$1,000,000,000,000? Keep the change.Follow

Yes. And the moment the Fed issues the T-bills, it increases the very debt that they're trying to avoid hitting. That's what I was talking about. The moment you actually try to use it, you incur an increase in debt equal to the value of the coin you minted. And that is legally bound by the debt ceiling legislation.

Nope. The Fed loans against assets on it's balance sheet *all the time*. It's not considered debt then. I'm not sure where you get your idea of what is "legally bound" by statute. Matlock? There are (weak) arguments against minting a high value coin for this purpose, *none of them* involve debt sold against the asset as "counting" towards the debt ceiling legislation. *All of them* have to do with the intent of the original minting statue wording. There's no argument at all that borrowing against assets deposited at the Fed ever count as debt.

Still not worth it without a matching manufacturer's coupon.

 

You're missing the key step "deposited at the Fed", and also missing the key point I wrote. The federal debt is the total dollar value of all outstanding treasury bills. How they come to be outstanding is irrelevant. We've had discussions in the past about intergovernmental debt and whether/how-much it counts as "real debt", but for purposes of the debt ceiling it does not matter. Your earlier post mentioned the use of t-bills as part of how the coin(s) would be used. All I'm saying is that once t-bills are issued, it adds to the debt which is limited by the debt ceiling.


I've already said that if said coin could be used in a way that didn't involve additional T-bills, you could avoid increasing the debt and thus the need to increase the debt ceiling. However, I don't think it's possible, not because of legality, but because all other methods would require that some third party accept the coin as actually being worth $1T all by itself. No one's going to do that. The Fed wont do it. China wont do it. The issue is less about the legal ability of the US to mint the coin, and how a monetary source obtains value. The US government could also just declare it has a Trillion dollars in the treasury. And the Fed's response will be the same: "We'll let you borrow against it just like we normally let you borrow against the faith/credit of the US economy". The claimed value of something is irrelevant. As I said earlier, dollars have value because they are borrowed, cycle through the economy, and return to the original lender. It's not about the physical coins and paper.

Huh? You just linked to a source which confirms what I just wrote:

"The Sum of debt held by public and debt held by government is the total federal debt".

Both of those are measures of outstanding T-bills Smash. WTF? How about instead of just linking to stuff and assuming it supports what you're saying, you actually find some quote which supports what you're saying? That would be a novel approach, wouldn't it?



What's how it functions? You didn't actually say anything Smash. You just linked to a document. The total federal debt is the total dollar amount of all outstanding treasury bills. Period. There are two methods under which the treasury issues bills:

1. It borrows money from the public, typically to make up for a deficit. This is called "Debt held by public".

2. It borrows money from budgeted government programs. This happens when congress mandates that X dollars fund a given program, but the program has a surplus. instead of having congress pass a new law every time this happens, the treasury simply hands the program X dollars in T-bills, and takes the money out and re-allocates it to some other program. This is called "intergovernmental debt" (or "Debt held by Government" as the document you linked calls it).


Point being those are the only two ways that treasury bills exist, and their total is the total of federal debt. The debt ceiling caps federal debt. Therefore, if you increase the number of T-bills outstanding, you increase the federal debt. If your process to leverage the $1T coin through the Fed involves the treasury handing the Fed a $1T worth of T-bills as it's method of borrowing against the coin, then that process increases the federal debt by $1T. Period. You can't use that as a means to get around the debt ceiling.


For a guy who claims to understand economics and monetary theory, you're sure failing to grasp the most simple concepts here.

For a guy who claims to understand economics and monetary theory, you're sure failing to grasp the most simple concepts here.

Yeah, it's that or you missed something. Either I, and everyone else who has commented on the legality of the coin approach misunderstood a simple fact that you inferred with no actual knowledge of the mechanics...or...you missed something.

Let's reiterate the "everyone else" includes former Treasury secretaries, Nobel Prize winning economic theorists, constitutional scholars (Larry Tribe at the diploma factory I hung out at, for instance) etc.

We're either *all* incorrect....or you missed something.

Occam s razor and all that, obviously we're all wrong. It's weird how you can pinpoint when you start to go to crazytown, and in some ways so disappointingly easy to manipulate.

I never said it wasn't legal. I said that it wouldn't accomplish what people think it would. In more or less the exact same way that someone can claim that "buying a red car will allow me to drive 200mph!", but no amount of pointing out how it's legal to buy a red car means that said red car will allow him to drive 200mph.



Uh huh... It's not about distraction at all though. Krugman said in his article(s) that you'd still end out having to raise the debt to actually use the coin Smash. But Krugman is well aware that downplaying that aspect of the issue and just going along with the whole "yeah. They could do that!" bit provides a helpful distraction. That guy hasn't been a serious economist in like 20 years. He's all about the politics of economic language, not the economics itself.



Or I saw something you missed. And btw, "we" isn't correct. I'm reasonably certain all those experts you're talking about know exactly what I'm talking about. But they know that most people wont know that, so they just don't mention it. They didn't miss anything. I didn't miss anything. You may or may not have missed anything, depending on whether you honestly believe a coin could be used that way, or you're just playing to a crowd you know doesn't know one way or another. I'm still somewhat on the fence with that one.



Occam's razor tells us that we should look at what people actually say about the coin, not what other infer from it. There's no contradiction in reality. It's two different things.

Unless San Diego move to future land, it's still Thursday.

Lol! Total brain fart. Got waaaaay too much stuff going on atm.

Different kinds of busy. Busy with developing and testing some automated configuration processes, licensing implementation, and coordinating some modifications to some already done systems, gives me time between configs/reboots/whatever to do things like post. Might be a bit distracted, but it doesn't prevent me reading and writing on the forum. Busy re-coding some incredibly complicated and obscurely written bastardization of pearl pretty much requires getting one's head completely into what you're doing. Take 5 minutes to think about something else and you'll lose the 3 hours worth of coding ideas you had juggling in your head just a minute ago. Think of it like trying to solve a puzzle in your head, and then writing down the solution you figured out. In my case, there were a half dozen different parts of the script which all needed to be modified in tandem. You can't stop halfway through doing those bits or you risk frankly ending up with the code that the previous guy handed me in the first place (I kid you not, there were sometimes three of four different functions with only slightly different names that did more or less the same thing, and were called by those different names throughout the main program apparently purely because he'd forgotten that he already had a function that did what he wanted. And don't get me started on the meandering path of variable names). And it's not just one change. It's a series of changes, each of which lead to the need to make another set, etc, etc.

That kind of busy involves shutting your door, turning off your phone, and focusing on just what you're doing with as few distractions as possible.

Edited, Jan 10th 2013 6:31pm by gbaji

Man, I miss being seventeen...

But only pretty sure?

He's furiously ************ as we speak.