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  #71  
Old 11-29-2007, 12:51 PM
Moseley Moseley is offline
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Default Re: Understanding the Social Security scam

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So you're saying that the U.S. has defaulted on it's bond payments? Wow that's news to me and here I thought that U.S. treasuries were viewed has having essentially no default risk.

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Of course not. They issue more bonds to retire the bonds outstanding and fuel the current deficit.

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Corporations do this all the time and have capital structures that are such they constantly have debt on their balance sheets. So what/

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I know you're smart enough to realize that.

You are such a silly person, who must spend a lot of time trolling this site looking for fights.

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I'm trolling? You reponded to a post where I asked a specific question that you apparently don't want to answer. Why respond to my post then?

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Now I know you're out of touch. Corporations sell bonds for the purpose of leverage and increasing profits. Their goal is to increase profits by a sum that is much greater than the interest payments on the bonds.

The U.S. Govt can't do that. If they need 2 trillion dollars to run the fed govt in 2008, they need to come up with 2 trillion in taxes PLUS enough in taxes to pay the interest on the 10 trillion dollar deficit.

If they don't, which they won't, they have to go out and borrow more money, and in 2009 they will have to borrow more money.

Corporations do not work that way.

Now that I know what level of a playing field you are on, this will be my last response to you.
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  #72  
Old 11-29-2007, 12:57 PM
adios adios is offline
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Posts: 8,132
Default Re: Understanding the Social Security scam

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So you're saying that the U.S. has defaulted on it's bond payments? Wow that's news to me and here I thought that U.S. treasuries were viewed has having essentially no default risk.

[/ QUOTE ]

Of course not. They issue more bonds to retire the bonds outstanding and fuel the current deficit.

[/ QUOTE ]

Corporations do this all the time and have capital structures that are such they constantly have debt on their balance sheets. So what/

[ QUOTE ]
I know you're smart enough to realize that.

You are such a silly person, who must spend a lot of time trolling this site looking for fights.

[/ QUOTE ]

I'm trolling? You reponded to a post where I asked a specific question that you apparently don't want to answer. Why respond to my post then?

[/ QUOTE ]

Now I know you're out of touch. Corporations sell bonds for the purpose of leverage and increasing profits. Their goal is to increase profits by a sum that is much greater than the interest payments on the bonds.

The U.S. Govt can't do that. If they need 2 trillion dollars to run the fed govt in 2008, they need to come up with 2 trillion in taxes PLUS enough in taxes to pay the interest on the 10 trillion dollar deficit.

If they don't, which they won't, they have to go out and borrow more money, and in 2009 they will have to borrow more money.

Corporations do not work that way.[/qutoe]

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Yes corporations do it for economic benefits. So does the United States, different economic benefits. Let's have a hijack on the economic benefits of government deficit spending.

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Now that I know what level of a playing field you are on, this will be my last response to you.

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Great mucho appreciated.
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  #73  
Old 11-29-2007, 01:09 PM
mosdef mosdef is offline
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Default Re: Understanding the Social Security scam

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Yes corporations do it for economic benefits.

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What do you mean by this? A corporation with revenue less than the sum of it's operating expenses and interest on loans would have a hard time finding investors, unless it was a severe outlier with some hope of massive future revenues.
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  #74  
Old 11-29-2007, 01:22 PM
adios adios is offline
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Default Re: Understanding the Social Security scam

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Yes corporations do it for economic benefits.

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What do you mean by this? A corporation with revenue less than the sum of it's operating expenses and interest on loans would have a hard time finding investors, unless it was a severe outlier with some hope of massive future revenues.

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The favorable tax treatment of debt is why more or less. Why do they have to have revenue that is less than it's current operating expenses and interest on loans in order to hve corporate debt on the balance sheet?

I guess we'r now going to move towards a hijack of the economic benefits of government deficit spending. Why not just start a new thread on that topic?

