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Saturday, May 16, 2009

There is no Social Security Trust Fund

I already wrote about how Social Security is one big scam. There's one point I forgot to emphasize in my previous post.

Social Security is a massive profit center for the Federal government. In every year of its existence, Social Security taxes collected have exceeded benefits paid. With fiat money, when the State runs a taxation surplus, this is deflationary. The deflationary effect of this tax is offset by deficit spending elsewhere, or inflation by the financial industry.

There are no tangible assets in the Social Security Trust Fund. There merely is a stack of IOUs. When the paper in this pile is spent, that will cause further inflation.

The real crisis for Social Security comes not when the Trust Fund is exhausted, but rather when Social Security taxes collected are less than benefits paid. This date is only a few years away, and is much closer than the projected date for Social Security insolvency. When this date is reached, this spending will be inflationary. As the Social Security Trust Fund is spent, there will be massive inflation.

A default on Social Security is an economic certainty. There will be a tax hike, an inflation hike, an outright default, or some combination of the above.

The US Federal government is very bankrupt. Promises have been made to future retirees that cannot possibly be kept. Politicians cannot default on these promises, because then current workers would no longer be willing to pay the tax. If the State defaults on Social Security for current retirees, then what kind of idiot am I for paying Social Security taxes? The US Federal government isn't going to exist 20 years from now, so why am I paying tax for a benefit I will never receive?

Instead of Social Security, the average American would get a better return investing an equal amount in physical gold or silver. Current retirees are only earning a return of 2%-3% on their "investment" in Social Security, which is far less than true investment or any reasonable investment would have earned.

Social Security and all aspects of government are one big scam.

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