A side note on the $700 Billion “bail-out”

Another post on the topic of applying an MBA.

One of the skills that gets tuned (or at least well exercised) in an MBA program is looking at an issue and combining it with other issues then developing a combined solution.  You may have heard of this widely used methodology outside of the MBA world and referenced with the phrase “two birds, one stone”.

I wrote the following when commenting in an e-mail thread about the proposed $700 Billion bail-out.  Keep in mind this is just called a ‘bail-out’.  That’s just a catchy name for the media, but maybe I’ll get into that another day.  For now we can move on to something completely different…

In the future we may look back at this bail out as the point at which we privatized social security.  We all know a couple things from events of a few years ago:

1) In over simplified terms Social Security is not “Funded”, there is no bank account or lock box.

2) The ability of the government to make Social Security payments in the future is based on the ability of the federal government to make either (a) payments from income (taxes in, social security checks out) or (b) to make payments from assets accumulated through the sale of treasury securities, securities that are backed by the good faith and credit of the United States Government.

But what if those treasury securities are backed not just by the good faith and credit of Uncle Sam, but also backed by actual shares of real mutual funds (constructed from traunches of various grades of mortgages) held by the federal reserve?  Isn’t that essentially the same as “privatizing” social security?  I know its not the individual accounts usually associated with privatization theories, but in essence the ability of fulfilling social security obligations in the future would rise and fall with the value of these government held assets.

Conspiracy theorists, start your engines.  Maybe this is all part of a Grand Scheme…