Wednesday, January 05, 2005
Investor's Buiness Daily: the tabloid of financial journalism
Investor's Business Daily proves again why it's the tabloid of financial journalism (minus the page 3 spread of Maria Bartiromo). This time it's a bizarrely inaccurate diatribe about why Social Security should be privatized:
So let me see if I got this right? The general budget of the U.S. federal government is running $400 billion plus cash deficits, but Dick Cheney isn't concerned because "As Reagan proved, deficits don't matter". The reason they don't matter is because the U.S. government can just keep issuing treasury securities to finance budget deficits. Now it is true that according to the latest estimates, by 2018 cash payments to Social Security recipients will exceed receipts from payroll taxes and the fund will have to draw on a huge stash of treasury securities that it has accumulated over the preceding years. But you see: all those IOU's in the form of treasury securities that the social security trust fund has built up aren't really worth anything. Huh? Well, let's tell that to the Chinese and Japanese central banks that have been buying them. I wonder what would happen to interest rates if they believe the editors of Investor's Business Daily? But I guess I shouldn't complain too much. Without their stupid stock recommendations, I would never have been able to short Travelzoo at $101.
The system is headed for a collision with the hard wall of reality in just 14 years. That's when Social Security's revenues will no longer cover its costs. The many who insist there is no crisis ignore reality. By every realistic actuarial estimate, Social Security is headed for a bust.
So let me see if I got this right? The general budget of the U.S. federal government is running $400 billion plus cash deficits, but Dick Cheney isn't concerned because "As Reagan proved, deficits don't matter". The reason they don't matter is because the U.S. government can just keep issuing treasury securities to finance budget deficits. Now it is true that according to the latest estimates, by 2018 cash payments to Social Security recipients will exceed receipts from payroll taxes and the fund will have to draw on a huge stash of treasury securities that it has accumulated over the preceding years. But you see: all those IOU's in the form of treasury securities that the social security trust fund has built up aren't really worth anything. Huh? Well, let's tell that to the Chinese and Japanese central banks that have been buying them. I wonder what would happen to interest rates if they believe the editors of Investor's Business Daily? But I guess I shouldn't complain too much. Without their stupid stock recommendations, I would never have been able to short Travelzoo at $101.
# posted by Stockcoach @ 7:17 PM 
