It was interesting to read Greenspan’s comments on the Trust fund. My comments yesterday were not too far off.
There is the question of the 1 trillion in government borrowing to cover the proposed funding. From the government’s stand point there is no difference. Either the government owes the Trust Fund the Special Issue certificates of 1 trillion or the government owes the buyer of negotiable government bonds the 1 trillion. The terms are the same. The interest might be higher but not much.
From the standpoint of the Trust Fund it may not matter much either, in that the government can pretty much be counted on to pay its own Treasury Department as agreed.
From the worker’s view, however, there is all the difference in the world. Excluding the very high likelihood that the worker’s fund will be much greater, invested with time in the general market, the deposits will now be funded with negotiable securities and accounted for. The funded pension now represents a real asset and on the worker’s financial statement. That’s real money wherein the way it is that real money paid into FICA disappeared. Previously the worker lacked confidence that he would ever see his or her retirement pay.
You ask a complicated question about distant economic impact. Let all of those variables cancel out and consider only that there is now 1trillion in additional government bonds on the market probably at slightly higher interest rates. That will attract foreign money and in a sense supplemental financing to accommodate the shift of ownership of the IOUs. Influx of Chinese capital to reside safely deposited in the ownership of US Treasury instruments in part offsets the trade deficit with China. It is a good thing for that money to come back this way.
And yes, the investment of 1 trillion into the equities market by workers through select Investment Funds has the effect of financing growth in the most critical and worthy American Companies. These Investment Fund Managers do a good job of evaluating our companies and rewarding the best with financial investment. The effect on the Stock Market per se should resemble the effect in the late nineties with a large influx of foreign capital contributing to market liquidity.
There is the question of the 1 trillion in government borrowing to cover the proposed funding. From the government’s stand point there is no difference. Either the government owes the Trust Fund the Special Issue certificates of 1 trillion or the government owes the buyer of negotiable government bonds the 1 trillion. The terms are the same. The interest might be higher but not much.
From the standpoint of the Trust Fund it may not matter much either, in that the government can pretty much be counted on to pay its own Treasury Department as agreed.
From the worker’s view, however, there is all the difference in the world. Excluding the very high likelihood that the worker’s fund will be much greater, invested with time in the general market, the deposits will now be funded with negotiable securities and accounted for. The funded pension now represents a real asset and on the worker’s financial statement. That’s real money wherein the way it is that real money paid into FICA disappeared. Previously the worker lacked confidence that he would ever see his or her retirement pay.
You ask a complicated question about distant economic impact. Let all of those variables cancel out and consider only that there is now 1trillion in additional government bonds on the market probably at slightly higher interest rates. That will attract foreign money and in a sense supplemental financing to accommodate the shift of ownership of the IOUs. Influx of Chinese capital to reside safely deposited in the ownership of US Treasury instruments in part offsets the trade deficit with China. It is a good thing for that money to come back this way.
And yes, the investment of 1 trillion into the equities market by workers through select Investment Funds has the effect of financing growth in the most critical and worthy American Companies. These Investment Fund Managers do a good job of evaluating our companies and rewarding the best with financial investment. The effect on the Stock Market per se should resemble the effect in the late nineties with a large influx of foreign capital contributing to market liquidity.
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