Social Security Board of Trustees). These are ... present-value figures, heavily discounted to show in today's dollars what it would cost to pay off the debt immediately. The International Monetary Fund estimates the gap at $47 trillion, the Brookings Institution at $60 trillion. ... These obligations are not imaginary. And unlike the 1980s and 1990s, economic growth cannot bail out the government because the Baby Boom retirement is at hand. ... Gokhale said that fresh numbers from the Medicare trustees show the fiscal gap has since grown to $72 trillion, $10 trillion of that for Social Security and an astonishing $62 trillion for Medicare, the government health care program for the elderly. -Speeches ignore impending U.S. debt disaster, Carolyn Lochhead, Chronicle Washington Bureau, Sunday, September 12, 2004, San Francisco Chronicle 510_clip7
NEW: Federal Reserve Chairman Alan Greenspan, testifying to the U.S. Senate today, suggested it was necessary to cut Social Security benefits now, before the baby boomers begin to retire. Bush and Kerry both slammed the idea. -NWI, February 25, 2004, 18:00:54 510_clip8
PAUL GIGOT: I think that would be political madness. And it wouldn't ever happen. I mean-- but I think Greenspan is proving-- I mean, Greenspan committed the gaffe of telling the truth. And the truth is, that-- what he was saying is that promises that we've made through the great entitlements, Social Security, Medicare, are unsustainable in the long run ...
And, with the Baby Boomers, you, me, retiring-- here and-- we hope a ways off-- there are just going to be fewer workers-- too few workers to really sustain them on a pay-as-you-go basis, which is what Social Security is. Current workers pay for current retirees. So we're going to have to do something about it. NOW with Bill Moyers. Transcript. February 27, 2004, PBS 510_clip9
NEW: According to his [Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis] central analysis, "the US government is, indeed, bankrupt, [2] insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds''. US 'could be going bankrupt', Edmund Conway, Economics Editor, 14/07/2006 510_clip10
Sen. Robert Bennett (R-Utah): "We've held hearings in the Joint Economic Committee about medical costs, and there is a perverse and countner-intuitive circumstance going on and that the more technology we bring into health care, the more it costs. And this is exactly different from the way things work in other parts of the economy, the more technology you apply, the lower the cost becomes. And as we've tried to pursue why we have the opposite trend in health care, ah, it's because you keep people alive longer. If you were aimed at cost control only, you would let them die and thereby save the cost of their medical care in their later years." -to Senate Banking Committee, July 16, 2003, 10:43:52 510_clip11


[1] This explains gokhale smetters: return [2]

Contrary to popular belief, it [the so-called "Social Security Trust Fund] does not hold any marketable Treasury bonds. The government has been issuing a different kind of IOU to the trust fund since shortly before the surpluses by the 1983 tax increase began to flow in. They are called "special issues," and they are held only by the government trust funds. They are not marketable, they have no cash value, and they are not real assets.
Senator Hollings has referred to these special issue IOUs as "a 21st century version of Confederate banknotes." Economist Says Social Security in Trouble by 2018, NewsMax.com Wires, Monday, Jan. 24, 2005 return


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