tag:blogger.com,1999:blog-2222630007427380394.post3600894115702935694..comments2023-12-20T04:18:41.617-06:00Comments on The Hunting of the Snark: Reap, SowSusan of Texashttp://www.blogger.com/profile/00076915322771385454noreply@blogger.comBlogger55125tag:blogger.com,1999:blog-2222630007427380394.post-18715338376745363132011-09-09T13:35:42.197-05:002011-09-09T13:35:42.197-05:00No it is an accounting fiction. It is an asset tra...<i>No it is an accounting fiction. It is an asset transfer not a loan. </i><br /><br />But this "accounting fiction" cause havoc among Japanese banks in the 90s, because the fictional-loans went bad. <br /><br />Again it boils down to how one interprets these things in the case of formally separate institutions.<br /><br />We're going 'round in circles on the rest. My problem with your use of the limit case of 50-trillion is that it kind of begs the question. The limit case only matters if the issue is confidence. Etc, etc.<br /><br />It all boils down to when you think the theft happened. Did it happen when payroll taxes were raised and we're just squabbling over the entrails? Or is it in danger of happening when people declare "accounting fiction!" and turn around and tell Americans it's not there? You seem to believe it's the former. I believe it's the latter.Mandoshttp://politblogo.typepad.com/noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-91809389615554457912011-09-09T11:22:53.641-05:002011-09-09T11:22:53.641-05:00LC, all of what you say is true.
This:
don't u...LC, all of what you say is true.<br />This:<br /><i>don't understand that argument. When the money was spent, it wasn't debt. It was money.</i><br /><br />is right, but the money was spent on something other than SS so spending it means it now becomes a debt to the fund, i.e. that money is no longer there, i.e. there is no trust. <br /><br />and this:<br /><br /><i>Suppose they hadn't bothered with all of this, and instead of talking about trust funds, Greenspan had just said "We're going to raise payroll taxes to offset government spending".</i><br /><br />is in essence what happened via various accounting tricks by congress. (The cynical interpretation of this is that Greenspan set up the system to shift more of the tax burden to the lower income earners and away from capital gains taxes.)The argument upthread has been whether SS is "funded" i.e. do these T-bills represent assets or debts. You said, debt is $14 trillion either way which is all I am arguing as well, the trust doesn't represent assets, it represents obligations. <br />It is better to say currently US credit remains good so it can continue to borrow for spending at excellent rates and can pay out SS no problem. But at some point that could cease to be true and then things get more problematic. I have no clue as to what that tipping point might be. Way above my paygrade.fishhttps://www.blogger.com/profile/01522672049371678717noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-85033120179011916452011-09-09T09:55:13.326-05:002011-09-09T09:55:13.326-05:00LC, this is a good argument, but the reason it doe...<i>LC, this is a good argument, but the reason it doesn't work is because as I said above, Congress has already taken out T-bills against the fund and spent that money in the general budget. So to take out more T-bills is double dipping. You will double your debt.</i><br /><br />I don't understand that argument. When the money was spent, it wasn't debt. It was money.<br /><br />Let me try again, with numbers. I think that right now, the US national debt is $14T (or something), of which $5T is the SS trust fund and $9T is debt held by other investors.<br /><br />I think the government can spend $5T just by turning trust fund debt into other investor debt. The total is still $14T. Is that really "printed money", if it's already on the books?<br /><br />Suppose they hadn't bothered with all of this, and instead of talking about trust funds, Greenspan had just said "We're going to raise payroll taxes to offset government spending". Then they would have had $5T to spend over the last thirty years and the national debt would be only $9T today. So, they'd have to borrow $5T at market rates over the next twenty years to pay SS obligations.<br /><br />The end result is the same. $14T in government debt. But today, as things are, they already have $14T of government debt, so we know the market will accept that much. Why is it inflationary to change the name on the bond?Lurking Canadiannoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-69658192528321460672011-09-09T07:45:45.167-05:002011-09-09T07:45:45.167-05:001. I'm curious what you might think of the Jap...