I can't believe that with as much ranting and raving about the SS scam being perpetrated by the government in lending out the excess trust fund income that people don't have alternatives to that. It's amazing to me all the attempts at dodging the question simply because they don't like it. I guess I just have to conclude that the railing against the government lending money to itself is a smokescreen for just wanting to change the system entirely.
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  #75  
Old 11-29-2007, 01:23 PM
Copernicus Copernicus is offline
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Posts: 6,912
Default Re: Understanding the Social Security scam

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...That is an impressive prevarication except that congress isn't borrowing money from a third party, they are borrowing it from their own revenues, which qualifies the excercise as nonsense.

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Looking at it another way, government (trust fund account) is lending money to itself (financing other government spending). Let's say the U.S. government decided that it didn't want to have the trust fund money being lent to finance other government spending so the government either borrows from bond investors, cuts spending in kind, raises taxes, whatever to make up for the shortfall. Now the SS surplus can go right into the trust fund. What you want it to sit there in cash wasting away due to inflation? Perhaps it would be better to lend the money to a worthy creditor(s) and get a return on the cash to beat the effects of inflation. If so you'd certainly want to lend the money out to creditors with low to non existent default risk. Probably would want to be careful in lending it to emerging market creditors since many blow up so often (default). Remember Clinton was talking about taking the surplus and putting it in the stock market but then the stock market blew up. U.S. treauries are viewed as having no default risk more or less, at least close to the safest creditor there is. I believe many countries in the Eurozone are running budget deficits so maybe those places would be better options. The government issues non marketable bonds to the trust fund so it's not clear to me the effects of the government defaulting on those. I'm kind of thinking the stock, bond, and the US $ might rally. I think if the government is going to lend money to itself the trust fund ought to receive marketable securities where the government has a vested interest in making those coupon payments and redeeming the bonds.

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A good explanation of why natedogg's so wrong about the government "lending to itself". Its done all the time at the personal level.

Im not sure why you think that special issues are less credit worthy or give the government less reason to "make those coupon payments and redeem the bonds" though. They are a higher priority debt than regular issues, with a guarantee of return of principal prior to maturity if interest rates rise and their value drops below $1. Default on any Treasury security will have the same effect whether its a special issue or marketable...economic chaos (actually the chaos would precede the default).

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Thanks for the info about the nature of the debt owed to the trust fund. My main point though, after thinking about this some, is that given all the possible things that could be done with the trust fund, the safest and most prudent course would be to lend the money out to the borrower with a minimal amount of default risk. That borrower happens to be the Unitied States government. Hoarding cash is a dumb idea, lending it to less credit worthy borrowers is about as dumb, many problems with putting it in stock market(s), lending the money to the Eurozone doesn't seem like a good alternative, etc.

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Absolutely. You sound like an actuary, or do I remember reading that somewhere? Jeremy Gold has written some interesting papers on the intergenerational transfer of risk when a Government retirement plan invests in risky (meaning non-risk free, not those that carry unusually high risk) asset classes. I think one of them was at a Wharton conference, should be able to Google it. i don't agree with him totally, because there are 4 elements of total return, the risk free rate, the inflation premium, the risk premium, and productivity (the extra return inherent in equities over and above the risk premium..Dcifrthis describes this better). Gold would strip everything down to the risk free rate, the inflation and risk premiums have the offsetting inflation and risk, but he forgoes the last element, which is costly for all generations.
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  #76  
Old 11-29-2007, 01:31 PM
mosdef mosdef is offline
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Join Date: Jan 2005
Location: Toronto
Posts: 3,414
Default Re: Understanding the Social Security scam

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Yes corporations do it for economic benefits.

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What do you mean by this? A corporation with revenue less than the sum of it's operating expenses and interest on loans would have a hard time finding investors, unless it was a severe outlier with some hope of massive future revenues.

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The favorable tax treatment of debt is why more or less.

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Even the favorable tax treatment of debt isn't enough for private enterprises to engage in a borrowing-on-top-of-borrowing practice with no hope of ultimately making a profit. Government on the other hand...
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  #77  
Old 11-29-2007, 01:35 PM
adios adios is offline
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Default Re: Understanding the Social Security scam

I edited my reply. Instead of hijacking this thread about the evils/benefits of government deficit spending just make a separate one.
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  #78  
Old 11-29-2007, 01:40 PM
adios adios is offline
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Join Date: Sep 2002
Posts: 8,132
Default Re: Understanding the Social Security scam

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
...That is an impressive prevarication except that congress isn't borrowing money from a third party, they are borrowing it from their own revenues, which qualifies the excercise as nonsense.

