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View Diary: Why The Trillion Dollar Coin Is A Bad Idea (38 comments)

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  •  I like the coin for the reason (5+ / 0-)

    that it bypasses the Fed. The Fed-Prime Loans-Buy/Redeem Bonds cycle is one of ever-increasing debt -- can't possibly be otherwise -- so it would be a good thing for a modern precedent.

    Besides just ending this kind of hostage-taking once and for all.


    The Internet is just the tail of the Corporate Media dog.

    by Jim P on Sat Jan 05, 2013 at 10:43:59 AM PST

    [ Parent ]

    •  How do you figure it will end hostage taking? (0+ / 0-)

      Are we just to mint new coins whenever the debt ceiling is reached, forever? Won't this eventually call into question the value of our currency?

      •  Yeo, too gimmicky and not a solution, just a cheat (0+ / 0-)

        and then only so long as Congress does not repeal the enabling statute.

        There is a better, constitutional, solution, which rests on current caselaw.  Simply order Treasury to issue new bonds in amount equal to pay obligations from old borrowing.  The Congress has no standing to challenge this under current cases.  Those who do, bondholders, have no reason to do so, as it could only damage value of their holdings.  

        And if they did, current caselaw supports this action: The Impoundment cases (Nixonian) tell us the Exec has no choice but to spend the $ Congress ordered spent as Congress ordered it spent.  Thus, Exec can not really pick and choose who to short.  The spending bills post-date both the Debt Ceiling statute and most recent iteration thereof, and thus they control in a conflict of statutes.  Further, there is no Constitutional authority for Congress to order spending paid by acquiring debt but then ordering the debt not be paid.  That is not what the debt ceiling does.  It is merely the effect of ordering the Exec to adhere to an arbitrary limit that does not take into account the debt-funded spending subsequently mandated.  There is Constitutional authority, however, for the Exec having to spend as mandated by Congress. See, the aforementioned Impoundment cases & Art. I, Sec.9 (treasury shall spend as Appropriated).

        While Congress has the ennumerated power to issue debt, ('To borrow Money on the credit of US', Art.I, Sec.8, cl.2), it likewise has the ennurated power "To coin Money, and regulated the Value thereof".  If that can be delegated, ala the BigCoin, so can the borrow to borrow.  Further, by knowingly appropriating beyond income, with full knowledge this requires the Exec to spend beyond same, it has already borrowed the money.  The Debt Ceiling does not unborrow it, anymore than it unspends it.  It merely unconstitutionally seeks to prevent the Exec from issuing instruments to effectuate what was already ordered by 'Law' borrowed and spent.

        IOW, the Congress simply does not have the Constitutional power to default on debt.  A.Hamilton was no dummy.:)

        •  Generally persuasive-but interest rate contagion? (0+ / 0-)

          Re:  "bondholders, have no reason to do so, as it could only damage value of their holdings."

          Certainly bondholders could have a political, rather than financial, reason to challenge these bonds.

          Higher interest rates would most likely result from this risk, and a perception of other unpredictable risks, and general confusion.

          Perhaps a new category of bond could contain terms  carefully drafted for the purpose of ensuring that all of the above risks would be borne by this category of bond, thereby protecting all other US government bonds from doubt and its affect on interest rates.

          It would be fun to call this category "Boehner Bonds", although its formal name should probably be something along the lines of 'debt ceiling resolution' bonds.

          •  But huge amounts of thier investments would be (0+ / 0-)

            worthless if they did so (i.e., the existing bonds otherwise defaulted on, not the new ones).  Most of these folks are institutions or imo apolitical when it comes to these amounts of thier $.  And do not underestimate the pressure from other bond holders, since most of these folks are so insestuously intertwined financially.  Also, for what its worth, it would be an interesting legal question re: feduciary duties.

            But I love the idea of naming the 'Boehner Bonds'.  I can just hear Thugs saying "Boehner is worthless" :)

            •  Bonds bonds go away. (0+ / 0-)

              The banking system needs them. A government needs them in a time of emergency. (And no, the Permanent War of Aggression Formerly Known as the War on Terror, is NOT an emergency.)

              In general bonds are very bad bad things to have to give out, even when they are necessary and unavoidable.

              Because you pay interest. As time goes on, as more bonds issue, you pay more and more interest. Debt-service was more than 25% of our last deficit, and its proportion grows to over 40% over the next decade. If we had simply printed our own currency, as sovereign nations have done since recorded history began, as we did in the Civil War, all that debt-interest would not exist.

              We need to cut the Bankers out of what we do, in just the way, and because, the Bankers have cut humanity's and nation's needs out of their considerations.

              It's a matter of National Security.


              The Internet is just the tail of the Corporate Media dog.

              by Jim P on Sat Jan 05, 2013 at 05:06:14 PM PST

              [ Parent ]

              •  The minute you find a way to borrow money without (0+ / 0-)

                paying interest, I'd like to know.

                Your alternative is nothing but runaway inflation from monetarizing debt equal to the entire GDP.  Ask the Weimar Republic about that.

                And this: 'As time goes on, as more bonds issue, you pay more and more interest.' is untrue.  We've borrowing more and more for years and the interest costs have gone down over the last 4 years, and indeed have been historically low even during the preceeding 8.  

                That said, you are general correct that we can and will monetarize large parts of the debt, as has always been done at least in modern times.  But there is no reason to do so faster than necessary.  And its really not possible politically to do so faster than the Fed already is (what do u think the Fed's been doing?)

            •  "Certain bondholders" (0+ / 0-)

              is what I intended to write before my spell-checker decided that "certainly bondholders" would be better grammar...

              In other words, some politically motivated people could buy a few bonds specifically for the purposes of acquiring standing.

              Re: "pressure from other bond holders"

              This is precisely the political factor that should be sufficient to deter Boehner or McConnell from carrying out their threats to delay debt ceiling increase approval to the extent  of causing real disruption to financial markets.

        •  For sure. (0+ / 0-)

          But the Coin has the added advantage of not creating interest-debt. It has the advantage of being a modern precedent demonstrating we don't depend on the vast criminal conspiracy we call "Central Bank" or in the US specifically "Federal Reserve."

          So for those reasons I like it. (And "vast criminal conspiracy" is not snark, it's reportage.)


          The Internet is just the tail of the Corporate Media dog.

          by Jim P on Sat Jan 05, 2013 at 04:58:03 PM PST

          [ Parent ]

      •  Because the trump card will be shown (0+ / 0-)

        and the hand called. The DC crazies are using the threat because they think it can't be beaten. Show 'em it can.

        And anyway if we're not declaring currency into existence, the Fed does it as it stands.

        In fact, it would be better if we followed the Constitution and not the Federal Reserve Act, as it would cut out the middle-man and end the debt-servicing: 25% of last year's deficit came from paying off interest on bonds and the like. That'll be near 40% by 2020 or so.

        If anything it would strengthen our currency (as opposed to having Fed Reserve Notes).


        The Internet is just the tail of the Corporate Media dog.

        by Jim P on Sat Jan 05, 2013 at 04:54:15 PM PST

        [ Parent ]

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