Posted on 08/15/2002 6:35:28 AM PDT by End The Hypocrisy
No one cares that we are taking a larger and larger piece of the pie. The smaller "free" section left of the economy can't support the spending habits of the "rich" (the liberals).
No one ever prioritizes freedom and free enterprize over any wants of a liberal.
gimme, gimme, gimme....it never stops
Conservatives are the main beneficiaries of the interest paid on the national debt. I'm all for higher debt if it means putting the brakes on socialism. Technology will eventually save us, we just need to delay as long as possible until the technology arrives.
To those who have asked who the money is owed to, here is my recollection without checking primary sources:
$2.5 trillion intra governmental (primarily social security
$0.5 trillion the federal reserve
$1.0 other banks
$1.0 foreighn investors
$1.0 domestic investors
She was right. And it is so simple to understand if you know what the "national debt IS".
Worth repeating.
How can this be? According to many Freepers, President Bush is the ultimate incarnation of evil. How could he possibly be motivated to address such a serious problem?
First of all, the balance of the debt held by the public--that is, treasury bonds, bills and notes--that matures after the 5-7 year period you and he refer to, is non-callable. That means there is no way to retire it except to purchase it in the open market. Once traders know that the bonds must be repurchased, they will price them at outrageous levels. Scarcity of supply would also contribute to the problem.
As for the bigger lie, I didn't get from his testimony any hint that he was trying to delude the Senate as to Social Security's viability. He's been pretty frank about it. But no matter how you slice it, there is absolutely nothing that can be done with potential surpluses that would abate future SS liabilities
In order for him to come to the conclusion he did with the OMB numbers he was using, he had to assume that the social security surplus would have to be used to buy the debt held by the public. Since that has NEVER been the actual case, and since Greenspan knows that, there was no reason to make such an assumption (and cleverly not call attention to the fact that he was making such an assumption).
As for the white lie about the longer maturing bonds (which is actually mooted by the bigger lie above) you give the same explanation Greenspan himself gives. Over a 5-7 year period, for many reasons, the demand would not be felt and various inter-maturity arbitrage opportunities actually preclude the situation he claims to fear from developing. But, again, this white lie is diversionary. The BIG lie is exposed in the above paragraph and explicitly detailed numerically, Here
I'd be interested in knowing some of the reasons that "demand would not be felt" during the 5-7 year period, too. Besides accounts that are legally restricted to purchasing only Treasuries, the laws of supply and demand would certainly apply.
And I think the Chairman referred to implementing surpluses after that 5-7 year period anyway, since the staggering amount of notes and bills coming due would have pretty well chewed up the surpluses. After that, you're looking at 20 year bonds (originally sold as 30-years,) with no call feature and some pretty savvy holders. Not only do I fail to envision any arb possibilities there, I also fail to see any reason to retire them and quite a few good ones for leaving them out there.
Devvy Kidd is wrong, if she said that. She's usually pretty good on monetary matters, so I'd be interested in the context and/or a further specification of your basis for thinking such a comment is right.
Just to make sure I am understanding:
Does this position state that the government is perfectly able to issue interest bearing promises to pay money in the future but is mathematically unable to actually do so?
The current SS surplus IS NOT used to buy publicly held debt. It is used to buy special newly issued bonds. This is a fact. Therefore, ALL you have to assume is that such process continues and the problem that Greenspan claims to fear DOES NOT DEVELOP. This is not a subject of opinion it is a fact. When Hollings almost stumbled into discovering this (I was watching as it unfolded) an uncomfortable Greenspan went into his routine of: “I can understand your confusion Senator. If you call my office, I’ll take the time to walk you through it.” If you read the linked article in my above post, Greenspan’s purposeful deceit should become clear.
I address your other comments in a separate post. Greenspan also lied, there, but the issues are not as black and white as the one described above.
You’re right, he did. However, nothing prevents rolling over some of the shorter maturities in order to spread out demand for the longer maturities over a longer time period.
Not only do I fail to envision any arb possibilities there, I also fail to see any reason to retire them and quite a few good ones for leaving them out there.
First of all, traders don’t know for sure, that the bonds will be purchased, so it is not as if they KNOW there is overhanging demand. Therfore when somewhat better prices are offered some will bite to take advantage. For example, say that 10 year AAA corporate bonds yield 7% and 10-year governments, yield 4%. If governments move to 3.8% in this environment, some people will sell govs buy corporate. Others may wait and get better prices or fail to have capitalized on a nice spread. The fact is, spread over many years, such activity would be relatively minor. The Fed open markets committee does this all the time (admittedly, it is spread between demand and supply over long cycles).
In any event, this is is a diversionary smoke screen Greenspan put up in view of the fact that the purchase of private assets he PRETENDED to fear was a shameless LIE.
BTW, the reasons Greenspan gave for keeping the longer maturities out there was to satisfy the "demand preferences" for such products. He uses this kind of deceitfulness elsewhere as well. For example, in 1990, when people recognized that the FDIC guarantees played a major role in making the S&L crisis worse and some people were questioning whether we should REDUCE the $100,000 guarantee our free enterprise hero, Greenspan, had the following to say:
“If we were to start from scratch, the board believes it would be difficult to make the case that deposit insurance should be as high as its current $100,000 level. However, the level of coverage has been embedded in the markets and in the financial decisions of households. Therefore, any decision to reduce it would need a substantial transition period."
This year, the House voted to increase coverage to $130,000. Did anybody hear Greenspan feel we need a substantial transition period?
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