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January 18, 2005


Jim Glass

Uh, oh -- bogus comparison alert!...

"The C.B.O. assumes that the typical worker would invest half of his allocation in stocks and the rest in bonds. The C.B.O. projects the average return, after inflation and expenses, at 4.9 percent.

"This compares with the 6 percent rate (about 3.5 percent after inflation) that the trust fund is earning now."

... the above compares the return that *individuals* would earn on their contributions placed in real investments to the returns that the *trust fund* now earns on gov't bonds -- which has absolutely zero, nada, nothing with what *individuals* earn under the status quo.

In fact, indivduals under the status quo receive *less* than the return on gov't bonds -- and this loss grows forever more into the future.

I recently put real numbers from the SS actuaries showing the projected losses for persons who entered the work force in 1994, in dollar terms, at:


If you're about 30 years old, enjoy!


This is one of those old good new/bad news stories.

First the good news: there is a trust fund with funds currently invested in U.S. Treasuries, considered the safest investment on the planet.
Then the bad news: there is a trust fund with funds currently invested in U.S. Treasuries, considered the safest investment on the planet.

U.S. Treasuries are considered the safest investment on the planet because they are backed up the the U.S. government and it's taxing authority over the U.S. taxpayer. For this U.S. taxpayer, this is a real case of the self-insured trying to feel content that he/she is insured, when no matter what happens, you pay. Sort of, heads you pay, tails you pay.

In 2018, when the U.S. Treasury either has to find someone to buy a growing number of the notes being "redeemed" by the "trust fund", or find the money (with full expense to taxpayers) to "redeem" and retire those notes, the crisis will be all too real and growing each year. I suspect that a market that can anticipate a growing flood of notes from the "trust fund," will do it's best to devalue them. Thus, the second option, dumping the load on the taxpayer, will look the better of the two. Since I will be retiring shortly after this date, I know it won't be me paying (or will I ?).

When the 2052 (?) date arrives, the stock of "self-IOUs" will run out, but the ever increasing burden to the taxpayer will not. Taxpayers won't even notice that anything new as occurred, as they pay no matter. I find it strangely settling that I should probably be dead before this date arrives.

Anyone who can't see a generational war, based on the young paying for the old, abrewing is deaf and dumb in both eyes. I won't bore anyone with talk of the possible strategic effects of transferring over a trillion dollars of U.S. Treasuries to investors, mostly European and Chinese. Not even anything about the leverage they will have over U.S. foreign and domestic policies.


Neo - I agree

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