Posted on 01/09/2013 8:37:01 AM PST by Qbert
Well, the trillion-dollar-coin thing — deal with the debt ceiling by exploiting a legal loophole to have the Treasury mint one or more large-denomination coins, deposit them at the Fed, and use the cash in the new account to pay bills — has really taken off. Last month I spoke with a senior Fed official who had never heard of the idea; these days it’s all over.
There seem to be two kinds of objections. One is that it would be undignified. Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac — a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, “My god, we can’t dress the secretary up as a clown!” Even when it will make him a hero...
[Snip]
What the hysterics see is a terrible, outrageous attempt to pay the government’s bills out of thin air. This is utterly wrong, and in fact is wrong on two levels.
The first level is that in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised.
[Snip]
So minting the coin would be undignified, but so what? At the same time, it would be economically harmless — and would both avoid catastrophic economic developments and help head off government by blackmail.
(Excerpt) Read more at krugman.blogs.nytimes.com ...
"What the hysterics see is a terrible, outrageous attempt to pay the government’s bills out of thin air. This is utterly wrong, and in fact is wrong on two levels. The first level is that in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised."
The former Enron advisor crafts a new accounting fiction...
I wouldn't worry about the first objection, that it is an undignified thing to do. The economic reputation of the USA is already at rock-bottom as it is.
We actually own most of our debt, not China. A common misperception. So just forgive our own debt.
[Snip]
So minting the coin would be undignified, but so what? At the same time, it would be economically harmless — and would both avoid catastrophic economic developments and help head off government by blackmail.
Or, more accurately, it would be no more harmful than the Federal Reserve creating trillions of dollars out of nothing to lend to the government. When the dam breaks inflation is going to be ugly. Don't get stuck in cash or bonds.
Destroying a nation’s currency with massive infusions of fake (fiat) “money” is definitely NOT “economically harmless!”. Indeed, its exactly the prescription for (finally) bringing great nations to ruin. Krugman is not so ignorant to not know this. Any good high school history class covers this simple fact. So why is he lying to us about it ?
Here’s a useful question that Krugman should ask himself - What would happen if I tried this in the private sector, would I go to jail or to a local psychiatric ward?
“We actually own most of our debt, not China. A common misperception. So just forgive our own debt.”
We?
Probably both... in the psychiatric ward of the jail, at least if the world outside is sane.
The comments on the slimes site is generally to be expected - mostly leftists responding. One, though, of note turns the tables a bit: Imagine a republican president wanting to finance a war cheaply, and then minting overnight an $800 billion coin to do so. The left would go NUTZ in such a scenario.
"We" means the individual citizens and businesses of the country while "our" means the parasites in Washington. If those bonds are "forgiven" (i.e. stolen by the government), expect some very, very rough times.
Every bank's reserves in treasury bonds immediately become worthless. I hope you are the one in the front of the line for the bank run when the news hits.
How about your insurance company's investments? That life insurance you've put money into for your entire life? Gone instantly, or at least greatly reduced in value. And the reserves for car and property insurance disappear too, so you better hope that it isn't a bad year for disasters if you wreck your car.
Have bonds in your retirement account or even some savings bonds in your bedroom drawer? You better hope that WalMart can use you as a greeter when you hit seventy.
Just print it.
Till the Chinese informed him of the consequences of trying to pay debt with monopoly money!
Indeed...
Indeed...
It’s magical thinking. Straight up voodoo. Worse than “quantitative easing” by an order of magnitude. It’s the stuff of economic Zimbabwean laughingstocks and will destroy what credibility remains for US economic might. Which is, of course, what these transnational leftists no doubt want to do, usher in a single world currency under a single world authority. Got to destroy the US and the dollar first, and they’re just about there.
How long before we take a wheelbarrow of cash to the store to buy a loaf of bread?
William Flax
This is stupid gone to seed.
“What would happen if I tried this in the private sector, would I go to jail or to a local psychiatric ward?”
What if any impact does this have on the ‘BitCoin’ realm?
Are these people in danger by an intrusive govt? Will the govt go after these folks overnight?
"Destroying a nation’s currency with massive infusions of fake (fiat) “money” is definitely NOT “economically harmless!”. Indeed, its exactly the prescription for (finally) bringing great nations to ruin. Krugman is not so ignorant to not know this. Any good high school history class covers this simple fact. So why is he lying to us about it ?"
The whole idea is to create a false sense of "stability" in the short-term so that they can ram home as much of their progressive agenda as possible. When it all comes crashing down at some future time, it won't bother them at all, because if all goes according to plan, they will have already won.
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