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Tags mirrors , smoke , fund , trust , security

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Old 23rd January 2005, 09:07 AM   #81
Frank Newgent
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Quote:
Originally posted by Frank Newgent

George W Bush seems to have somewhere around five to ten million dollars in US Treasury bonds.

What's gonna happen if he ever tries to redeem them? Will he have to raise taxes to cover it? The answer, very clearly, is that money from the general revenues will have to be used to redeem the bonds from the President.

And come to think of it, having this big stack of big government IOUs written out to yourself when you're the head of that same big government is equivalent to having really nothing at all.

All that this means is that the President has gotten government bonds in exchange for the tax money that is being spent today instead of being saved. But you cannot spend and save the same money, no matter what accounting gimmicks you use.

If you ask me, it'll be like government moving money from its right hand to its left when the President raises taxes to cover his bond redemptions. And taxpayers left with having to pay the bill.
Quote:
Originally posted by Capitalist

Huh? You are not disputing my point at all!
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Old 23rd January 2005, 09:39 AM   #82
shanek
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Quote:
Originally posted by Frank Newgent
George W Bush seems to have somewhere around five to ten million dollars in US Treasury bonds.

What's gonna happen if he ever tries to redeem them?
That isn't how bonds work. You don't redeem them; they mature after a period of time.

Let's say you buy $1000 in 20-year bonds at 5% annual interest. So you put up $1000; at the end of the first year, you're paid $50, at the end of the next year, you're paid $50, and so on. So you receive 20 years of $50 payments, or $1000. Then, at the end of the 20 years, the original $1000 is paid back. It's all on a fixed schedule.

And yes, all of this money would have to come out of government revenues in the general budget.
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Old 23rd January 2005, 10:08 AM   #83
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Quote:
Originally posted by shanek

You don't redeem them; they mature after a period of time.
Yaddayadda, same thing.
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Old 23rd January 2005, 10:10 AM   #84
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Quote:
Originally posted by Frank Newgent

George W Bush seems to have somewhere around five to ten million dollars in US Treasury bonds.

What's gonna happen if he ever tries to redeem them? Will he have to raise taxes to cover it? The answer, very clearly, is that money from the general revenues will have to be used to redeem the bonds from the President.

And come to think of it, having this big stack of big government IOUs written out to yourself when you're the head of that same big government is equivalent to having really nothing at all.

All that this means is that the President has gotten government bonds in exchange for the tax money that is being spent today instead of being saved. But you cannot spend and save the same money, no matter what accounting gimmicks you use.

If you ask me, it'll be like government moving money from its right hand to its left when the President raises taxes to cover his bond redemptions. And taxpayers left with having to pay the bill.
Quote:
Originally posted by Capitalist

Huh? You are not disputing my point at all!
Quote:
Originally posted by shanek

And yes, all of this money would have to come out of government revenues in the general budget.
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Old 23rd January 2005, 11:10 AM   #85
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[quote]Originally posted by Frank Newgent
George W Bush seems to have somewhere around five to ten million dollars in US Treasury bonds.[quote]

I, too, had a bit of trouble seeing your point. It seemed that you were saying that George Bush holding US Bonds was the same as Social Security holding US bonds.

But that's not the case. George Bush is a citizen, not part of the government. His money is his money, not the government's.

There is one sense in which the analogy seems acceptable. When you hold a bond, whether a corporate bond, or a government bond, what you are holding is a promise to pay. If the entity that made the promise is unable to pay when the time comes, you get nothing.

When George's bonds mature (or if he redeems them early at a different rate, which I have done many times) the government will indeed have to raise money from general revenues to pay him, or default on that debt. And when the trust fund's bonds are redeemed, the same thing will happen.

My point is that there is no money saved to pay either George or the Trust Fund.
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Old 23rd January 2005, 06:08 PM   #86
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Quote:
Originally posted by Frank Newgent
Yaddayadda, same thing.
No, it isn't. "Redeem" means that they can be cashed in on demand. Some municipal bonds are like this, but Treasury bonds and most corporate bonds aren't.

The bonds can be sold, but that's an entirely different thing.
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Old 23rd January 2005, 07:11 PM   #87
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Quote:
Originally posted by shanek
No, it isn't. "Redeem" means that they can be cashed in on demand. Some municipal bonds are like this, but Treasury bonds and most corporate bonds aren't.

The bonds can be sold, but that's an entirely different thing.
Another novel definition from The SuperWonderful-and-Weird Fantasy Dictionary of Harry Browne?

