Social Security is Being Robbed?

Courtesy of Freepik.com

Bear with me...

You go to the bank and open up an interest bearing checking account. You deposit $500 and throughout the following month, write checks for $1,250, while depositing another $1,500. At the end of the month, there is $750 in that account. The bank pays you interest on that amount. This repeats month after month.

I hope you are not one of those people that think the money you put in is just sitting there and collecting interest. It is NOT. The bank pays you interest to use your money to facilitate loans, etc. Things that would give the bank a means to make money and in return... pay interest. THAT bank account is what the bank will back, if you ever need to withdraw its entirety.

The Federal Government has something similar called Reserve Accounts. There are dozens of these reserve accounts and the OAS Trust Fund (what we commonly refer to as THE social security trust) as well as DI (the social security disability trust)... so on and so on. 

It is called a trust fund due to the Constitution. 

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Basically it says that taxing the general public for benefit of one group is not constitutional. Hence the bookkeeping around the whole matter. It was a workaround to avoid constitutional challenges of the act. And constitutional challenges in the 1930s was a fixture during FDR's early years... which led to an attempt to pack the court. 

I'm not real sure how or why many people think the trust fund has been robbed, etc. While there has been some changes over the years, the trust fund is set up exactly as it was in the beginning... 1935.

Hence the phrasing of the original act... 

An act to provide for the general welfare by establishing a system of Federal old-age benefits

Here is the original Social Security Act. The above is the preamble. Note the number of "titles" in the act (11). The trust fund we are familiar with and the program most people think of in terms of Social Security is but one title. That would be Title II. 

There is hereby created an account in the Treasury of the United States to be known as the Old-Age Reserve Account hereinafter in this title called the Account.

It details how it would be collected, spent, interest paid etc. The only change is how the accounting of the trust funds, relative to the overall budge. For awhile, it was treated separately, but currently is counted together, as far as national debt. Note: intragovernmental holdings would include all trust funds, which are many, and would include OAS, DI, and Medicare A.

Actually, the fractional reserve monetary system is the monetary system used by banks, the fed, etc. There is a school of thought that this should considered theft. However, can we really call something theft if we agree to collect interest and have the federal government guaranteeing our deposits?

It has been getting interest since day one. Without that interest, the trust fund (OAS) would be more in the order of $500B, rather than the current $2.8T. When you think about, if there were a balanced budget excluding Social Security (OAS) revenue, would there be a need to pay interest? The interest accrued is likely tied to the 10 Year Note, as it historically has nearly matched that rate.

Whether you think it has been robbed or not, that $2.8T is the current balance and as more people retire and draw from that trust and outstrips the revenue... that balance will fall, just like that interest bearing checking account. Added into the equation is interest paid is falling as interest rates have fallen.

Doing nothing guarantees the fund will finally hit zero in the 2030s. And just as you would with that interest bearing checking account you have at the bank... you will start delaying payments until the money is the bank, to back that payment. It will not go bankrupt, but simply be arrears in payments. Yes, people and companies can go or be forced into bankruptcy, which is the inability to pay creditors. We the People are both creditors and debtors in this instance. We gonna sue ourselves?

For Social Security (OAS), this would result that monthly check getting delayed by a couple of weeks each month, until the checks are behind about 3 months in the first year. That continues until the revenue returns to match the outgo. Then there is the matter of revenue being enough to catch up on all those delayed checks.

So when you hear someone throwing a hissy fit about proposals regarding saving Social Security (OAS) and then proclaim there is/would be nothing wrong if the government hadn't robbed it, they are to put it delicately... stupid.

The argument being put forth would be similar to someone screaming there is/was nothing wrong with their dwindling bank account if the bank hadn't robbed them. How else can that be anything but... stupid. The alternative would be to have the bank charge YOU a fee for holding that money in a vault OR you could stuff it under the mattress.

