![]() The takeaway from all of this is that Donald Trump’s claims that he’ll “leave Social Security alone” is an empty promise because, if his debt plan becomes reality, the Social Security Trust will lose years of solvency and the billions of dollars contributed to the Trust Fund by American workers will actually be worth only pennies on the dollar.The White House referred questions on whether Trump would deduct the donation to his outside counsel. Do you think it is possible that Mr Trump didn’t think it through and just said the first words that came into his head? Couldn’t be.” In short, this seems like a completely nonsensical idea. So the government would, in part, be defaulting to itself. To cap it all, the Federal Reserve owns almost $2.5 trillion of Treasury bonds and the Social Security Fund some $2.8 trillion. Any default within the system would have cataclysmic consequences for the economy that would far outweigh any gains in refinancing costs. Banks use them as collateral for loans insurance companies hold them as reserves pension funds own then to fund retirement benefits mutual funds own them as well. Treasury bonds are at the heart of the financial system. A forced deal, of course, would count as a default. It is the risk-free asset that underpins the entire global financial system. Emerging economies have done the same in the past when they have fallen on hard times it happened in Greece.īut with Treasury bonds, investors expect to get 100 cents on the dollar. This happens with corporate bankruptcies if the market price has fallen to 60 cents on the dollar, and been snapped up by specialist hedge funds, then redeeming the debt at 70 cents on the dollar may be a good deal. “The idea, it seems, would be to get creditors to accept less than 100 cents on the dollar. The Economist reminds us this approach is what got Greece into so much fiscal hot water: Doing so could wind up hurting current and future retirees who depend on this key federal program.” If Trump were to consider buying back debt at a discount it would potentially reduce the investment value of the Social Security Trust, which generally invests its cash reserves in extremely safe, interest-bearing U.S. debt include the Medicare Hospital Insurance Trust, military retirement fund, and federal civil-service retirement and disability fund. debt is the Social Security Trust, which held 16% of outstanding national debt at the end of Q1 2013. stock market and in markets around the world that look to the U.S. debt and raise major red flags in the U.S. debt to get into a situation that incites a crash in bond prices would probably undermine the high quality ratings bestowed on U.S. ![]() ![]() government is done so with the ‘full faith and credit’ of the United States. But, you know, debt is tricky, and it’s dangerous you have to be careful, and you have to know what you’re doing.”īoth the Motley Fool and The Economist have raised red flags on what this strategy would actually mean for the Social Security Trust Fund - which has $2.79 trillion invested in Treasury notes that Trump is apparently willing to devalue. I understand debt better than probably anybody. First of all, you never have to default because you print the money, I hate to tell you, OK? So there’s never a default. … People said I want to go and buy debt, and default on debt. “If we can buy back government debt at a discount - in other words, if interest rates go up and we can buy bonds back at a discount - if we are liquid enough as a country we should do that. government like one of his failing casinos. Starting first with The Donald’s plan to run the U.S. While we could write pages on the Treasury bond market, federal debt and the Social Security Trust fund, chances are you wouldn’t want to read it, so instead, here is a quick summary of the issue. The latest idea from Donald Trump, the GOP Presidential candidate and self-proclaimed “king of debt,” would have devastating effects on the Social Security Trust Fund.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |