The difference between money, legal tender and bonds
Tomm Carr
it made no difference if the Social Security "Trust Fund" consisted of
dollars or Treasury bonds.
He held out a dollar bill and a US Savings Bond. He said, "This is a
piece of paper (holding up the dollar bill) and this is a piece of paper
(holding up the bond). Both represent obligations placed on the US
Treasury." So it's not a problem, indeed it makes no difference
whatsoever, apparently, if Social Security has a big vault full of
dollars or bonds.
Well, a death certificate is a piece of paper and a marriage license is
a piece of paper. That makes them similar...how?
I could take my dollar bill directly to the US Treasury, hand it to the
clerk behind the barred window and demand to exchange it for "money."
"Sure thing," the clerk would say as he takes the bill and places it in
the cash drawer. He then reaches back into the drawer and takes another
dollar bill (it could even be the same one I just handed him) and gives
it to me. "There you go. Now we're even-steven."
Back until 80 years ago, when the legion across the top of the bill said
"Silver Certificate", the scenario would have been slightly different.
After placing my bill into his Cash drawer, he would have reached into
the Money drawer to take out $1 worth of real money -- gold or silver.
That would have been an obligation.
Legal tender, or fiat money, places absolutely no obligation on the
Treasury.
Suppose the cash drawer was empty. No matter. After placing my dollar in
it, he then takes the same one out and returns it to me. Dollar in --
dollar out. We're square. We can "convert" as much cash as we want, we
would just end up with the same cash given back to us. So the Treasury
doesn't really care how much "cash" is floating around. It doesn't have
to deal with it at all.
If I take the Treasury Bond to the clerk, he puts it in his Bond drawer
and then must give me the current value of that bond in cash. Now if the
cash drawer is empty there is a problem. The Treasury must get that cash
from somewhere. Whether or not there is enough cash on hand to cover it,
the Treasury Bond /does/ create an obligation on the Treasury.
Rep. Becerra is listed as "the top Democrat on the House Ways and Means
Subcommittee on Social Security." This is the guy in charge of Social
Security. Wow, does that ever make me feel, well, secure.
--
TommCatt
What do we want? PROCRASTINATION! When do we want it? NEXT WEEK!
Jim Klein
one that's hugely deficit-financed, they both ultimately
represent a fractional claim against YOUR future production.
If that ain't enough to make a guy nauseous, I don't know
what is. OTOH, it also makes the only two possible
resolutions--default or devaluation--look relatively
appealing. Every cloud has a silver lining, I suppose,
if we ignore the blood along the way.
jk
Paul Robinson
[Tomm Catt] Yesterday (Sunday) I saw Rep. Xavier Becerra (D-CA), try
to explain why it made no difference if the Social Security "Trust
Fund" consisted of dollars or Treasury bonds.
Putting "trust fund" in quotes is appropriate. Social Security is no
more a trust fund than my savings account at my credit union (as
opposed to my 401K at my brokerage, which really is a trust fund; I
can't get to the contents). The Social Security Deposit Accounts are
nothing more than a big, fat, piggy bank full of cash that Congress
can raid - and does - at any time.
[Tomm Catt] He held out a dollar bill and a US Savings Bond. He said,
"This is a piece of paper (holding up the dollar bill) and this is a
piece of paper (holding up the bond). Both represent obligations
placed on the US Treasury." So it's not a problem, indeed it makes no
difference whatsoever, apparently, if Social Security has a big vault
full of dollars or bonds.
Dollars, if dumped on the market immediately, would increase the money
supply. Treasury bonds are a promise to pay in the future, but, if
you're willing to accept the future value discount you can generally
convert them to cash at any time. But for all intents we could
consider them close equivalents, they are fiat money or debt
obligations of the U.S. Government. The issue over whether they are
worth anything - neither being real money - is not relevant here,
because if they became worthless Social Security would already be out
of business anyway.
[Tomm Catt] Well, a death certificate is a piece of paper and a
marriage license is a piece of paper. That makes them similar...how?
They're both issued by the clerk-recorder of the county where the
incident occurs.
[Tomm Catt] If I take the Treasury Bond to the clerk, he puts it in
his Bond drawer and then must give me the current value of that bond
in cash. Now if the cash drawer is empty there is a problem. The
Treasury must get that cash from somewhere. Whether or not there is
enough cash on hand to cover it, the Treasury Bond /does/ create an
obligation on the Treasury.
So the Treasury calls up the bureau of printing and engraving and
tells them to print $2 million in cash (or whatever the amount of
bonds presented for redemption is) and tells them to deliver it to
whatever office it is that has been requested to pay them. Or the
Treasury issues an electronic transfer from its Fedwire account with
the Federal Reserve Bank (probably the Richmond branch, it's closer to
DC than Philadelphia) to the bank account of the bond holder.
Tomm Carr
> On Jul 12, 2:54 am, Tomm Carr<tommc...@gmail.com> wrote:
> [Tomm Catt] Well, a death certificate is a piece of paper and a
> marriage license is a piece of paper. That makes them similar...how?
>
> They're both issued by the clerk-recorder of the county where the
> incident occurs.
Poor choice of words on my part. I should have said, "That makes them
/equivalent/...how?"
--
TommCatt
An eternity is very, very long...especially towards the end.
Paul Robinson
> On 07/13/2011 03:40 AM, Paul Robinson wrote:
>
> > On Jul 12, 2:54 am, Tomm Carr<tommc...@gmail.com> wrote:
marriage license is a piece of paper. That makes them similar...how?
[Me] They're both issued by the clerk-recorder of the county where the
incident occurs.
[Tomm Carr] Poor choice of words on my part. I should have said, "That
makes them /equivalent/...how?"
And that's why Charles "Ding Dong" Bell doesn't like me. To quote
Francisco d'Anconia to James Taggart, "You should learn that words
have exact meanings." I've never found him able to answer a question
without long-winded equivocations of dubious meaning, or by parroting
others. And I think that bothers him so much because I can answer
questions, cleanly, simply and honestly, without regard to secondary
issues.
But since some of what I say slaughters his sacred cows, he has to try
and trash me. Since he can't do it honestly, he does it by channeling
Nancy Grace, whom my sister has noticed does similar things, acting
like a tabloid reporter. British tabloid, that is.
And to answer your question, how are a marriage license and a death
certificate equivalent? They're both public announcements about how
some poor unfortunate has reached a tragic end. The difference being
that you only die once and you don't keep suffering after you're
dead. :)
RichD
> Well, he's right in one respect. In a fiat system, particularly
> one that's hugely deficit-financed, they both ultimately
> represent a fractional claim against YOUR future production.
Indeed.
And, U.S. Treasury bonds are considered the world's
safest investment. Now ask, why is that? What
backs up those bonds?
But you already answered that -
--
Rich
Jim Klein
> > Well, he's right in one respect. In a fiat system, particularly
> > one that's hugely deficit-financed, they both ultimately
> > represent a fractional claim against YOUR future production.
>
> Indeed.
>
> And, U.S. Treasury bonds are considered the world's
> safest investment. Now ask, why is that? What
> backs up those bonds?
>
> But you already answered that -
Ha ha. The joke will be on them, cuz there is no production.
jk