Thursday, March 25, 2010

Fudd's First Law of Opposition*

"If you push something hard enough, it will fall over." [Read]

*

2 comments:

Anonymous said...

Gotta love Firesign references!

Don't forget Teslacle's Deviant to Fudd's Law: "It goes in, it must come out."

Seems even more fitting.

jon said...

"the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual."

which will be worth 10% less, or worse, every successive year.

"the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances."

it's insolvent now. everything but the general fund holds non-marketable IOUs. they cannot be redeemed right now. that is insolvency. what it is on its way to is default, where they try to redeem non-marketable securities and find... there's no market for it. surprise! they are talking about "cash flow insolvency," which is an accounting fiction. it means you can't pay down your debt as it comes due. but the cash paid out of the "trust fund" comes from the general fund. the intragovernmental IOU is "redeemed" to get it there.

imagine you start a bank account in a safe in your closet by writing down on a balance sheet that you owe your wallet a $10 bill. that is what a non-marketable IOU is. that is what intragovernment debt is. you take $20 from the ATM, put $10 in your wallet, spend $10, and then cut an IOU for $10 more. you start paying $1 back to your wallet every month... where's it coming from? taxation or the printing press.

what do you mean you don't have a printing press? what do you mean it's illegal for you to take money from someone else with the threat of force?

well, just give your friends a tenth of that balance sheet. write "worth $1" on it. you're good for it, right? see? $10 right here in your wallet. any time you want it, come ask for it.

...what do you mean those scraps of paper are non-marketable?

congress cannot do anything about this. because of term limits, nobody will be around when their short-term-relief decisions bring the long-term-pain, so nobody takes the pain. the fed papers it over and then gives themselves a raise to maintain their purchasing power against the new money supply. "suckers!"

if a massive depression doesn't hit soon, the hole just gets deeper. eventually, the military goes insolvent. will our sons and daughters still be in afpak, out of gas, holding worthless USD, looking for a ride home?

long walk.