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

To: Steve Lokness who wrote (12981)	3/19/2012 3:12:43 PM
From: TimF	2 Recommendations Respond to of 85487

When the government issues paper to borrow money for stuff like fighting wars - there is every expectation they will need to pay it back. But if your both the payee and the payer you don't gain or lose anything, not only does the asset cancel the debt leaving zero, the paying out cancels the receipt of payment leaving zero. In accounting a debt to yourself might have some utility, but economically it represents nothing. China understands that and it is exactly why they loan us money. China understands that when they get a payment from us, they aren't making the payment, thus they benefit from the payment. It is why anyone loans money to another party. The SS trust fund isn't loaning money to another party, its the government loaning money to itself. Your ridiculous idea that for some reason the government is not obligated for the SS borrowed money Its not something I said, so your attacking a point that hasn't been raised (at least not in this conversation). But in a sense it is correct since SS is the government. So its the government "returning" money to itself from itself no gain and no loss. The government isn't obligated as a matter of contract, to make payments to the SS recipients. Its is obligated by law, but all spending is obligated by law (all entitlement spending by law of longer duration, but non-entitlement spending is also under budget law, or continuing resolutions, or other funding bills that pass in to law. Part of the government, is obligated by contract to make payments to another part (the SSA or SS trust fund). So that obligation exists and I never said otherwise. But, as the creditor the SSA can cancel the debt, and since the SSA is part of the government it can decide (congress can decide for it) to cancel the debt. All of which was not a point I had raised, so its a bit bizarre you attacked me for raising it, but it is true. The point I raised was not "the government isn't obligated to make payments on this debt", but rather that making payments on the debt has no economic effect. SS is part of the federal government. Making payments to yourself doesn't cause you to get richer. Promising to pay yourself doesn't give you an asset. Its not that the government won't, or doesn't have to make the payments (it almost certainly will as long as it is able to, and barring a fiscal collapse it will be able to, and it has to until it, as the creditor, cancels its own debt, which its very unlikely to do), its that the payments are not a source of income for the government the way they are for anyone else holding government bonds. Why in gawds name would anyone loan money if there wasn't an expectation of getting the money back? You wouldn't. But you can't get money back by making payments to yourself. A real loan, means your giving money to someone else with the plan to get it back (usually with interest) later. When you give money to yourself you haven't really made a loan, you've shuffled money around between accounts. One account may pay back the other account, and may do so with interest, but the shuffling doesn't create an asset for you. Someone else other than you has to be making the payments to you for the loan to be an asset to you.