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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Henry Volquardsen who wrote (2660)12/23/2000 6:28:43 PM
From: Hawkmoon  Read Replies (1) of 3536
 
I'll quibble slightly with your statement that the surplus is a drain of liquidity from the system.

The reason I say it is a drain on economic liquidity is that the rate of return on SS money is a pitiful 2%, but mainly as a result of the government paying itself through the process of extra taxes.

Bush is proposing permitting individuals to place 2% of their FICA tax payments into IRAs limited to specific index funds, which suggests that money that may be placed in bond funds for safety could provide the reserves for additional lending.

With a fractional financial system $10 Billion in deposited bond money can provide the collateral for $100 Billion in loans.

Bush's plan also makes sense because these extra FICA taxes are now channeled into hard assets that can be passed on, whereas SS is not transferable to other than minor children.

As it is right now, they are just going to spend the surpluses on additional entitlements which will have to be funded forever, and especially 20 years from now when the SSTF starts trying to redeem those T-Bills to fund their liabilities from the Baby Boomers retiring.

I still predict that SS will be means tested 10-20 years from now, with only the poor and middle class receiving benefits.

The wealthy will be left to fend for themselves in order to prevent major deficit spending.

Regards,

Ron
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