I hope you're not trying to claim that U.S. has no assets? In any event,
so far it hasn't issued stock, either


Dave wrote:
It has no assets that are specifically earmarked to pay its bonds.

For most of our history, the US has very definitely had "assets
specifically earmarked" to pay all public debts.... ever heard of Fort Knox?

... A US bond
holder is just another creditor. If the bonds were asset backed, bond
holders would be entitled to all of the proceeds of sale of the specific
assets ahead of other creditors.


Is that the way they work those loans to South American countries?

With regard to Bush's SS plan, the simple & honest way to accomplish
what they claim is to increase the allowed deduction for retirement
contributions, be it IRA or 401K etc etc, and begin a schedule of
scaling back SS benefits to match projected income. If they start in 10
years it should be very easy & gradual. Might even be able to give the
average working stiff a tax break on his SS tax bite.


Not that far different from what's being proposed. But forget about reducing
the SS tax bite. Ain't a gonna happen.


Why not? Isn't that one of President Bush's cardinal principles?

And one KEY difference between increasing the IRA deduction and Bush's
SS plan is that Bush & Cheney would not control who gets to pocket the
fees & loads from increasing everybody's IRA.

To be fair, another key difference is that many people do not save any
money and would not take the benefit (although as a real conservative, I
believe that's their problem). Diverting their SS taxes is a way of
forcing them to save.... gee another great gov't program interfering
with people's lives...



BTW as far as AARP goes, ever hear the saying "fool me once, shame on
you, fool me twice, shame on me"? President Bush fooled them badly on
the Medicare bill. And so of course that makes AARP the target of a Karl
Rove smear campaign... which you seem happy to parrot...


I've long seen AARP for what it is--an interest group run by its managers,
for its' managers' benefit, and with its' managers' agendas, with access to
"members" being its principal "product."


And up until the SS plan hit the fan, they were quite supportive of
President Bush... but of course, it's always "what have you done for me
lately?"



If an insurance company's investments were limited to bonds of that
insurance company, how much faith would you have in its ability to pay on
policies and annuities in the event of a downturn in its fortunes?

That depends greatly on how it laddered it's bonds.


Nope. Makes no difference. If the insurance company can't repay the money it
borrowed when it issued the bonds, it's gonna be in hot water trying to pay
its policies and annuities.


You got it backwards again, Dave. If an insurance company *buys*
bonds... properly laddered... then they would have no trouble at all
with cash flow for payouts. They wouldn't get as high a return as with
other investments, though.



Fortunately, state insurance commissions don't let insurance companies do
anything so foolish.


So foolish as what, invest in bonds??? Maybe where you're from, that's
considered foolish. Here in NC insurance companies are darn well allowed
to invest in US treasury bonds (the most secure investment available...
is that sinking in yet?). Maybe you mean that insurance comapnies are
not allowed to invest *all* their funds in US bonds.


You're confused here, Doug. What the insurance commissioners prohibit is an
insurance company's investing in bonds issued by the insurance company.

So why did you try to say that they are forbidden to invest in US bonds?


But if the foreign gov't starts printing money like crazy, then you not
only have the risk of getting nothing (gotta cash youor bonds in person)
or getting a double whammy when you change your funny money at a US bank.


Wrong. I run the risk of getting nothing from that bond issuer.

That too... which I said...

Y'know, it's kinda funny. You go charging off toward the sunrise,
insisting at full throttle that I'm wrong... then a few posts later,
you're repeating what I said earlier as though it should be a great
revelation!


Not really. The US Treasury bond is *the* *most* *secure* and *safe*
investment possible. That means your foreign bonds carry a *higher* risk
of default. Besides, they have to do something with the money, and Uncle
Sam has to borrow from somebody.


Basic portfolio theory, Doug. While each particular country's bonds may have
a higher risk of default, the risk of losing the total investment is far
less than the risk for any single country, perhaps even including the
country whose bonds are (at present) "the most secure and safe investment
possible."


Key word "perhaps"

However, I'm not arguing against the wisdom of diversification, other
than to say (again) that this is a special case.

Besides, do you *really* want a US gov't agency investing it's surplus
money in the bonds of foreign countries?



I don't think I've made any representations about the likelihood of a US
default.

Other than suggesting foreign bonds as a safer alternative? Other than
advocating a vague plan that does not get the majority out of US
treasuries anyway, but the biggest reason for it is that US Treasuries
are "empty promises" and "worthless IOUs"?


Simply trying to inject a note of realism, Doug.

Really? How realistic is the expectation that the US is going to default?

You'd be better off worrying about meteor impacts.

... The SS Act is a promise to
pay. Bonds are promises to pay--nothing more. Backing the promise to pay SS
benefits with a promise to pay on bonds is no more than saying the guvmint
is less likely to break the one promise than it is to break the other
promise. Largely smoke and mirrors.

Nope, it is entirely a question of the reliability of the gov't. Since
President Bush is claiming that the risk of US default is high, maybe I
should take him seriously... that may be the new Republican plan. Maybe
you are worried about default because you know how sneaky & unreliable
Bush & Cheney are.

DSK