Should the US Treasury mint a Trillion-dollar coin?

[luke viia]

Vhy, could you elaborate a bit more? You're probably right -- that is how I always tend to think of money on some level, though I have come to understand that for the money creator, nothing is as it seems ... at any rate that link isn't really clearing things up for me, lol.

 

it's akin to owning a business, having employees, guaranteeing them wages, and then, upon not having the wages you promised them, suggesting that you will just create more wealth spontaneously by hand-waving while standing in the room with your angry employees. Now let's talk about trust - why would the employees trust you if you do this as a "solution" to owing them money? How could they trust such a tactic? Bring it back to government scale, and adding the fact that we're already all sharing a fiat fairyland illusion that's keeping us all 'wealthy,' and can you see why this idea seems like a bad one? It's one thing to mint money to have money to give out (what the country has always done by necessity), but minting money to pay yourself back? WTF?

 

The employees would trust this magical gesture, iff by the end of the month some number is added to their bank-accounts. (And that's why I thought the house-buying analogy is similar, btw). The same could happen when a 1T coin is pressed. One of the problems with the debt ceiling is for the government to pay it's bills to all the people working for the government. So by simply lifting the ceiling (or pressing the 1T), the government could pay its employees. It's a legal issue in the sense that congress should support it and all, but other than that, why not lift the debt ceiling?

 

What you're seeing btw, is a huge negotiation over the backs of a lot of people. A negotiation on how the manage a country and spend money. Personally, I think it's clear this problem should be solved. But the way is just immoral. Either way, it does more harm than it does good. If only for the ease for congress to break with earlier made obligations. The real problem is not the coin. A problem may not even be the economy. The real current problem is politics.

 

Anyways, I get the impression that although you may not completely agree with, you're getting a better picture of how/what/why. Even though this economy might still seem very alien. The 'joke' actually is that this alien economy is man-made. There is no absolute science involved similar to that in physics. If you take away people, you immediately take away the economy. There's no natural principles (directly) involved. It's our game, so to speak. If you tell people it's june, and most of them believe it, well, guess what: it's june! No matter the amount of snow in the streets. I'd agree there's quite an amount of creativity involved. And if that creativity has bad intentions behind it, you'll see stuff happening like in those Enron days. But that doesn't necessarily mean the game is bad or anything. The only notion someone may have to stretch a little bit, is the notion of value (or future returns).

 

Good post, and yeah I am getting a slightly better picture of the workings behind this shared fantasy. Not really enjoying what I'm finding out, of course, but thanks for trying to lay it all out as the current system sees it. And I agree that the root problem is politics right now, but to be honest, I think money within American politics is the root of the root. =P

[johnnix]

Countries with own currencies have in the past (and will in the future) pay off their debt by printing money wich is really no different than crafting a big coin. Problem is it leads to inflation, but if you beleive in new keneysian's works like Krugman, inflation won't arise now because the USA is in a liquidity trap, were usual monetary rules don't apply for various reasons (zero interest rates among them).

There is many proof of the situation to be found in japan's economy since 10-15 years and in the US since 5 years.

Once the economy starts going again, and rates goes up, inflation starts arriving and a that time the fed is going to "buy back" the money created to starve off inflation.

You should really read some of krugman's blog poqst on liquidity trap, zero-lower bound, and the effects of crafting the coin because he explains it way better than I am.

 

Oh and don't forget that if you pay people working for the governement with this platinum money and they spend it on things like cars and houses, etc... it's becoming something of value all of a sudden...

[Guest Vhy]

Vhy, could you elaborate a bit more? You're probably right -- that is how I always tend to think of money on some level, though I have come to understand that for the money creator, nothing is as it seems ... at any rate that link isn't really clearing things up for me, lol.

 

Money is always a debt in the sense that the government owes you a credit against your tax liability.

 

David Graeber on the origin of coins:

 

“Say a king wishes to support a standing army of fifty thousand men. Under ancient or medieval conditions, feeding such a force was an enormous problem—unless they were on the march, one would need to employ almost as many men and ani­mals just to locate, acquire, and transport the necessary provisions. On the other hand, if one simply hands out coins to the soldiers and then demands that every family in the kingdom was obliged to pay one of those coins back to you, one would, in one blow, turn one's entire national economy into a vast machine for the provisioning of soldiers, since now every family, in order to get their hands on the coins, must find some way to contribute to the general effort to provide soldiers with things they want. Markets are brought into existence as a side effect.”

[VIII]

a future world war and reconfiguration of governments is the most likely way the debt will reset, according to my finance major sibling

 

also post consumerism in the next few generations might mess things up even more

[goDel]

Money:

 

(I know it is a pretty sad clip, but the explanation is actually pretty good, I think)

[luke viia]

um, not sure who's replying to me at this point, but thanks for all the attempts at explaining money to me. I do have a grip on the concept that's as good as the average person, btw... that IMF video was a little on the lame side.

 

Vhy - so from the govts perspective, money is always a debt. I can understand that. How does it play into your opinion on the $1,000,000,000,000 coin (opinions are what I'm really after)? (and i like the explanation of the origin of coinage, but it was in no way that simple or smooth...)

[Guest Vhy]

The coin's just an accounting trick, but I think the guy who proposed it was trying to make the point that bonds are operationally unnecessary.

 

My understanding of how deficit spending works is that the fed allows banks to overdraft their account to buy treasury debt, then spending by the treasury adds reserves to the banking system and the banks pay back the fed. So what happens if congress cuts out the middle-men and lets the treasury overdraft it's account at the fed? The fed pays interest on reserves instead of the treasury paying interest on bonds - in other words there really is no reason to raise the "debt limit"

 

The trillion dollar coin is not as elegant as removing the overdraft; it just happens to already be legal.

[johnnix]

borrow one trillion in debt by raising the debt ceiling, or create money (a bit like debt) by creating the coin, not very different from an economic perspective if i understand it right.

but people don't see it that way so it's a bit controversial

[Guest boo]

This is a great analogy:

 

 

Krugman and others also say that, as crazy as this sounds, it’s less crazy than Congress forcing the country into a default by not raising the debt ceiling. Krugman does acknowledge that it may 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,” he writes. “And the response of the nervous Nellies is, ‘My god, we can’t dress the secretary up as a clown!’ ”

i don't like that analogy