Is Bush Advocating a Return to the Gold Standard?

By DHinMI

On day 35 of his tour of bad news, this is how President Bush described the Social Security trust fund:

To dramatize Social Security's future solvency problem, the president peered into the four-drawer ivory cabinet inside the Bureau of Public Debt office here along the Ohio River. In the second drawer was a white three-ring binder filled with pieces of paper providing physical evidence of $1.7 trillion in treasury bonds that back Social Security benefits.

"Imagine," Bush said in a speech a short time later at West Virginia University at Parkersburg. "The retirement security for future generations is sitting in a filing cabinet.

"It's time to strengthen and modernize Social Security for future generations with growing assets that you can control, that you call your own — assets that the government can't take away."...

The pieces of paper Bush saw are not real Treasury securities. In today's computer age, investors no longer get honest-to-goodness Treasury bonds they can hold in their hands. However, by law, the bureau creates paper bonds to put in the file cabinet just in case anybody, like Bush, wants to see the trust fund.

While the paper IOUs are not negotiable instruments, they still represent trust fund Treasury bonds that are backed by the full faith and credit of the United States.

As proof that the GOP will never stop insulting our intelligence, Bush is essentially saying that paper securities and symbols of debt and asset are valueless.  Now that's an interesting proposition, which if carried to a logical extension, would lead one to question what backs up the debts of the US to bond holders around the world.  After all, for over 40 years our currency has floated on international markets unfettered from the gold standard.  In short, all US debt and much of our wealth is "symbolic" and represented by pieces of paper (or computer code).  Therefore, by claiming that there is no Social Security trust fund because it's "symbolic" and not a stack of gold bars, he's also implying that many of our assets are illusions, and our debt doesn't exist.

Most people realize that banks "hold" more wealth than could be paid out in the event of a run in which everyone demand a full withdrawal.  The also understand that even though they may live in a house, it's not really theirs as long as a mortgage lender holds a "piece of paper in a filing cabinet somewhere" that represents unpaid principle on the loan.  So hopefully people recognize that this is nothing but a ridiculous stunt by Bush and his handlers. 

But the fact that Bush could actually stand before a crowd of people and say something so damn stupid may be an indication that he really doesn't realize that just because debts and assets are represented by "symbols" like pieces of paper doesn't make the debt any less real.  Could that be why he's failed to balance the books in every business he ever entered, and has run up the largest debts in U.S. history?

[UPDATE]

Commenter Scott pulls out another implication, one that I hope the Dems throw back in Bush's face:

I wonder where your rights to ever withdraw money from your private account will be held...possibly a filing cabinet in Washington?

Comments

[NG]

I hate to get into a pissing match with you here, and I assure you I am a strong progressive in my views but consider this. Federal intra-agency debt is not the same debt as public debt (debt owed someone outside the federal government). Intra-agency debt is held separate from public debt, and its real meaning is an intention by the federal government to honor an idea in the future. I know many folks say the SS trust fund money is not the fed's money, but the people's money! However, you could really say that about all federal revenues.

The best analogy I can give would be to look at your family budget. Let's say you had intentions to set aside money in an account to buy a boat, but you never had any excess funds to put in that account each time interval after paying other more pressing expenses. Are you obligated to put that collective funding obligation to yourself back in the boat account in the future?

Maybe this isn't the greatest analogy, but it does point out that we are really just talking about internal (important) categories in a budgeting process!

[DHinMI]

NG:

You're approaching this with nuance, which wasn't Bush's intention. Like the stupid "it's not the government's money, it's your money" crap that ignored federal debt that we all agree is real and not a marker for interagency budgetary intentions, this was essentially an attempt to create belief in the mindlessly literal. It's as if he's saying "look, all that's here is some paper, and we all know that you can write anything on a piece of paper. Surely something supposedly worth billions of dollars would take up more space than a binder in a filing cabinet. Therefore, it doesn't exist."

Which, like I argued, contains some absurd implications.

[scott]

I wonder where your rights to ever withdraw money from your private account will be held...possibly a filing cabinet in Washington? I'm not sure I can find many modern financial transactions that aren't IOU's in the basic sense. When was the last time any actually kept stock certificates in their basement? Don't we all just have IOU's from our broker? It's up the federal government to make our broker honor those IOU's too. What an idiot.

[dday]

Look at all these dollar bills in my wallet. They're just pieces of paper with a bunch of words and pictures printed on them! Sure, they SAY they're worth something, and the Treasury will back them up, but what does that really mean? I wish somebody would strengthen my wallet and turn these worthless pieces of paper into ASSETS for me!

[praktike]

This is becoming quite the clown show.

[George]

To answer your question: yes. I have heard more than a few people (who voted Bush, naturally) say that this should be the ultimate goal of US monetary policy.

Yes, the US is so down in the world that its "full faith and credit" is worth less than some lumps of shiny dirt.