November PCE, 12-23-2021

 

The Commerce Department released the latest CPE information. This concludes the inflation information that I track... for the month of November. 5.7% PCE; PCE EX-F&E at 4.7% and trimmed mean PCE at 3.5%. All numbers are above October data.

There is really no surprise, and the latest numbers simply affirm what is already widely known, so has been rather mildly reported. Especially the relationship between PCE and the Federal Reserve's reliance on that information.

The FED has already mentioned what they might do, but haven't done anything, other than reducing bond buying... which is the key point. 

As for me, the MPI is my gauge and I suspect it will go up for the December report to about 5.1% annual and 0.4% on the month.

Forecasts for CPI-U range from -0.3% to +0.4% for December and year to year between 6.7% and 7.1%. I suspect we are nearing the end of peak y/y numbers and should look closer at month to month in the upcoming reports.

OMICRON

Omicron is spreading very fast, according to news and data sites. While it appears to be much less severe than previous covid variants, the current CDC protocols for medical staff is quarantining for 7 days from testing positive from covid... any covid, mild or not. Considering how pervasive the omicron variant is, and the apparent weakness of vaccines and prior covid immunity are to the omicron variant, the likelihood of much higher infection rates exists. This would include the medical community.

As with any virus, certain portions of the population are more susceptible to serious illness and death and would require medical attention. Medical attention that might be restricted by its own members infections and requirement to quarantine.

The timing for getting sick and seeking medical attention might not be as good as current. Then think about all the various companies, schools, etc. that require testing and adhering to various protocols. Think about the grocery stores that look warily on employees sniffling and sneezing. 

Just sayin..

Odd and interesting things found on the internet.

My reading list needs to be trimmed...

One website had a thread complaining about what to do with a narcissist. There were multiple people weighing in with advice... (narcissists?)

Clearly some threads are simply a mundane idea that has popped into someone's head. (Narcissism?)

Multiple threads purporting to be about facts, that degenerate into myths and urban legends. Is it intentional?

In that same theme... Quotes of the day, which should be relabeled as MIS-quotes of the day.

Some folks, apparently, prefer to ask questions on social media about their medications, which could be obtained by reading the literature that is already available. Reading is reading... smh!

Ran across a piece regarding Fruitcakes! No, not us internet denizens but rather the actual fruitcake... The magnificent history of the maligned and misunderstood fruitcake. For me it was a fun read and not my usual material. But education comes in all forms. 

A few thoughts on Omicron. It was first detected in South Africa, where several cases were among 35~39 years of age and the symptoms were mild. Sounds good, but I wondered about some of the other statements. 

While South Africa has a poor vaccination rate, the general belief is the rest of the population has probably had covid. Which led me to wonder why their death rate was ranked 55th in the world. Turns out they have an average age of 27 and only 5.5% of the population is above 60, which seem to be the prime age group for severe cases and deaths. When adjusting the death rate to the USA's 16.5% of population in that age group... the ranking might be closer to #2, just behind Peru.

There is also the matter of cases being "mild" among that 35~39-year-old age group already infected. What is mild? Would the older age groups also be mild? IF South Africa is either vaccinated or had covid, then Omicron can overcome the vaccine and/or immunity from previous infection. 

A lot more questions, than answers at this point. In any case, I am certainly maintaining the hermit lifestyle I have adopted. I do wonder about the almost guaranteed potential wave of cases upon the working folks and how that might impact industry output, etc. 

Even with hermit lifestyle, I cannot avoid such impacts and need to prepare quickly... on top of might current preparations. 

And yes, I will likely pay more as inflation is going to continue the upward trend. I lot of folks are saying this and that about the FED, and the Fed has been banging the drums. Yet the FED has done nothing and clearly is waiting on inflation to taper, prior to doing anything meaningful, imo. Also in my opinion, the FED is at least 6 months behind on tightening and possibly 9+ months. Tightening should be done when growth is heating up, not when it begins to slow, and I think that will likely start at the first of the year. 

