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View Diary: New MSM Trillion Dollar Coin Wave: Here's The Big Story (20 comments)

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  •  About a month ago, I read an article about the PCS (0+ / 0-)

    and  buried deep within the article was a paragraph explaining why President Obama was unlikely to pursue such an approach which mentioned his legal advisors told him it was unlikely to survive a constitutional test.

    It was not really an announcement, as much as a report of off the record inside comment, sorry I miscommunicated that part.  I'll see if I can find the article later this afternoon.

    I remember though thinking it seemed like a weak argument, that wasn't convincing, and I was annoyed if Obama rejected the idea on such a flimsy basis.

    I caught the aspect of your proposal that the administration would not be injecting any funds into the economy that were not approved of by congress, which is an excellent point politically, which may in fact, be a tipping point factor that might convince our cautious president he is not really doing anything other than keeping the government solvent to spending funds already authorized by the legislative branch.  

    In one of your next posts I think you should emphasize this point to refute the concern that this would be overreaching by the executive branch, infringing on the legislative's branch control over the budget.  It seems to me that one might be able to argue the opposite.  That once the legislative branch has authorized spending programs, then it is the executive branch's duty to implement and execute those plans, so the whole debt-ceiling constraint becomes a constraint on the executive branch's ability to fulfill this obligation.  

    If the legislative branch issue two contradictory sets of bills, they seem to me to be the party responsible for creating the extraordinary situation that requires an extraordinary response by the executive branch -- which set of laws does the executive branch implement?  

    The strongest argument seems to me to be using another capacity already authorized by the legislative branch - that of PCS coinage to maintain continuity of spending and payments, until the legislative branch gets its act together, is actually the most conservative, and most consistent with the separation of powers.

    With regard to your last point on inflation, I'm still puzzled.  My memory of my macro-economics classes was that expanding government debt is thee the traditional way of expanding money supply, and if done so beyond the expansion of the "real production" in the economy the result is inflation.

    So, I understand that you are suggesting that expanding the reserves is not doing this but only enabling government spending authorized by congress.  

    But, this still seems potentially inflationary to me.  While I support the idea of Keynesian  stimulus during times of great recession, and acknowledge that government spending is a direct component of GDP, it still seems suspicious to me that this be counted fully as equivalent of an expansion of "real production."  

    If we were to inject $60 trillion of deficit spending into the economy over some period of decades, would we not expect inflation of "hard assets" such as real estate and commodities as greater numbers of dollars are chasing a finite number of "real goods?"

    I accept your argument that "spending that money into the economy, without floating debt" might be less inflationary that "doing it along with debt," but it would seem to me that both would have some potential for inflation.

    I'm reminding of the text book examples of Keynesian economics where critics suggested that we hire people to dig holes then then hire them again to fill them up.  But at least they have wages that create consumer demand which then stimulates real production.

    But, how much better it would be to have them to real productive work such building productive infrastructure such as roads, bridges etc.  

    I've used this argument to suggest that the President infrastructure bank or even just domestic spending on Medicare, Medicaid, and Social Security have higher economic multipliers than military spending just on the basis that the spending is done domestically, and health care expenditures have "real economic" value as opposed to leaving military hardware, or exploded bombs overseas. (Whatever "utility" one attributes to "feelings of greater security" does not seem to me to count as much as a "real productive" assets or good, - but I'll admit I'm struggling to understand this distinction more clearly.)

    So, perhaps, one could argue that anything people are willing to spend money on is a "real" good or asset, but this doesn't seem right to me.

    Here I'll admit I'm beyond the edge of my understanding of economics.  

    But, as I think about it more, would it not be fair to say the second part of your proposal would be a subset of Keynesian stimulus plans? Perhaps, a more clever one, but likely to be opposed by everyone who already oppose Keynesian stimulus?  

    BTW, I started the Keynesian Kossacks group thinking we need such stimulus now to counter the "austerity bomb" impacts of excess cuts backs to government spending - so I'm certainly not opposed to it. But, I've always thought we do incur a trade-off of  some degree of inflation risk that we should be willing to make up for by cutting back on such spending during times of stronger "natural" economic expansion. ?

    Now, I'm wondering if I should be republishing your PCS proposals and analysis which I have learned a great deal from in the Keynesian Kossacks group?

       

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Sat Dec 15, 2012 at 08:37:07 AM PST

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