Those who are actually concerned about foreign holdings of U.S. government debt should know that it depends on the trade deficit, not the budget deficit. This is all simple econ 101. It means that the jingoistic budget hawks are yapping about the wrong deficit. The recipe for correcting the trade deficit (more econ 101) is lowering the value of the dollar against other currencies.

Usually it is the politicians who use euphemisms to try to conceal the impact of their policies. However, the Washington Post decided to help them along in a front page article when it twice referred to Social Security “changes” that could be part of the budget agreement.

Of course “changes” don’t reduce the deficit unless they are cuts. President Obama and the congressional leadership were discussing plans to cut Social Security. These cuts are likely to be very unpopular, so it is likely that they would rather have the public not realize that they were debating cuts to Social Security.

You can view Social Security accounting two ways: First, you can view it as a separate fund, in which case the Trust Fund surplus of $2.5 trillion is very relevant. Or you can view the issue from the perspective of the entire budget, and ask, “how much of the total is paid for by total incoming revenues?” But what you can’t do is mix the two; you can’t honestly switch between the two accounting perspectives just to make a political point about Social Security.

I’m feeling pretty guilty. I hadn’t known I was causing billionaires so much suffering. The former co-chair of President Obama’s deficit (a.k.a. catfood) commission just asked me during a public event to stop going after rich people. Then he came up to me after the event to make sure I’d gotten the point.

With the exception of the McCarthy era, I can’t remember a time when the facts pointed so clearly to mass public hysteria, denial and delusion among those who are driving government policies.

In The Monster, Michael Hudson gives us a detailed account of the how Roland Arnall created Ameriquest and made it into the giant of subprime lending. In the process the book implicates the major Wall Street firms, most importantly Lehman, who eagerly packaged junk loans into mortgage backed securities and more complicated instruments. He also notes the corruption of the three major credit rating agencies, who received big fees for giving these assets investment grade stamps. The list of aiders and abettors includes Massachusetts Governor Deval Patrick, California Governors Grey Davis and Arnold Schwarzenegger, and even the community group ACORN.

We’re headed into the deficit debate, and one attractive idea has been left on the sidelines – the notion of a financial transactions tax. Most of our stock transactions these days come out of a computer. They offer nothing of value to the public, enhance risk and feed a desire for more dangerous bets that could (and often do) cause financial crashes. As a society, even if we had no need for more revenue, we would do well to limit this growing financialization in the economy, and that goes hand-in-hand with limiting stock transactions. And one great way to use market forces to reach that goal is through a small tax on each transaction.

In case you been on vacation on another planet, the conventional wisdom now solidifying among the D.C. Beltway elite is that old people are a huge problem we just can’t afford, and the only solution is to take money from them, even if it’s their money they’ve been saving for decades.

We are left with no jobs, no pensions, Social Security being cut/defaulted. But hey! We bailed out the banks!

Rand Paul’s grasp of economic theory leans toward the fantastic these days.