I might be wrong and certainly hope I am, but it seems the "good" news has to be viewed as suspect, much like the "bad" news. 

Finally, there is the "logic" being used. According to one internet sleuth, "we have tried masking, vaccinations, shutdowns, and social distancing... and none of it has worked, so anyone with basic logic skills should recognize none of it is working and should be ignored." 

It is sad that something akin to this is passed of as a logical deduction! It's a sad world that accepts this type of irrational thinking.

We have tried to get people to mask universally, but with limited success and strong resistance; we have tried to fully vaccinate people, but with very limited success; We have tried shutdowns in some areas, but only for short periods and thus with very limited success; and finally... social distancing was never really practiced in most places. So, to form some logical conclusion from any of this is rather idiotic. 

But we see evidence every day, as to how irrational the world has become. That is the sad reality.

Retail Trade Report for November-2021

 

The Census Bureau released the advance data for November Retail. The real story is the upward revision for October, which seemingly blunted the November numbers. Factoring in inflation, less "stuff" got bought with more money. Hence the slight dip in after inflation numbers.

Still the amount of "stuff" being bought is well ahead of pre-pandemic economic expansion, in my opinion. For the month of November, the drop in department stores coupled with appliance and electronic stores were quite noticeable. The retail drinking establishment numbers were up.

As for those drops, the revised numbers upward in those areas for October, also lend to the idea of earlier holiday shopping. 

Altogether, not to good, but not too bad... probably more like a pause, with direction from here being anyone's guess. 

Producer Price Index for November 2021

 

The Producer Price Index as released by the BLS, this A.M. 

The Producer Price Index for final demand increased 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.6 percent in each of the 3 prior months. (See table A.) On an unadjusted basis, the final demand index rose 9.6 percent for the 12 months ended in November, the largest advance since 12-month data were first calculated in November 2010.

In November, the index for final demand services rose 0.7 percent and prices for final demand goods increased 1.2 percent.

Clearly not good, looking forwards. The Final Demand is higher than previous month, as is the intermediates. It would appear that a lot of inflation is to be passed on to the eventual consumer. There appears to be limited hope of annual inflation falling below 3% before next summer, based on these numbers. 

It should be noted that this is all in the review mirror as will be tomorrow's  Retail numbers. Those retail numbers, however... could provide a clue going forward.

Breakdown of CPI DATA and Real Earnings, November, 2021

 

The BLS report for November, indicated a 6.8% increase from year ago and 0.5% from previous month. 

A variety of other data releases indicated many different inflation numbers...

Of course, mine is also included at 4.7%...

Going forward, the expectation is for December's numbers to rise another 0.4% for the month, or 6.98% over the past 12 months. Meaning December is likely to be between that 6.98% and 7.16%. This month's number were last seen in June 1982, when it was 7.1%. I should point out the inflation rate was falling at that time, from a high of 14.8% in March of 1980. Good times!!!

There weren't many surprises in this report, and it was near expectations... so December expectations might be on target as well or possibly above, as the misses of late, have been on the underside. 

Real Earnings were also released...

The hourly real rate slipped a bit and is now back to March 2020 levels.

Despite the real hourly rate being near March 2020, real weekly earnings are still a few dollars above. 

Assumptions of Ancestry

 

We all really want to believe we are descended from greatness or at least that our ancestors were pure, with well developed moral ethics that does not exist in today's world. 

Yet somehow every family manages to have skeletons in the closet. Of course we attempt to say these are recent issues that did not exist in yesteryear.

To start with, if you think Scotch-Irish, means part Irish and part Scotch... not so fast. Who were the Scotch Irish ethnically? While the link mentions Ulster Scots, as they seem to be know in certain parts of the world (Northern Ireland), it probably is better to think of them as protestant. And yes, they settled in the colonies, most notably in the south. You should also remember that for all practical purposes... they spoke English. 

