Social Security Gold Backed Trust Fund

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The Christian Constitutional Republic
One Nation Under God

Government of, by, and for the People

Liberty and Justice for All
by: Thomas Lee Abshier, ND

Social Security Gold Backed Trust Fund
By: Thomas Lee Abshier, ND
9/21/2011

http://news.goldseek.com/GoldSeek/1295593500.php

The essence of this essay is that the Social Security Trust fund, and America, would be in better financial shape if the government had invested in gold to store value for the Social Security Trust Fund.

Since the lockbox doesn’t exist, and never did, we can only speculate as to the full impact of implementing such a proposal. Certainly it is preferable to own an asset that has actual value (rather than an unfunded liability -- such as exists now) at the time when disbursement is required.

One theme underlying the article is that gold backed money is good and valuable, and that fiat money is in some way fraudulent, or at the very least undependable (because of government’s temptation to devalue the money with overspending). Of course gold has some inherent value, and fiat money is backed only by the promises to render valuable goods and/or services in exchange for fiat money, which is in turn exchanged for the same, ad infinitum.

The actual issue is the integrity of a nation’s money, which has been damaged by the government’s injection of money into the economy without commensurate increase in the availability of products and services. Certainly, requiring money to be backed with a fixed amount of gold per dollar limits the ability of government to inflate the money supply to meet its desire to buy votes by legislative appropriation of other people’s money. A gold backed currency would prevent the government from reducing the value of the dollar by spending dollars which are actually owed to retirees (who thought they were paying into a system which was saving money for their retirement, but were in fact merely funding the retirement of their neighbors).

But there is another issue in this proposal. Of course it is better to store value in preparation for retirement than spend it now, and have only an IOU obligation to meet at the end of a working career. The relevant question, “Is gold really the best vehicle to invest into and store and grow wealth?” Gold does not produce any wealth over time, it only stores wealth/value. A man’s working career FICA dollars stored as gold will equal only the same number of dollars (stored value) disbursed at a later date.

Some may argue that the value of the gold will increase in value with inflation. And yes, the value of the gold will increase in terms of dollars, but it will not increase in value of corresponding consumable utility. Gold does not compound its value with time, it will only track inversely to the devaluation of the currency. Of course there may be differentials of redeemable value at any given time due to the inexact tracking of dollar to gold value. But, the general principle remains that gold is a store of value, not an exponential multiplier of value like investment in industry.

A more profitable use of the dollars collected by the FICA tax would be to invest them in industry, and thereby use the deferred savings of an entire nation to expand the productive capacity (and hence the available consumable value) of the economy. As an industry grows, so does the value of the investment. Any industry which grows at a % per year is on an exponential growth curve. It is only a matter of time before the wealth produced by industry is very great. When the time comes for redemption of the value stored in industry to fund the retiree’s lifestyle, stocks or bonds invested by the SS Trust Fund could be redeemed and disbursed to the beneficiary.

A stock ownership position by government (as the agent administering the SS Trust Fund) in an industry/company, is essentially an investment by the public, which means that the public is the true owners of the stock owned by the government. This means that the public should have voting rights in all issues put before the stockholders.

The public should rightfully be the master of the corporation, since the purpose of the corporation is to serve the public (and in the case of a truly publicly held company, the owners, the people at large, are truly invested in the profitablity of the company -- there is no public vs ownership disparity). Such a configuration would truly be a corporation of the people and for the people, not in a communal/communistic sense, but in the best form of capitalism, where investment, labor, materials combine to produce consumable wealth.

The choice of which stocks would be owned/invested-in by government could likewise be chosen by the public. Obviously, inserting government and huge amounts of money into the process of choosing investments would place the allocation of these funds subject to corruption of many sorts. Thus, leaving the investing decisions in the hands of a few governmental administrative fund managers would produce the same poor effects as top down, 5 year plan, central planning, socialistic economies.

Investment in index funds or ETFs does not really contribute to the productivity of the economy. But, investing in bonds funds allows banks and other lending institutions to use those funds to loan to worthy productive industry. The discrimination and accountability needed to insure wise use of capital, and utility of the products produced would be important considerations that lending institutions would use in choosing which industries should receive loans. A typical bond fund should yield several percentage points per year above inflation. And, if the people, banks, industry, and government are listening to the economy, it should be possible to stabilize the value of the dollar.

If the society wishes to continue using the Social Security as a retirement savings vehicle, then it should be funded with some investment instrument that produces a compounded rate of return. A workable system of stocks and bonds could be engineered that produces a dynamic balance between the interests of industry, society, individuals, and government.

The web-linked cyber-society makes it possible for all interested parties to participate and give feedback on both the choice of investment and stockholder interests. The funds could be bundled or individual, government directed, or professionally traded. The choices offered should be as varied as the tastes and types of investors. The opt-out policy should also be available.

Note, government was not given the Constitutional authorization to be in the investment, medical, retirement, or safety-net business. In fact, it should be entirely the realm of the State governments if any of the above were to be instituted. Thus, to maintain Constitutional integrity, such decisions to invest, store, and distribute wealth for later consumption should be delegated to the States for their adoption and administration.