[/ QUOTE ]

Looking at it another way, government (trust fund account) is lending money to itself (financing other government spending). Let's say the U.S. government decided that it didn't want to have the trust fund money being lent to finance other government spending so the government either borrows from bond investors, cuts spending in kind, raises taxes, whatever to make up for the shortfall. Now the SS surplus can go right into the trust fund. What you want it to sit there in cash wasting away due to inflation? Perhaps it would be better to lend the money to a worthy creditor(s) and get a return on the cash to beat the effects of inflation. If so you'd certainly want to lend the money out to creditors with low to non existent default risk. Probably would want to be careful in lending it to emerging market creditors since many blow up so often (default). Remember Clinton was talking about taking the surplus and putting it in the stock market but then the stock market blew up. U.S. treauries are viewed as having no default risk more or less, at least close to the safest creditor there is. I believe many countries in the Eurozone are running budget deficits so maybe those places would be better options. The government issues non marketable bonds to the trust fund so it's not clear to me the effects of the government defaulting on those. I'm kind of thinking the stock, bond, and the US $ might rally. I think if the government is going to lend money to itself the trust fund ought to receive marketable securities where the government has a vested interest in making those coupon payments and redeeming the bonds.

[/ QUOTE ]

A good explanation of why natedogg's so wrong about the government "lending to itself". Its done all the time at the personal level.

Im not sure why you think that special issues are less credit worthy or give the government less reason to "make those coupon payments and redeem the bonds" though. They are a higher priority debt than regular issues, with a guarantee of return of principal prior to maturity if interest rates rise and their value drops below $1. Default on any Treasury security will have the same effect whether its a special issue or marketable...economic chaos (actually the chaos would precede the default).

[/ QUOTE ]

Thanks for the info about the nature of the debt owed to the trust fund. My main point though, after thinking about this some, is that given all the possible things that could be done with the trust fund, the safest and most prudent course would be to lend the money out to the borrower with a minimal amount of default risk. That borrower happens to be the Unitied States government. Hoarding cash is a dumb idea, lending it to less credit worthy borrowers is about as dumb, many problems with putting it in stock market(s), lending the money to the Eurozone doesn't seem like a good alternative, etc.

[/ QUOTE ]

Absolutely. You sound like an actuary, or do I remember reading that somewhere? Jeremy Gold has written some interesting papers on the intergenerational transfer of risk when a Government retirement plan invests in risky (meaning non-risk free, not those that carry unusually high risk) asset classes. I think one of them was at a Wharton conference, should be able to Google it. i don't agree with him totally, because there are 4 elements of total return, the risk free rate, the inflation premium, the risk premium, and productivity (the extra return inherent in equities over and above the risk premium..Dcifrthis describes this better). Gold would strip everything down to the risk free rate, the inflation and risk premiums have the offsetting inflation and risk, but he forgoes the last element, which is costly for all generations.

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No I'm not an actuary but I take it as a complement that you believe I'm thinking like one. As I've read your posts on this subject I've gradually changed my viewpoint on SS as I did more thinking on it. I appreciate your efforts and thanks for the recommendations.

For the record, I'm a Computer Engineer and an active participant in the financial markets.
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  #79  
Old 11-29-2007, 01:52 PM
mosdef mosdef is offline
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Default Re: Understanding the Social Security scam

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I edited my reply. Instead of hijacking this thread about the evils/benefits of government deficit spending just make a separate one.

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I don't really want to start a separate debate about government spending, but you seem to be defending that the government does it by saying "Hey, private business does it too", which I don't really see as being accurate.
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  #80  
Old 11-29-2007, 02:03 PM
xorbie xorbie is offline
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Join Date: Jan 2005
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Default Re: Understanding the Social Security scam

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In fact, Clinton claimed to have balanced the budget one year, when it fact, it took about 300b of ssi taxes to make up the deficit spending from the general budget.

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Do you have a link to this? Would be very interested in reading up on it.
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