SS Trust Fund Treasuries: due and payable

[Days]

that's a damn good question. The crucial point being "paying"?

The bonds are accruing interest, but the bonds and their interest remain inert in the trust fund... the bonds can not be paid out to the beneficiaries; which is the whole point of my top post. The trust fund is owed to the beneficiaries. So those bonds are owed to the beneficiaries, so let's give them to the beneficiaries... if we can't do that, then let's address those bonds and clear them out. What we have right now is a clusterf*ck; the bonds are scored as part of our national debt while simultaneously being totally ineffective towards circulation. Lehman Brothers went bankrupt from holding worthless bonds. The Trust Funds are going bankrupt from holding these place holder bonds. Technically, the bonds are due and payable, but when you try to do that with them, you find out it can't be done. To date, not a single dollar has been paid out to a single beneficiary from those bonds! And yet, there's over $3.5 Trillion of them sitting in the SS Trust Fund alone. We've got the smartest banker in the nation running the Treasury for the past 4 years and he hasn't come up with a single idea about what to do with these bonds.

 

[Days]

They are, but Connorbug doesn't understand the value of the bonds... bonds are part of the currency, it is a totally moot point to turn them into cash, that's like saying I have to exchange my silver for gold in order for it to be money... which fails to recognize the value of silver, (that it is already money). The bonds do not need to be liquidated to become money, they just need to be circulated. Give the bond to a beneficiary and what will he do with it? He will take it to the bank. Why? Because it is money, the bank will redeem it for face value. You don't need to go into the nitty gritty of market valuation, which is a totally moot point for bonds anyway (his whole understanding seems stock based) because the value is recognized by the US Treasury and the FED... do you go to the store and ask the clerk how much he will offer you for your ten dollar bill? Of course not, the value is recognized.

Fairsheet understands the bonds are part of the currency, but he is failing to see my point that the bonds are being held off market.

 

[fairsheet]

No I'm not - in the least. You keep tossing around various forms of "instruments", as if I'm ignorant as to various forms of instruments. What I need for you - or someone - to do, is explain WHY - using numbers and math - you think your proposed instruments are preferable to the existing instruments.

 

[fairsheet]

They are, but Connorbug doesn't understand the value of the bonds... bonds are part of the currency, it is a totally moot point to turn them into cash, that's like saying I have to exchange my silver for gold in order for it to be money... which fails to recognize the value of silver, (that it is already money). The bonds do not need to be liquidated to become money, they just need to be circulated. Give the bond to a beneficiary and what will he do with it? He will take it to the bank. Why? Because it is money, the bank will redeem it for face value. You don't need to go into the nitty gritty of market valuation, which is a totally moot point for bonds anyway (his whole understanding seems stock based) because the value is recognized by the US Treasury and the FED... do you go to the store and ask the clerk how much he will offer you for your ten dollar bill? Of course not, the value is recognized.

Fairsheet understands the bonds are part of the currency, but he is failing to see my point that the bonds are being held off market.

I don't agree that these bonds are being held off "the" market. Instead, I would suggest that they're in "a" market and being held off "another" market. So, we need to determine why one market might be preferable - or not - to the other one.

 

[gabriel]

is this guy sayin us treasury bonds don't fluctuate in value?

 

[Days]

Well, they are being held in trust... that's not a market. You can't trade bonds held in trust. I see your point that the govt trust funds are part of the entire bond market, that's a given, seeing as any bonds that exist, anywhere, are part of, and compose the bond market. But while the bonds in trust might be defined that way, they still can not be traded with the rest of the market. This seclusion from circulation is what causes so much confusion about the bonds... people think that the bonds are worthless until they are redeemed by the government; that's no more true of the trust fund bonds than any other bonds, I totally agree with your points on value. Like Wooley said, the bonds are due and payable; hence they hold the same value as any other US Treasury bond/bill.

We still have not fleshed out what exactly happened when those bonds were placed. It is my contention that FICA taxes were received and spent in the general budget and then recorded by the trust fund bonds. The FICA taxes were not directly invested in Treasuries. Congress placed those bonds as a debt owed the trust funds for spending the "cash" (in context to this thread) that was in the funds. That was what I said was illegal... the monies held in trust were spent by Congress. Hence, these bonds are considered intragovernment debt - as in, debt the government owes itself - but that leaves out the beneficiaries of the trust funds! In reality, this debt is owed by Congress to the trust funds, which in turn is structured for employees and participants from all kinds of non government employment... so in the final analysis, the debt is only intragovernment in the first stage of the debt, in the final stage of delivery, it is no different than the rest of the national debt... but we can't get the final stage performed, and that's the problem with these bonds; they aren't being delivered to the beneficiaries: and that is happening because of the confusion from Congress having spent the funds already once in the general budget. Money can be spent over and over, and money is printed out of thin air, especially this form of money, but the banks are mad that the government unwittingly printed it's own currency into these Trust Funds, and the wimp Treasury dares not touch the money they printed because their master, the FED, is quietly telling them not to put that money into circulation. So, the American people are being shafted, but no one is saying why, hence, all the confusion... but if it isn't due to the FED, it doesn't make any sense, the bonds are perfectly deliverable to market one way or another, and yet they sit there... and no one says why they won't - at least - deliver the bonds to the beneficiaries, after all, that's how the trust fund is supposed to function by law.

