4 ms·
> Who loses? Mostly the holders of treasuries. In the United States, defaulting on Sovereign Debt would basically guarantee the death of social security. If yo
by throwawayjava 8y ago
> Who loses? Mostly the holders of treasuries.
In the United States, defaulting on Sovereign Debt would basically guarantee the death of social security. If you're in the USA, by far the best way you can insulate yourself against sovereign debt is by:
1) organizing your life's expenses so that you can retire (or at least continue to live) with $0.00 from social security.
2) Ensuring that you don't rely on any federal pension (including military retirement).
Of course, that isn't possible for most people. So in the USA, the answer to "who loses?" is "old people".
3) Ensuring you will have be able to afford healthcare in old age without medicare.
- EGreg 8y agoWhy can’t these funds including the social security funds diversify into real assets ahead of a default?
- throwawayjava 8y ago...by selling them to who? SS and other entitlement/retirement programs hold a monstrous amount of the total federal debt. I doubt the federal gov't could divest even a small fraction of those securities without destroying market for them.
- JackFr 8y agoSo lets the the economy has $X trillion (nominal) of real assets. You privatize social securities $Y trillion assets with the stroke of a pen. You now have $(X+Y) trillion chasing the same real assets. The rate of return on those assets will decline in proportion to the new money chasing them. On the margin, (and more so over time) new productive opportunities will occur as the cost of capital to business declines, but in the short run all you are doing is inflating a bubble.
- erikb 8y agoEverybody gets old at some point, so I would extend that.