<i>1. I'm curious what you might think of the Japanese keiretsu, where, as I understand it, a banks lent money to companies in which they also had influential or controlling ownership and still, as I understand it, do. Is the bank "lending to itself"? </i><br /><br />No it is an accounting fiction. It is an asset transfer not a loan. <br /><br /><i> Your use of the 50 Trillion Coin example is misleading.</i><br /><br />An extreme example to make a point. The debate should be how much money printing is "safe" not is the SS trust funded or not. <br /><br /><i>The assets in which the government invested via these IOUs are not all unproductive assets but return money to the government with which it can make good on the IOUs.</i><br /><br />Acknowledged. But this is a modifier to the simplified (for argument) equation, not a rebuttal.fishhttps://www.blogger.com/profile/01522672049371678717noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-70460531394869601412011-09-09T07:40:16.751-05:002011-09-09T07:40:16.751-05:00I think if the trust fund is real, then the US'...<i>I think if the trust fund is real, then the US's assets are reduced by $1B net (trust fund) and the US's liabilities are reduced by $1B net (pension owing). In addition, the total debt owed by the US does not change. This is exactly what would happen to the balance sheet if the trust fund consisted entirely of a pile of gold doubloons.</i><br /><br />LC, this is a good argument, but the reason it doesn't work is because as I said above, Congress has <i>already</i> taken out T-bills against the fund and spent that money in the general budget. So to take out more T-bills is double dipping. You will double your debt.fishhttps://www.blogger.com/profile/01522672049371678717noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-44517829498737874542011-09-09T07:34:24.805-05:002011-09-09T07:34:24.805-05:00I don't see how that is different from putting...<i>I don't see how that is different from putting money in the bank, which is invested but paid out on request. Both bank and gov. pledge to pay out and do so.</i><br /><br />Susan, the difference here is that congress immediately borrows money against the SS fund and spends it (not investing). So yes there is a column on the gov budget that is a + for all SS assets, but there is another - column item that is the exact same amount every year. There are modifiers to that (multiplier effects that Mandos alludes to for one, with gov spending coming back as taxes again), but the bank analogy isn't the same because the bank is lending to someone else with a repay promise attached (an asset) while the gov is lending to itself and the only way the gov can pay itself is through more taxes or printing money since (theoretically at least) the gov isn't a business.fishhttps://www.blogger.com/profile/01522672049371678717noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-65678485126666044962011-09-08T16:56:05.727-05:002011-09-08T16:56:05.727-05:00If anyone cares, at this point, here's trusty ...If anyone cares, at this point, here's trusty old Wikipedia's <a href="http://en.wikipedia.org/wiki/Social_Security_Trust_Fund#An_economic_perspective" rel="nofollow">summary</a> of the perspectives on the "reality" of the SSTF. <br /><br />We are ultimately talking about what happens to excess money that was delivered to SS via payroll taxes and whether it continues to exist in some sense when it was used to lend to the government. If wealth was created through this process on which SS has a claim (far less than 50 Trillion at this point), then yes, it does continue to exist.Mandoshttp://politblogo.typepad.com/noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-78862484934881934562011-09-08T16:48:47.851-05:002011-09-08T16:48:47.851-05:00fish:
1. I'm curious what you might think of...fish: <br /><br />1. I'm curious what you might think of the Japanese keiretsu, where, as I understand it, a banks lent money to companies in which they also had influential or controlling ownership and still, as I understand it, do. Is the bank "lending to itself"? There is a definite issue with the fluctuating value of assets in terms of whether the banks were going to get back the loans they had made to "themselves"...<br /><br />2. Your use of the 50 Trillion Coin example is misleading. At the moment, the alleged confidence fairies are practically crying out for fiscal or monetary expansion. Yes, a 50 Trillion Coin would hurt the relationship of the US sovereign with other sovereigns. But we aren't talking 50 Trillion here. There is yet another excluded middle here: just enough to pay back what was lent to the government, from the assets in which the government invested...