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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (12967)	3/19/2012 2:24:43 PM
From: TimF	1 Recommendation Read Replies (1) \| Respond to of 85487

What was the government suppose to do? Put the money in the White House mattress. I didn't say they should have saved it, I pointed out the fact that they didn't. Description, not prescription. If the government actually does want to actually save, it has to lend to or invest with someone outside of the government. It could buy corporate bonds, invest in securities, lend to foreign governments, etc. Again this is description not prescription. I'm not saying the government should do this, only that if it did it would then actually have a store of wealth it could call on later (assuming the investments didn't fail. If it had put it all in internet bubble stocks, then flipped what was left in to FL real estate and then in to Greek government bonds, it might have a hard time getting much of it back...) I'm also not saying that putting in in to treasury debt was useless. If you assume that it didn't encourage extra spending (not a safe assumption but I'll go with it for a moment) then it reduced the interest cost for US federal debt, both by creating a larger demand for debt (thus lowering the interest rate paid) and by owning a lot of it, with the interest going from a government organization to another government organization which is zero cost to the government (other than perhaps the modest cost of paying people to keep the accounting straight). They put the money in government securities Which is why there is no store of value. If I put my money in to "Tim securities", I don't generate a real store of value for myself either, and I wouldn't even if my future ability and willingness to pay was greater than the federal government's, or even if it was a meta-physical certainty. A loan to yourself is not an asset, or alternatively its an asset exactly canceled out by a liability, leaving a net of 0. If I take $20 from my right pocket, and put it in my left, then I write out "To right pocket, IOU $20 - Left Pocket" and put that in my right pocket, I'm not any richer than I was before. Its the same with the government. You don't create a new asset by shifting your assets from one account to another. you know, just like those that China and everyone else buy. Not actually just like, but I consider that a minor point. Its treasury debt either way. The big difference though is that for China etc. US treasury debt is an asset. When the US government pays interest on it, they gain the interest. When it pays the principle on it, they have the extra cash the principle amounts to (which is just giving them back their money, its doesn't create wealth for them, but it is a store of wealth). When the US government pays the US government interest it doesn't gain any money since its making the payment, not just receiving it. When it pays the principle back it isn't getting any money back, since its also making the payment. Since the US government is both the creditor and the debtor here, the trust fund is just an accounting entry, not something that has any real economic impact. If there was no nominal trust fund, and SS taxes didn't bring in enough to pay SS payments, and the government was going to pay SS payments in full anyway (contrary to current law, but that would be easily changed) then it would have to raise the money from other taxes (or borrowing or "printing" money). With the trust fund as it is, if the government needs extra money to pay out SS claims, beyond what SS taxes bring in. The in still has to raise the money from other taxes. If the trust fund was a real store of wealth then it could just draw down the fund, it wouldn't have to raise other taxes, increase borrowing, or inflate the money supply.

To: Steve Lokness who wrote (12967)	3/19/2012 2:47:54 PM
From: Bearcatbob	Read Replies (1) \| Respond to of 85487

I think Steve is correct on this. The only alternate to Treasuries is a mixed portfolio of stocks, corporates and municipals. I do not think you want the government owning a lot of shares of corporations. Basically it is like any other Ponzi scheme that runs out when less is coming in than is going out. We now are converting Inter Agency debt to Publicly Held debt. Essentially our debt to GDP ratio is now over 100% if this conversion is recognized for what it is. We are broke and getting broker. Bob