Post by jeffolie on Jul 4, 2012 12:59:38 GMT -6
I read a thoughtful piece defending SS in the LA Times [ www.latimes.com/business/la-fi-hiltzik-20120704,0,1556561.column ] that appealled to the general societial benefits of support most of the elderly who otherwise would be flat broke, failing bodies unable to earn plus the would be there for future generations senior years...if we put aside the devisive 'divide and conquer' generational clash and all pulled together.
I was thinking of the 'pernacious' long term inflation threat as well.
SS has many difficulties...one of which is neither inflation nor inter generational warfare...insolvency: the money in the trust fund does not exist except as nontradeable debt IOUs by law debt to the fund from the govt which has raided the SS trust fund leaving no assets other than the nontradeable debt IOUs by law debt ... worthless if the govt does not pay. How can the govt pay: tax, borrow, print money, reduce benefits or some combination of these. The govt does not mark to market the SS trust fund because there is no market for its assets which are nontradeable debt IOUs by law debt. Instead, the govt pretends the assets are good without any discounts for the yields nor the market ability. And the marketplace accepts this as well as proven by trading in Treasuries are well received and quickly valued highly. This acceptance of the SS trust fund has been written and talked about ad infinitem...boring.
'Pernacious' long term inflation get ignored for the SS trust fund, asset values gets ignored...this reminds me of the same ignoring that happened to Japan's bank assets that fell 80%. Denial reigns supreme in the minds of investors [ 23 years and ongoing in Japan] until it does not, then confidence falls leaving soveign bonds to collapse.
I was thinking of the 'pernacious' long term inflation threat as well.
SS has many difficulties...one of which is neither inflation nor inter generational warfare...insolvency: the money in the trust fund does not exist except as nontradeable debt IOUs by law debt to the fund from the govt which has raided the SS trust fund leaving no assets other than the nontradeable debt IOUs by law debt ... worthless if the govt does not pay. How can the govt pay: tax, borrow, print money, reduce benefits or some combination of these. The govt does not mark to market the SS trust fund because there is no market for its assets which are nontradeable debt IOUs by law debt. Instead, the govt pretends the assets are good without any discounts for the yields nor the market ability. And the marketplace accepts this as well as proven by trading in Treasuries are well received and quickly valued highly. This acceptance of the SS trust fund has been written and talked about ad infinitem...boring.
'Pernacious' long term inflation get ignored for the SS trust fund, asset values gets ignored...this reminds me of the same ignoring that happened to Japan's bank assets that fell 80%. Denial reigns supreme in the minds of investors [ 23 years and ongoing in Japan] until it does not, then confidence falls leaving soveign bonds to collapse.