 

[gabriel]

your white flag is noted

 

[Days]

I don't think there is any problem with value at all, I totally agree with you that the bonds hold the same value as any other Treasury bonds, that their value is defined by their being Treasuries, and anyone can check their value on any given day... the bonds are part of our currency.

But the problem with these particular bonds is that these bonds are printed money... which the FED seems to think is their domain, even though the FED only derives their fiat from the Treasury in the first place, today they seem to think the Treasury has relinquished the fiat to them and they don't want anyone printing money except themselves. See, when Congress spent the monies and then placed the bonds as a debt owed, the debt owed that they placed in the trust funds was printed money... all the bonds in trust were printed from thin air, which is the same for all the bonds brought to auction, except the FED is out of the loop, when the bonds are brought to auction, the money is ultimately printed by the banks and owed to the banks (the way they like it) but when Congress placed those bonds in the trust funds, the money was printed by Congress and owed to the American people... that's the catch, that's why those bonds are cursed; the FED is angry that they were left out of the loop, and since all our Treasury personnel come directly from the banks and return directly to the banks, they won't give the people their money, because that would put these bonds into circulation. Otherwise, it makes no sense at all to not deliver the trust funds to their beneficiaries; that's what the Trustee is supposed to be doing, and value is not an issue; the bonds are due and payable, they are no different than any other Treasury bond.

 

[fairsheet]

The Social Security Trust Fund represents something of value. Every month, some small portion of that value is converted to checks, which are then converted to cash by the recipients, and spent on goods and services within our economy. THAT is a market. It may not be the sort of market you would prefer, but it's a market nonetheless. The fact that the existing bonds aren't traded on the open market, doesn't mean the current framework of Social Security doesn't represent a market.

So...(for the umpteenth time?), you need to make the case for why YOUR preferred market pencils out better than the existing market. WHY would being able to buy/sell these instruments be to our advantage? I really don't think you can do that.

I imagine some are STILL convinced that it might be possible - within some alternative market framework - for the Social Security Trust Fund to outperform its existing framework. I think that's naive.

 

[Days]

The trust fund bonds are already part of the national debt, they record deficits that already took place. How would the handling of the debt affect our future deficits? Those are two different animals.

Specifically, these bonds that are in our govt trust funds; why are they not being deposited at the FED in the accounts that draw on those bonds? For instance, why aren't the SS trust fund bonds deposited in the account that writes the checks to SS beneficiaries? Why are we only depositing FICA taxes in that account?

The Trust Funds are entirely solvent, but the Trustee is acting like the bonds have no value. Why aren't those bonds deposited as needed in their associated accounts at the FED? That's what the Trustee is supposed to be doing... running the fund.

 

[KnotaFrayed]

OK, I will jump in since I like Days. Here is how it worked: For years we paid more in benefits than we took in because SS taxation was very low at the beginning. Every dollar in excess of revenues were taken from the general fund until SS revenues started creeping up. At some point, SS revenues exceeded payouts which means that our payout was X and the taxes generated by SS were X+Y or Z. The amount Y was invested in the safest instrument possible so that the fund could pay for future retirees. It could have been put in a lock box but it was instead thrown into the general fund so that the excess revenue could support a war and a low tax rate elsewhere. The fund keeps growing and the economy grows as well. Until we get to the era of massive continuous deficits during the Reagan era, this does not pose any problems. As long as the economy grows and taxes are sufficient to cover expenses, SS is secure. When we get into situation like we have today, then someone has to divvy up the funds according to national priorities and political will. All the talk about fiat money is a theoretical puzzle that would not change one bit if we decided to go on the gold or silver standard. You would still have money created out of thin air based upon a false sense of value in a metal instead of an economy. You would still have the problem of controlled lending or the expansion of the money supply regardless of the value you put on the metal to currency exchange. If we did was Days wants, someone would have to value all the gold and silver in circulation along with all the values of assets and deposits and then divide it into the metals on reserve to get a multiple. The only way the money supply could grow then was to find more metals or by changing the value of those metals meaning a run up in prices. You get the same problem at the end of the day as long as the people, the banks and the government cannot control their irrational behavior. The key is changing the behavior. If you believe that lower taxes pay for themselves, your behavior needs attention. If you believe in massive deficits as a way of standard operating procedure, your behavior needs attention. If you believe that the market is efficient and that everyone acts rationally, the same thing needs attention. There is no substitute for mature, pragmatic and prudent money management, tax policies and political leadership.

