U.S. says Medicare to exhaust funds sooner

I want to know who is the investment genius who put all the "trust fund" eggs into a single basket of Treasury Notes. Oh sure, the securities are backed by the full faith and credit of the US Government, but what happens if/when the currency upon which they are issued suffers the type of devaluation we are currently seeing as the federated government attempts to use its printing presses to secure the dollars it needs to redeem the securities it has issued?

The value of the USD declined by a heck of a lot more over the last year than the 2.76% interest the "Trust Fund" realized from "investing" those funds by "lending" them to the federated government. The only way the federated government has the ability to redeem those securities is to borrow more money from the funds to pay the earlier notes off or borrow more money from foreign countries when it is consistently and constantly spending over a Trillion dollars more than it realizes in revenues from tax receipts. What is happening to the "trust funds" of Social Security and Medicare is the same thing that is happening to the individual savings of the citizens in the states. It is being consumed faster than it can be accumulated by the devaluing of the dollar that happens as a result of the fiduciary mismanagement of the federated government. It is doing the same thing to the senior citizens that it is doing to the investors who have financed their largess thus far. Reducing the value of the investment so that the amount paid back is actually less than the initial amount originally invested.

At this point I wonder what else could we invest the SS "trust fund" in? There used to be talk of investing part of it in the stock market (even Democrats like Clinton suggested it). Al Gore had his "lock box", but I was never clear just what that was.

The problem is the trust fund is at about $2.7 trillion (if I recall correctly), but it has no cash, just these treasury notes. Even if you wanted to invest in something else, how would you purchase it? I don't know if the notes could be exchanged for something else, or if they'd have to be converted to cash first (but that's cash we don't have).

Back when SS had a yearly surplus, you could of bought into some other security using the surplus. But since last year, SS is now spending more than it is taking in.

Anyway, I can't think of much anything safer than US tresury notes, but we sure don't have any diversity putting everything into just one type of investment.

Well Pine, that is an academic question at this point since there is no longer a surplus of money flowing into SS. It is cash flow negative and probably will stay that way.

But it would be hard to beat the "special issue Treasury securities" They are unique. Can be redeemed anytime at face value, guaranteed higher interest rate, guaranteed no loss of principle, guaranteed captive income tax payers to pay them sometime in the future if there are any income tax payers left.

But seriously, there could have been other options for investing trust fund money that would have generated real income and economic activity instead of a pure paper liability for future taxpayers:

Municipal loans to state and local govt for infrastructure, school construction.
AAA corporate loans if they are asset backed.
(People rant about TARP and GM, but in the end it looks like the Feds will make a profit)
Electric and water utility loans
Nuclear power plant construction loans
Loans for RTD projects that have a revenue stream.
Real marketable treasury bonds not artificial ones.

Really any loan for public infrastructure projects that are asset protected, and have a revenue stream would be pretty safe and diversified. (public hospital, toll road construction, airport construction, etc etc.)