Please show some evidence that this is the definition of redeem. Please don't embarrass yourself further by showing the m-w.com definition that gives as an example of the use of the the U.S. Treasury redeems savings bonds on demand.
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Old 23rd January 2005, 07:17 PM   #88
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Quote:
Originally posted by hgc
Another novel definition from The SuperWonderful-and-Weird Fantasy Dictionary of Harry Browne?

Please show some evidence that this is the definition of redeem. Please don't embarrass yourself further by showing the m-w.com definition that gives as an example of the use of the the U.S. Treasury redeems savings bonds on demand.
M-W is hardly a legitimate source. They think real estate is an investment!
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Old 23rd January 2005, 07:29 PM   #89
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Quote:
Originally posted by shanek
No, it isn't. "Redeem" means that they can be cashed in on demand. Some municipal bonds are like this, but Treasury bonds and most corporate bonds aren't.

The bonds can be sold, but that's an entirely different thing.
I know that I am responsible on this thread for talking about "redeeming" bonds, and I know that technically, there's a difference between redeeming them and letting them mature.

But, in the words of another poster, yadayadayada.

The technical manner in which bonds, which are different from T-bills, turn from promises into cash is not of much interest for this discussion. Nor are the different types of debt instruments used by the government, and the different rules that apply to each. Sooner or later, there is going to be a need to really pay out some dough, and when that day comes, all the trust fund is going to have is a promise that the government will go out and get some dough.
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Old 23rd January 2005, 09:09 PM   #90
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Quote:
Originally posted by Meadmaker
I know that I am responsible on this thread for talking about "redeeming" bonds, and I know that technically, there's a difference between redeeming them and letting them mature.

But, in the words of another poster, yadayadayada.

...
Welcome to the world of Libertarian political science. Religious arcana at every turn. He speaketh in tongues.
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Old 23rd January 2005, 10:42 PM   #91
Frank Newgent
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Quote:
Originally posted by Frank Newgent

George W Bush seems to have somewhere around five to ten million dollars in US Treasury bonds.

What's gonna happen if he ever tries to redeem them? Will he have to raise taxes to cover it? The answer, very clearly, is that money from the general revenues will have to be used to redeem the bonds from the President.

And come to think of it, having this big stack of big government IOUs written out to yourself when you're the head of that same big government is equivalent to having really nothing at all.

All that this means is that the President has gotten government bonds in exchange for the tax money that is being spent today instead of being saved. But you cannot spend and save the same money, no matter what accounting gimmicks you use.

If you ask me, it'll be like government moving money from its right hand to its left when the President raises taxes to cover his bond redemptions. And taxpayers left with having to pay the bill.
Quote:
Originally posted by Capitalist

Huh? You are not disputing my point at all!
Quote:
Originally posted by shanek

And yes, all of this money would have to come out of government revenues in the general budget.
Quote:
Originally posted by Meadmaker

When George's bonds mature (or if he redeems them early at a different rate, which I have done many times) the government will indeed have to raise money from general revenues to pay him, or default on that debt.
Thought I was satirizing the Social Security Trust Fund's surplus not really being "there"... when it seems I was scoring points about an entirely different government entity's Treasury holdings.

Who knew?
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Old 24th January 2005, 07:39 AM   #92
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Folks, levy all the pathetic insults you want. The fact is that the Treasury does not pay off the bonds until the end of the term. If you want to get rid of your bonds before then, you have to sell it.

Of course, all bonds are bought and sold through a bond broker. The Federal Reserve is the bond broker for the Treasury, but they also broker bonds between third parties. Most banks also act as bond brokers. You sell the bond for whatever the current value is considered to be, and that is based on the interest rate.

In the example I gave above, the bond was purchased for $1000 and paid $50 a year, an interest rate of 5%. Suppose interest rates go up to 6%—why would anyone pay $1000 for your bond when for the same price they could get one that pays $60? So in this case you'll have to settle for selling your bond for about $833, because that's the price at which $50 ends up being 6%.

But suppose interest rates go down to 4% instead. Of course now people want to buy your bond, but you also want to get as much money out of it as you can. So now your bond, which you paid $1000 for, will sell at $1250, since $50 is 4% of that figure.

This is why the value of a bond rises and falls inversely with interest rates. But the point is, when you sell the bond, the bond is sold to a third party and not redeemed by the original issuer. Again, municipal bonds and maybe the rare corporate bonds work that way, but not Treasury bonds. And, in fact, investors usually try to avoid bonds that can be redeemed before they come to term.

