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View Diary: Abbreviated pundit roundup: Giffords and Kelly launch group to take on the NRA (60 comments)

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  •  In effect, that's what the Fed is doing (1+ / 0-)
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    by buying up commercial paper from the banks and mortgages held by Fannie and Freddie.  I like Krugman's idea of the treasury's selling "Moral Obligation Coupons" to get around any debt ceiling debacle.  His best idea is having the Fed buy the coupons.

    So the government should have no trouble raising a lot of money by selling MOCs. It’s true that if they’re sold on the open market, they would probably sell at a substantial discount from face value, so this would in effect be high-interest-rate financing. But that’s better than either default or giving in to blackmail.

    And maybe the coupons wouldn’t have to be sold on the open market; why not just have the Fed buy them? Bear in mind that the Fed doesn’t always buy safe assets; it’s buying a lot of mortgage-backed securities (from Fannie and Freddie; see above), and during the worst of the financial crisis it bought lots of commercial paper. So why not slightly speculative pieces of paper sold by the Treasury?

    The best thing about having the Fed buy such coupons is that the Fed could just sit on them indefinitely, and their issue wouldn't count against the debt.

    You can read about his idea, which is no stranger than minting a trillion-dollar coin, on his blog.

    "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

    by SueDe on Tue Jan 08, 2013 at 07:19:56 AM PST

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