Also, think in terms of today as Northern Ireland and Ireland as two separate entities. Ireland was mostly Catholic, did not speak English. While there were Catholics in the colonies, they number something like 20K.

The Ulster Scots were generally from the lowlands of Scotland and did not particularly mingle with Catholics, nor care much for them. That feeling was mutual. They fought wars of religion, which is kind of odd, as the Scots, Irish, English, Normans, Vikings, etc. spent hundreds of years invading each other and... you can imagine the rest. 

It was the Romans that labeled the inhabitants of Ireland as Scots. Which then migrated to Scotland and many were sent back to Northern Ireland. 

There is a whole history of who are Scots, Scotch, Scotsmen, Scots Irish, Ulster Scot, etc. Apparently people in Scotland get ruffled, if you refer to them as "Scotch".

Needless to say, the family trees of all these folks are fairly knotted, in my opinion. So they couldn't use skin color, hair color, eye color or anything else to distinguish good from bad, so off to war over beliefs. 

The potato famine in Ireland occurred in the 19th century and mostly affected the city dwellers that did not speak English, had limited education and limited skills of value for the new land. These Irish were not very welcome in the new land. 

I should briefly touch on the propensity of Europe to fight wars over religion for long periods of time. It seems the plague created a great breakdown in society as that society rebelled against the morals as presented by the Catholic Church in far off Rome. The tithes and offerings demanded by the church with no respite in reducing the plague, called more than a few to question the role of the church. 

Here is a touching read about the morals of our ancestors during this period. You look around and can easily wonder if we are heading right back to that unrest. 

In any case the Catholic church violently seized the day and lay waste to any other religions. We were taught about the Spanish Inquisition and the horrors of that, but are never taught the greater horrors of the French Inquisition. I figure it had something to do with over 8,000 French troops at Yorktown and dozens of French ships offshore. (psst... the British would not have surrendered at Yorktown without the French making up over half the boots on the ground).

The French were more terrible than what is listed in this link. The French went so far as to empty the prisons and have the prisoners live with Huguenot families as the overlord of the house, with all the evil that can be imagined. 

This was not just a French phenomenon, as this type of behavior was throughout what is now Northern mainland Europe. There are numerous books on this matter, but it is rarely discussed in polite company.

Now that we have established the horrors of the people and why they fled to various countries seeking safety... and then many turned to crossing the Atlantic, which was also full of peril, as well as the manner of booking passage.

There were the indentured servants (slavery) that made the passage and served for their period of indenture... often under very harsh conditions. Then there was the matter of treatment of women on the voyages. Often times food and water was in short supply, so a barter system was commonplace. Let your imagination run with that. Women were not considered as equal to men, so take it for what it is worth.

I guess the point of all this, is to remind us that GGGGGrandfather might not have been the biological father of GGGGrandfather. Oh what a twisted tree.

So many skeletons and very difficult to truly know ancestry. Which should be no surprise, when a DNA test indicates something other than what you were brought up to believe.

BUT... there are numerous things we were taught or led to believe that do not adhere to the reality of history. Yet we adamantly state that our version of our history is true, and anything different is simply revisionist history. 

It is probably a case of this...

via GIPHY

Additional Sources:

• The Norman Conquest
• The Viking Age in the British Isles
• The Black Death
• Who exactly were the Scotch Irish
• THE HISTORICAL USE OF THE TERM “SCOTCH-IRISH”
• The Huguenots -  England's First Refugees
• History of the French Huguenots
• Indentured Servants
• Crossing the Atlantic
• Gottlieb Mittelberger, Journey to Pennsylvania (1750)

There is an abundance of literature on the internet and in a decent library to research. To assert your history is somehow different ignores the reality and suggests you can't handle the truth.

Is My Attempt at Hoarding Merely Transitory?

 

It depends on definitions. An individual's life is transitory, in the grand scheme of things.

