Dave wrote:
Doug, Nobody's holding any "excess funds."

Really?


... The money is collected from
workers and immediately goes out. Some pays benefits, and the rest is
"borrowed" by the outfit that's promising to pay future benefits in exchange
for its IOU, and is immediately spent.


And you're talking about accounting in another thread? Hoo boy.

You get things all backwards, and want to denigrate both the Treasury
(specifically) and the U.S. gov't (generally).

Nothing is "borrowed" from Social Security. Money collected from SS
taxes is either spent or invested in US treasury bonds... the most
secure investment possible. Maybe after I tell you this 15 times it will
begin to sink in.

That makes Social Security a lender, not a borrower.

This kind of repetitive & misleading crapola is why I am extremely
dubious about Bush's SS plan. Anything that relies on deceit & ignorance
to gain approval is *not* likely to be a good fiscal policy.

It doesn't matter to me personally, I am very unlikely to rely on Social
Security for more than a miniscule portion of my retirement income. But
it's reassuring to see the poll numbers for Bush's plan dropping...
maybe this is the one time he won't be able to fool a slim majority.


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.


To some extent it may.

One thing I meant is that this may be another item that President Bush
will shed some of his teflon coating.

... Most people don't understand that the full amount of
their accrued pension is not covered by the insurance. The problem is
declining, however, as more and more companies go to plans in which
employees have their own accounts.

Yep. If the problem holds off long enough, it will go away. But right
now it appears we haven't seen the peak yet.

... Of course they also take more market risk
in these accounts. Those kinds of plans are not covered by the guvmint
insurance.


You mean like individual 401Ks


... 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.


Whoever lent the Japanese government money, whether Japanese of not, would
suffer. In fact, just substitute the U.S. for Japan in the above and you see
just what I mean.


Yep. Except that Japan's economy is not as big as ours, and if Japan
defaulted it would not cause as much of a world wide crisis (more below).



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".


Taxpayers are parting with money today in the form of SS taxes, and
expecting to get something back in the future. Labeling it as an investment
or something else doesn't advance the analysis.


It also can be misrepresented that the individual paying SS taxes is
making an investment... which is absolutely not the case. SS is more
like an insurance plan... and guess what, insurance companies invest in
all kinds of things, including US bonds...


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?


Ever hear of German gold bonds? I know where you can get a bunch of them.


You keep harping on this as though it wasn't your team that's running
the deficit up like a rocket. If the US gov't defaults, which I (and
99.9% of the sane world) consider extremely unlikely, then it will be
largely because of Bush & Cheney's deficits.

And (maybe after 15 times this will sink in too) if the US defaults,
then we will have a world crisis that will rival the Great Depression &
WW2 rolled into one.



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.


If the US tries to solve the problem by simply printing money, I'd prefer
the francs, yen, etc.


If you'd swapped for Euros about 6 months ago, you'd be doing great.
However, if you hold US bonds and we decide to print our way out of
debt, you get cash. If your holding somebody elses bonds and they decide
to, you probably get nothing since you have to return the bonds to the
central bank of the country that issued them.

Bond history is interesting... at one point, a person I know acquired
some old Russian (by "old" I mean Tsarist) bonds... which he thought
were worthless. They were issued in face values of British pounds. But
the amount was large enough to be worth checking out, and glory be! He
got quite a nice payday because the Russian gov't at that time (just
after the Yeltsin takeover) was *very* interested in preserving it's
credit rating. Of course, not many years later, Russia played a con game
of forcing foreign holders of businesses in Russia to buy a new bond
issue, and then defaulted on them.


This is a special case IMHO.


"Special case" is the term one uses when he can't accept the proposition
that the rules governing all other cases suggest a different answer.


Except that I'm not the one trying to misrepresent Social Security, US
Treasury bonds, and the likelihood of US default.

DSK