That's how it works. The bigots can insult me all they want now; I just don't f*cking care anymore.
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Old 24th January 2005, 08:02 AM   #93
Frank Newgent
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Quote:
Originally posted by shanek

Folks, levy all the pathetic insults you want. The fact is that the Treasury does not pay off the bonds until the end of the term. If you want to get rid of your bonds before then, you have to sell it.

Of course, all bonds are bought and sold through a bond broker. The Federal Reserve is the bond broker for the Treasury, but they also broker bonds between third parties. Most banks also act as bond brokers. You sell the bond for whatever the current value is considered to be, and that is based on the interest rate.

In the example I gave above, the bond was purchased for $1000 and paid $50 a year, an interest rate of 5%. Suppose interest rates go up to 6%—why would anyone pay $1000 for your bond when for the same price they could get one that pays $60? So in this case you'll have to settle for selling your bond for about $833, because that's the price at which $50 ends up being 6%.

But suppose interest rates go down to 4% instead. Of course now people want to buy your bond, but you also want to get as much money out of it as you can. So now your bond, which you paid $1000 for, will sell at $1250, since $50 is 4% of that figure.

This is why the value of a bond rises and falls inversely with interest rates. But the point is, when you sell the bond, the bond is sold to a third party and not redeemed by the original issuer. Again, municipal bonds and maybe the rare corporate bonds work that way, but not Treasury bonds. And, in fact, investors usually try to avoid bonds that can be redeemed before they come to term.

That's how it works. The bigots can insult me all they want now; I just don't f*cking care anymore.
Please don't confuse the President. He's in bad shape financially. Looks like an imminent crisis.
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Old 24th January 2005, 08:09 AM   #94
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Quote:
Originally posted by shanek
Folks, levy all the pathetic insults you want. The fact is that the Treasury does not pay off the bonds until the end of the term. If you want to get rid of your bonds before then, you have to sell it.
...

This is why the value of a bond rises and falls inversely with interest rates. But the point is, when you sell the bond, the bond is sold to a third party and not redeemed by the original issuer. Again, municipal bonds and maybe the rare corporate bonds work that way, but not Treasury bonds. And, in fact, investors usually try to avoid bonds that can be redeemed before they come to term.
Look, all of this is obvious, except that you chose to take the whole debate off course by disputing the definition of the word "redeem." Let me provide another reference...
Quote:
from Treasury site
How To Redeem, Reinvest or Sell

When your fixed-principal Treasury bond matures, you either can reinvest its principal into a Treasury note or receive payment of the principal.

Choosing To Reinvest or Redeem

About 45 days before your bond matures, we mail you a notice stating the securities into which you can reinvest and the methods by which you can reinvest. Your deadline for reinvesting is 11 days prior to your bond's maturity date.

If you don't schedule your bond for reinvestment, we redeem your bond on its maturity date, depositing the security's proceeds into your bank account.
...
Quote:
That's how it works. The bigots can insult me all they want now; I just don't f*cking care anymore.
If you would stop derailing threads with absurdly irrelevant arguments, then you would take umbrage a lot less at the ensuing feeding frenzy.
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Old 24th January 2005, 09:42 AM   #95
shanek
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Quote:
Originally posted by hgc
Look, all of this is obvious, except that you chose to take the whole debate off course by disputing the definition of the word "redeem."
Hel-lo, bigot? THIS is what I was responding to:

Quote:
Originally posted by Frank Newgent
George W Bush seems to have somewhere around five to ten million dollars in US Treasury bonds.

What's gonna happen if he ever tries to redeem them? Will he have to raise taxes to cover it? The answer, very clearly, is that money from the general revenues will have to be used to redeem the bonds from the President.
He's clearly using "redeem" to mean getting the money back from the Treasury. So stop with your personal vendetta.

Oh, and your source clearly says, "we redeem your bond on its maturity date," clearly backing up my point.
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Old 24th January 2005, 09:40 PM   #96
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Quote:
Originally posted by shanek

So stop with your personal vendetta.
Vendetta? Why would I feud with the President, especially when he's down on his luck financially?
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Old 24th January 2005, 09:54 PM   #97
shanek
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Quote:
Originally posted by Frank Newgent
Vendetta? Why would I feud with the President, especially when he's down on his luck financially?
I was talking to hgc. I only referenced your post to show him what we were originally talking about. I'm sorry for the confusion.
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Old 24th January 2005, 10:56 PM   #98
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Quote:
Originally posted by shanek
...The Federal Reserve is the bond broker for the Treasury, but they also broker bonds between third parties. Most banks also act as bond brokers....
Should I school you on the Federal Reserve again?

Nah, I think I've embarassed you enough!
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