<br /><br />3. The assets in which the government invested via these IOUs are not all unproductive assets but return money to the government with which it can make good on the IOUs.<br /><br />But we're going around in circles. I don't accept your (or Myles') conceptualization of the issue for many reasons including the actual relevance of the issue of "confidence", the manner in which money obtains its value (a political question) and so on and so forth...<br /><br />I do agree with the end goal as you state it here:<br /><br /><i>It is better to just argue that SS is a right that citizens have paid for. We willingly pay into the system for our financial security in our older years. It is theft if the gov tries to use it for something else.</i><br /><br />It is merely the scope and nature of the actual theft that is at stake. I don't think it's theft for the government to spend using sovereignly defined assets as collateral, and I do think it's theft for the government to turn around and claim that this was an accounting-fiction Ponzi scheme. <br /><br />That's because I know that the sovereign has the right to create all assets and all assets depend on the sovereign, and to deny this is to deny the existence of the public good. <br /><br />It will find a way to make war either way. What it won't find a way is to build bridges.Mandoshttp://politblogo.typepad.com/noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-80786914965652813002011-09-08T15:43:42.286-05:002011-09-08T15:43:42.286-05:00love it when blowhards like myles declare "th...love it when blowhards like myles declare "this debate is over".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-17389911246260405392011-09-08T15:07:13.676-05:002011-09-08T15:07:13.676-05:00The word "progressive" has been so debas...The word "progressive" has been so debased as to include standard-issue left-leaning neoliberals such as MY that I don't think I count as a progressive. <br /><br /><i>I think Mandos's problem is that he doesn't believe in such a thing as intellectual honesty. He imposes political ends above intellectual means, and debases both in the process.</i><br /><br />Another way of putting this is that I don't believe that the left should disarm itself in accepting definitions that have been rigged in advance by the opposing team. There is no economic means that is not a political end.Mandoshttp://politblogo.typepad.com/noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-49907264994322895552011-09-08T13:07:39.345-05:002011-09-08T13:07:39.345-05:00Is there a trust fund into which money is paid in,...Is there a trust fund into which money is paid in, then paid out to SS recipients? And is that money invested into US government special issue securities?<br /><br />And if there is a trust fund into which money is deposited and withdrawn, how can there be no trust fund? Because the money is invested in securities, which are sold to pay benefits? I don't see how that is different from putting money in the bank, which is invested but paid out on request. Both bank and gov. pledge to pay out and do so.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-55061151252476305752011-09-08T12:58:39.888-05:002011-09-08T12:58:39.888-05:00I don't expect to convince anybody else, but h...I don't expect to convince anybody else, but here's a question that will at least resolve this issue for me. Suppose that tomorrow, the US treasury sells $1B worth of T-Bills on the open market and uses the cash thus obtained to discharge $1B worth of whatever security the trust fund is holding. Then social security uses the money thus obtained to pay out $1B worth of pensions owing.<br /><br />What is the effect on the balance sheet of the US of this transaction?<br /><br />I think if the trust fund is real, then the US's assets are reduced by $1B net (trust fund) and the US's liabilities are reduced by $1B net (pension owing). In addition, the total debt owed by the US does not change. This is exactly what would happen to the balance sheet if the trust fund consisted entirely of a pile of gold doubloons.<br /><br />On the other hand, if the trust fund is not real, then the net effect on the balance sheet should be no change (a new debt liability replaces the old pension liability) and the total US debt should go up.<br /><br />I honestly don't know which of these two cases is what would happen. But if (as I suspect) it's the first, then the trust fund is real. The ability to turn one kind of debt (owed to self) into another kind of debt (owed to other people) and cash without changing "the national debt" is a significant issue, I think.Lurking Canadiannoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-87500135506023780632011-09-08T12:48:33.147-05:002011-09-08T12:48:33.147-05:00Does Social Security exist now, Myles?
Yes and ab...<i>Does Social Security exist now, Myles?</i><br /><br />Yes and absolutely, but not the trust fund. The trust fund is fiction.Mylesnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-64166455494839885462011-09-08T11:56:10.629-05:002011-09-08T11:56:10.629-05:00Does Social Security exist now, Myles?Does Social Security exist now, Myles?Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-350850229342558282011-09-08T11:36:55.802-05:002011-09-08T11:36:55.802-05:00fish, I think Mandos's problem is that he does...fish, I think Mandos's problem is that he doesn't believe in such a thing as intellectual honesty. He imposes political ends above intellectual means, and debases both in the process. For him, as for many others, argument is not a process for the discovery of truth, but a sophistic process of achieving a specified political end.Mylesnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-81535356114925600322011-09-08T11:35:33.983-05:002011-09-08T11:35:33.983-05:00Let's just take it fresh from Matt Yglesias, i...Let's just take it fresh from Matt Yglesias, in his just put-up post:<br /><i>Social Security is <b>not</b> a prefunded pension plan or a savings scheme.</i><br />This is the standard progressive position, not your sophistry, Mandos. Social Security is not a prefunded pension plan, and something which is not prefund logically cannot have such a thing as a trust fund, or one that is at all relevant to anything.<br /><br />This debate is over.Mylesnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-24024184582242056062011-09-08T08:55:35.021-05:002011-09-08T08:55:35.021-05:00The point of contention is whether the government ...<i>The point of contention is whether the government "can lend to itself." I suggest that this is very much the wrong way to look at it, as though The Government were just another organization in the economy subject to the same conventions of accounting that other organizations are. </i><br /><br />Mandos, much of what you say is formally true, but there are two points that completely deflate the whole argument. <br />1) the "value" of the US dollar completely relies on the fiction that the US gov behaves by the same rules as the rest of the economy. I said before that the ledger sheet isn't really a true analogy because the gov can add money at will to the equation, (or property or any asset as you argue), but the fiction is necessary so that world "confidence" in the value of the US dollar is preserved. This is why we don't make a 50 trillion dollar coin and it is also why I am saying the whole economy is imaginary. <br />2) You are arguing that it is legitimate for each created institution to be treated separately. Okay sure, but the reality is that the SS fund is not treated that way. Assets are transferred into the SS fund and then congress immediately borrows money against them to cover current expenses. I.e. the gov has transferred the assets into another column on their ledger and left the IOU. It is complete doublethink to then argue that SS is "funded" except by arguing the gov can get something for nothing. Sure the ledger is fictional, but see above, we can't upset the world economy confidence fairies or the whole world system crashes. <br /><br />The arguments that SS is funded or not are ultimately useless because they can be argued legitimately from both sides. It is better to just argue that SS is a right that citizens have paid for. We willingly pay into the system for our financial security in our older years. It is theft if the gov tries to use it for something else. We have not paid into the system to make sure Jamie Dimon's compensation package is secure and we have not paid into the system so the US can kill and torture as many brown people as it can find. This is an argument with real bite.fishhttps://www.blogger.com/profile/01522672049371678717noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-3497970343827471392011-09-08T07:30:24.845-05:002011-09-08T07:30:24.845-05:00"stems from some believe natural life people&..."stems from some believe natural life people"<br /><br />should be<br /><br />"stems from what some believe is the natural life of the people"Mandoshttp://politblogo.typepad.com/noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-27482276175992161332011-09-08T07:28:13.516-05:002011-09-08T07:28:13.516-05:00fish:
The longer this discussion goes on, the mo...fish: <br /><br />The longer this discussion goes on, the more I am convinced that there *is* an ideological point at stake in these definitions. I'm not *actually* accusing you of being a ronpaulitarian but I am suggesting that you're uncritically allowing distinctions that the economic right uses to set the terms of the debate and ensure that left-wing argumentation is <i>ipso facto</i> "financial illiteracy".