Dum-dum, dum-dum, dum-dum II (sang to the tune of jaws for full effect)

The future is now.

For years, subsequent administrations have used the money collected by social security to spend on other things. The rationale for doing this was that SS was collecting much more than it was spending thus the surplus could safely be used by government. The rationale for doing this is two fold; on one hand, the sums borrowed from the SS do not count towards government total public debt and, on the other hand, by borrowing from SS, government can bypass the scrutiny of the debt markets.

http://www.google.com/hostednews/ap/article/ALeqM5jWbISwIapd30hnID5R3gGD7VFZ3QD9EED7CO0

“For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more. […] Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. […] Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.”

The situation alarmists have been warning about for years, is now coming to pass. Here is the kicker. This comes at a time when Western governments may be about to lose their top notch investment rating:

http://www.bloomberg.com/apps/news?pid=20601103&sid=av16pDNNrMig

… so that borrowing from credit markets may be about to become much more expensive…

The future is now. We are staring sovereign bankruptcy in the face. We can keep flim-flamming and doing the Three-Card-Monte shuffle all we want and, with luck, these flourishes will buy us a little time. But until tax revenue does not turn up, we are now bankrupt and the more we dance around the issue the worse it will become.

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World war is still very much dialed-in from where I am standing.

Tags: fiduciary duty, ious, public debt, social security surplus, sovereign credit, sovereign default, white collar crime