Multiple companies, of course... but how is this relevant? For one
thing, no private company can print it's own money; for another, if
Uncle Sam defaults on our debt we will have a full-blown world-wide
economic crisis to worry about; for a third, Uncle Sam is already the
guarantor of all companies private pension plans already... in fact this
is another impending blow-up...


Dave wrote:
Very basic principle called diversification.

Sure... if we were talking about something other than a gov't program
holding excess funds in anticipation of disbursement, I'd agree. It
would even make sense to hold some percent in equities... if we were
talking about something else...

... One country can default. (Some
Latin American countries seem to do it regularly.) Chances of several
defaulting is much less.

As to the private pension situation, I'm not sure Javits got it right with
ERISA in setting up the guvmint insurance scheme, encouraging unions to
negotiate unsustainable defined benefit pension levels. Long-term, however,
it seems to be moving in the right direction by shrinking the defined
benefit universe and increasing the defined contribution universe.


Yep, but the bail-out... and the crash of some pension programs... is
going to hurt a lot of people. The political fall-out could be huge...
of course it could amount to nothing, also.


IMHO you're the one who has it backwards... why would the Japanese,
Chinese, French, Swiss, etc etc pay private US citizens retirement
benefits when they could default at no risk?


If our SS fund were holding their bonds, they would pay those bonds for the
same reason any country pays its bonds. If they don't, their borrowing
ability going forward is severely limited, whether that borrowing is from
our SS trustees or somebody else..

Except that we don't live in Japan. If Japan defaults, the Japanese
nation as a whole would suffer economic reverses. If Japan defaults
owing you or me money, we also suffer a loss.

It may be stated that holding solely US bonds in the SS Trust Fund is a
lack of diversification... but this ignores the point that SS is *not*
an investment. Advocates of President Bush's plan often overlook this
point... IMHO deliberately, in the same way they use derogatory phrases
like "empty promises" and "IOUs".

It also could be said that since US Treasuries are the safest & most
secure investment available, why would you want anything else in the SS
Trust Fund? The name is "security" not Social High Risk / High Return.
In fact (to repeat a point) Social Security doesn't *have* any "return."
And unlike Japan, Switzerland, etc etc, the US can always print money
and hand it out to beneficiaries if default looms. You'd look very cute
asking retirees to take part of their income in francs, part in yen, etc
etc.



The way the current system is set up, default is *very* risky to the
borrower. This should give a great deal of reassurance to those
dependent on the proceeds of that debt.


The question, of course, is whether you want to have one borrower that could
default, or several, none of whom represents the whole ball of wax.


We agree that diversification... as a general principle... is a very
good idea. This is a special case IMHO. A corollary BTW is that one
should always invest in the stock of a monopoly one is forced to do
business with.

DSK