<br /><br />The point of contention is whether the government "can lend to itself." I suggest that this is very much the wrong way to look at it, as though The Government were just another organization in the economy subject to the same conventions of accounting that other organizations are. <br /><br />It's not just money that is created at the disposal of the sovereign, it's property itself, and the sovereign by the force at its disposal can arrange it as it sees fit within its ambit. That's practically the definition of sovereignty. <br /><br />So of course the sovereign can create entities that buy assets from one another, and of course it is legitimate to account for them separately. From this perspective, the only difference between SSTF and a private pension fund is that the sovereign has granted particular rights to those designated as owners of the "private" fund. <br /><br />Just as the sovereign can "print" money, the sovereign can "print" ownership, and designate it to "the public" or to private entities. It can force "private" individuals and organizations to recognize certain kinds of property/assets and even oblige them to purchase it under certain conditions.<br /><br />In that sense, these "private", domestic institutions as much The Government Lending To Itself as a public agency. AWS' criticism holds: if the IOUs in the SSTF are accounting ephemera, so too is the very independent power of the sovereign to designate property. So too are all pension funds. It's not a distinction that matters, except in a right-wing world where private investment is legitimate and public is not.<br /><br />The argument comes from the same family of arguments that decries public investment as having little or no positive effect.<br /><br />I used to use terms like "fiat" money, but for some of the reasons above, I've been trying to quit. "Fiat" money is intended to be set in opposition to "natural" money that stems from some believe natural life people. But the value of money is not just a social fiction, the "fiat" really means something: money is valuable because people are *forced* to use it by the same mechanism that property is enforced.<br /><br />The same reality that permits the government to "print money" is what permits the sovereign to assign property and decide what is and what is not property and who can and can't hold it. When vaguely left-ish neoliberals like DeLong and Krugman claim that the SS IOUs are valid investments and talk about the cash flow from and to SS, that is ultimately what they mean.<br /><br />If it is merely a matter of "buyback" and the "government not being its own creditor", then we are permitting an ideological framework (government as "equal" participant, rather than private property fully subtending from government) to be framed as fact.Mandoshttp://politblogo.typepad.com/noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-4494723882370954642011-09-07T17:27:34.851-05:002011-09-07T17:27:34.851-05:00it is human nature that what a person hates is oft...<i>it is human nature that what a person hates is often a self-deficiency. poor myles.</i><br /><br />How absurdly wrong and nonsensical. I know very little of many subjects that I hold in great esteem, such as biology, chemistry, and so on, but I do not therefore have some complex of self-deficiency because of it.<br /><br />What an utter non sequitur.<br /><br /><i>Now, now. I expect people to call each other idiots with a little more finesse.</i><br /><br />It's a bit hard to finesse aggressive ignorance of the (unjustifiably) self-righteous kind.Mylesnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-17100527735926322392011-09-07T12:49:25.164-05:002011-09-07T12:49:25.164-05:00it is human nature that what a person hates is oft...it is human nature that what a person hates is often a self-deficiency. poor myles.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-43425247852933787532011-09-07T12:47:39.924-05:002011-09-07T12:47:39.924-05:00Myles, you mad bro?Myles, you mad bro?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-11260000713289650312011-09-07T12:08:41.877-05:002011-09-07T12:08:41.877-05:00Now, now. I expect people to call each other idiot...Now, now. I expect people to call each other idiots with a little more finesse.Susan of Texashttps://www.blogger.com/profile/00076915322771385454noreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-17421867041357002912011-09-07T11:44:38.506-05:002011-09-07T11:44:38.506-05:00"Aggressive and truculent economic illiteracy..."Aggressive and truculent economic illiteracy pisses me off."<br /><br />self-loathing much?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2222630007427380394.post-68896432840496451152011-09-07T11:38:37.961-05:002011-09-07T11:38:37.961-05:00The money is loaned out in both cases and might be...<i>The money is loaned out in both cases and might be "fictional" in an accounting sense but in a practical sense it should be reasonable to talk about the fund as if it will be paid out.</i><br /><br />I'm afraid this is no longer as true as it once was. Banks now increasingly try to match maturities on their lending and borrowing and merely profit from the same-maturity spread.<br /><br />What the government does is rather different. It's essentially a LIFO system.<br /><br /><i>Has anyone else noticed that this is the discussion that has caused Myles to finally lose his composure? </i><br /><br />Aggressive and truculent economic illiteracy pisses me off.Mylesnoreply@blogger.com