This term cropped up regarding inflation and it may or may not be transitory, but what about my hoarding habits, due to covid? I realize that Jerome Powell has said it might be time to retire the term "transitory". Seems like an admission that someone was wrong, when first describing inflation as merely transitory. Which begs the question of how much else might be wrong? Oh well, back to my situation.

Shortages early in the Pandemic caused me to add shelves inside the house; stuff the pantry full and then those added shelves being packed. It took a while to get that done but was largely completed in August 2020. At that time, it became just a matter of maintaining the stash. 

Since then, there has been limited contact with people and mostly visits to healthcare settings, etc. This has become normal, and I don't seem to have a problem with the lifestyle. In fact, discovering the many "curbside" opportunities have led me to the conclusion that I can get by quite nicely.

Having established the "stash" of goods, worry over shortages have abated. Granted, there are items each week that are marked "unavailable", but generally within a couple of weeks... they become available. The stash covers that, except for "perishables" which at times is hit or miss. Doing curbside from 2 different stores each week, reduces that as well.

Periodically, I try to evaluate the hoarded goods and estimate long term needs. Generally, this means looking at the world of covid, which currently looks dicey, even with double doses and boosters. 

Which brings me to discuss this Omicron variant. A lot seems to be missing regarding knowledge of this variant. I feel confident our own personal lifestyle should keep us safe from these variants. These variants will likely continue for quite a while as new types of vaccines will likely need to be developed and the lag time between development and sufficient global uptake to slow the rate of mutations... seems to be out of reach.

I would suspect the "supply chain" crisis will be alleviated in the spring, but that does not necessarily mean everything will be readily available, especially in the food area. When I refer to supply chain crisis, I am referring to the piles of goods at our ports, intermodal congestion, etc. We still have the issue of countries closing borders, the flow of goods, etc. You can't really have port congestion if there is no cargo coming in. 

Inflation will likely continue to be a factor, well into 2022, imo. I can almost guarantee the CPI for November will be at 40-year highs and December might ease a bit from the November numbers, as energy seems to be plateauing. However, nothing else seems to be easing, although it may well be the October retail sales, which were stellar and might just be people ordering Holiday "stuff" early... to avoid any potential shortages. That might explain the less than stellar sales of the past Thanksgiving weekend.

Food does not seem to be catching a break and given the disruption to meat packers, etc. due to covid; disruption to farmers worldwide, due to weather and covid, it would seem to indicate no immediate relief in the inflation trajectory. 

While most of our food supplies are of North American origin and would seemingly be safe from issues overseas, etc., the packaging materials, equipment, and replacement parts of equipment used in the food sector are not so safe, imo. 

Just as many industries are moving from the just-in-time model to the just-in-case model, it seems imperative that I consider that as well... which I did but need to continue.

I cannot say when I will ease off the hoarding or if I ever will. There are certain benefits to knowing I have enough to overcome most issues. So, renewing my zeal for hoarding and maintaining the current stockpile will continue and perhaps I will consider expanding, although the latter is much less likely.

Everything stated to this point is about unknowns, regarding inflation and supplies, but another worry and also unknown as well... is breakdown of societal norms, via social upheaval and in case anyone has forgotten... 2022 is an election year for all of Congress and 1/3 of the Senate. By the way... vaccine hesitancy will likely become a bigger issue, the Supreme Court is weighing in on some "hot" topics and people are generally in a bad mood over just about anything you can imagine. Some people are mad at other people because the other people are mad and it escalates from there. 

Outbreaks of the past have seen public trust eroded and with it... a breakdown in societal norms. The Spanish Flu saw some of these societal issues regarding trust in authority figures and the Black Plague was catastrophic.

Trust in leadership had been waning pre-pandemic and multiple factors not directly related to Covid... has eroded the trust even more. 

History indicates that breakdowns in society are not merely transitory, in that it requires changes over may years to achieve a new normalcy. Transitory might mean a lifetime.