In reality, the government does not owe anything to the banks. If the government had not been hijacked by corporations and banks in the past few years, we would not hear such ridiculous claims by the banks (and repeated by the media in this article). If the government were not already captured by the banks, it could do away with investment banks altogether and charter a bank that services the need of its people and not the debt of the banks.
It is the investment banks like Goldman Sachs that are superfluous to the benefits of the community rather than Social Security and Medicare. It would be interesting to see Goldman's off-the-balance-sheet liabilities before it borrowed $800 billion from the Federal Reserve. Debt holders should have shared all the pain when they brought down the financial system in 2008 instead of being bailed out by taxpayers. Where is the humility, banking industry?
Watch what you say to the people, Mr. Goldman Sachs!
Goldman Sachs: Social Security and Medicare Are 'Weaker' Promises Than Debt
By Peter Coy - BloombergBusinessweek
A report released today by Goldman Sachs says that if push comes to shove, the federal government will pay its lenders before it pays Social Security and Medicare beneficiaries. Debt service “should be seen as the top claim on government resources in most cases,” says the Goldman analysis.
On one hand, the idea that lenders come first is blindingly obvious. Just look at what happened last summer, when the government tied itself in knots to make sure it didn’t default on bond payments. Of course lenders stand at the head of the line for taxpayers’ money. On the other hand, if things got really bad in the U.S.—as in Greek bad—the priority of payments could start to flip. At some point, as we have seen in Athens, citizens rise up against lenders and insist that the country protect its own ill and elderly before it pays faceless creditors at home and abroad.
So it’s interesting for all concerned—creditors and beneficiaries of the federal government alike—to understand how much the government owes to whom.
One number soars scarily above all others. It’s the burden of Social Security, Medicare, and other entitlements in excess of money set aside for them, otherwise known as “unfunded entitlement payments.” Their net present value is 188 percent of gross domestic product. By contrast, debt held by the public—which got all the attention last summer—has a net present value of 54 percent of GDP. The federal government’s total on- and off-balance-sheet net liabilities, present and future, have a net present value of 299 percent of gross domestic product, Goldman calculates.
Read the entire article here