Thank you Woolley, I was about to say many of the same things.


I think the greedy wealthy (as opposed to the very fortunate who are not so greedy with their good fortune) either know from whence the real value behind anything, paper or metal comes from and that paper, gold, diamonds or a treasure chest of jewelry and precious metals is only as good as it's value in trade and if there is no one with something of equal appraised (by the possessor) value to trade for it, the appraised value is worth less until someone comes up with an equal value to trade for it and if they don't the value remains worthless until the posessor trades it for some value. As you have pointed out, the value of any medium of value or currency that is not of some real value to the possessor (can we eat paper, gold or jewels?) is in what it represents. If there is no real value (pragmatic, useful value) it is worth no more than paper with a number printed on it, a paper weight or something pretty to look at that no one else would pay for.

The greedy know their compensations and investments have to represent real value, however they also believe if they squeeze enough and milk enough "wealth" out of an economy and hoard it instead of reinvesting it (recirculating it) in real value activities, they might provide enough buffer for themselves if the economy tanks and until it does, they can live the "good life" a 100 times over. Others recognize that there has to be some real value to any currency and that does not simply mean changing the medium of currency, but as you have stated, backing it with real value. This is why the "working class" is not a disposable class of people, but perhaps even more vital and important to any healthy economy than those counting or trading paper and getting paid obscene amounts for doing so based on nothing more than a huge world population and many billions of transactions worth pennies or less, but cumulatively worth billions in fees for doing nothing but transferring ownership.

 

[fairsheet]

.....you STILL aren't telling us WHY what you're suggesting, matters. Something tells me you're assuming as fact, something untoward about the current arrangement, that isn't in evidence herein.

In other words, you're assuming I know something you know, and that you're building off that common knowledge. But, I obviously don't know what you're assuming I know!

 

[Days]

IF the bonds being held in trust are simply deposited in their associated accounts that write the checks that go out each month, ALL our government trust funds are solvent for a long, long time. BUT they are not doing it, Fairsheet, and that's why they are saying these government trust funds are going bankrupt. Look around the room, spot any 800 lb gorillas? There's $4.8Trillion dollars in those govt trust funds, how the heck are they saying the trust funds are insolvent? Obviously, they are assigning a value of zero to the bonds. You can't see that? Read Wooley's post that trapdoor and I are replying to... if those bonds are put in circulation, the trust funds are going to be solvent forever.

 

[fairsheet]

You're STILL not copping to what circulation they should be put into, and why that's a better thing. My most generous guess is that you know your alternative might be a tough arithmetic sell.

 

[Days]

What part of "depositing them at the FED" didn't you understand?

 

[fairsheet]

I don't understand ALL parts of "depositing them at the FED". Help me...without assuming that I necessarily feel your all-encompassing fear/hate of the Fed.

 

[Days]

I've never been for closing the FED, I just think we need to take better advantage of the FED. Here's a perfect example of how the US govt could print $4.8 Trillion through the Treasury, keep the FED out of the currency creation, and still push the bonds on the FED. The FED runs the checking account that the Treasury writes the trust fund checks on each month, so just deposit the bonds, as needed, into those accounts to fund the benefit payments. The FED going to not accept US Treasuries from the US Treasury? That would give the money to the people without dividing the bonds into a million tiny pieces. Connorbug got one thing right, it would be absolutely crazy to send the bonds as payments; but it still would be better than not assigning the bonds value. Right now, the people are being told that those bonds are worthless... I can remember posting as much, ten years ago. But it has dawned on me slowly that a rose is a rose is a rose; those bonds are due and payable, damn right. Let's deposit them as needed in their associated accounts to make the trust funds viable and solvent for as long as they are running. As soon as you deposit the first million, the remaining $4.8 Trillion become money again, all they need is an avenue onto the open market.

 

[fairsheet]

Days, I love communing with you because your head's in the clouds, same as mine. Our heads are just in different clouds. So...I'm going to have to accede this one, on the basis that truth be told....I'm just not getting what you're putting down, and I don't imagine I ever will!

 

[gabriel]

if you get close, there will be a quick jump to another cloud

 

[Days]

correct! Which I top posted this morning, that basically says, the government can and should pay off these bonds with their own issue, not our taxes. Use taxation to balance the wealth, not build it up in the hands of the super rich.

no one replied.

again