On Jun 23, 2010, at 1:05 PM, Doug Henwood wrote:
>
> On Jun 23, 2010, at 12:52 PM, Shane Mage wrote:
>
>> But it can manage the redemption schedule to ensure that the cash
>> will be there when needed.
>
> So what you're saying is that the Treasury will have to do fresh
> borrowing sometime in the future to make good on the claims that
> were supposedly made good on in advance. Which is exactly my point.
I thought your point was that T-bonds in the Trust Fund cannot be sold on a securities market:
I wrote: "And in what way does that make T-Bonds in the trust fund any different from all other T-Bonds that come due for redemption? Hasn't every dollar obviously been "pure money of the mind" since 1933 (domestically) and 1971 (internationally)?"
and you replied: "A private holder can sell a bond to someone else for cash. The Treasury can't sell one to itself for cash."
Since the Treasury has to "do fresh borrowing" each and every time any of its bonds is redeemed, that indeed is a distinction without a difference (even in the event of a general 1933-type debt repudiation). Economically, Moynihan was of course completely right. But at least the trust-fund fiction does place "the full faith and credit" of the US government behind our pensions and protects them from *selective* repudiation.
Shane Mage
"All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods."
Herakleitos of Ephesos, fr, 90