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View Diary: House Republicans mock idea to save economy from threat of GOP sabotage (146 comments)

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  •  What effect would a trillion dollar coin (0+ / 0-)

    have on inflation and the value of the dollar?

    Lo que separa la civilizacion de la anarquia son solo siete comidas.

    by psilocynic on Tue Jan 08, 2013 at 09:13:54 AM PST

    •  None. The money is already spent. (16+ / 0-)

      Its already been borrowed.

      All the coin would do would assure creditors that the U.S. didn't intend on deliberately crashing the world economy anytime soon by refusing to pay its bills.

      Tax and Spend I can understand. I can even understand Borrow and Spend. But Borrow and give Billionaires tax cuts? That I have a problem with.

      by LiberalCanuck on Tue Jan 08, 2013 at 09:46:56 AM PST

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      •  We don't need a Big Coin to reassure creditors. (2+ / 0-)
        Recommended by:
        ZedMont, aitchdee

        In fact, they'd probably think the whole government is as crazy as the House GOP.

        Just keep paying bills and the interest as it comes due, and keep track of the cost of debt issued after the Constitutionally meaningless "debt ceiling" is reached, so we can show the cost of the irresponsible Republican hostage taking.

        And keep running the government that We the People rely on to keep us safe and promote the general welfare.

        2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

        by TRPChicago on Tue Jan 08, 2013 at 10:35:23 AM PST

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        •  You're right. Just keep on paying debts and dare (2+ / 0-)
          Recommended by:
          aitchdee, TRPChicago

          the Republicans to a Constitutional challenge.  Talk about embarrassing.  Even if they win they lose, because the only remedy if they win is to deliberately destroy the economy after the Democrats have saved it.  If there was ever any doubt as to who would be responsible, that would remove it.

          And who the hell is Grover Norquist???

          by ZedMont on Tue Jan 08, 2013 at 11:01:16 AM PST

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    •  Great question. (9+ / 0-)

      As LiberalCanuck says - none. One reason, of many, is that the United States enjoys fiat currency status. The $US is a global currency, unlike currency as Zimbabwe's - for example.

      There could be a slight inflationary effect that the Fed gauges with its "core" inflation report. But the reading will be negligible just as it was negligible when The Fed created $1.29 trillion to buy mortgage-backed securities in 2009.

      •  Theoretically less inflationary than debt (5+ / 0-)

        since new money for debt service is not required.

        •  Yes. (2+ / 0-)
          Recommended by:
          Vote4Obamain2012, aitchdee

          There can be some comfort in that the money needed to continue government operation would be nearly free. We should not, however, relish the option of The Mint issuing a trillion dollar coin. I certainly do hope this remains in the realm of the theoretical.

        •  And also (1+ / 0-)
          Recommended by:
          aitchdee

          as I've gathered from my reading, "real" debt becomes bank reserves which are used to back a pyramid of money creation through lending.  Because the coin would NOT become "capital reserve" in a commercial bank's accounts, it wouldn't form the basis for direct monetary multiplication.
           

          •  As I understand it (3+ / 0-)
            Recommended by:
            offgrid, aitchdee, cynndara

            the credits from PCS would go to the treasury general account which is not included in reserves, unlike the TT&L accounts where they accumulate taxes and bond proceeds. The money is only transferred into reserves when it is spent. Bank lending is not constrained by reserves, and reserve requirements are made up ex post facto over a 14 day averaging period. The Fed is lender of last resort and automatically makes up any shortfall in reserves if the bank fails to do so in the interbank market. The Fed now pays 25bp on reserves and doesn't currently soak them up with treasuries.

            The private sector may pine away for those treasuries that aren't being offered, but there are plenty of other investment opportunities in our economy in the private sector. Let them put their money into something productive instead of the free lunch treasuries offer. That might actually be a little stimulative.

    •  Zero (4+ / 0-)
      Recommended by:
      cynndara, ferg, Vote4Obamain2012, aitchdee

      It's essentially an inter-departmental fund transfer, except the Fed is only quasi-governmental.

      Economics is a social *science*. Can we base future economic decisions on math?

      by blue aardvark on Tue Jan 08, 2013 at 10:30:52 AM PST

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    •  Inflation and Devaluation are likely (0+ / 0-)

      The US dollar is a fiat currency, which means there is no obligation to make a fixed exchange in a commodity - it keeps its value as long as markets have confidence in the currency. Market confidence takes a very long time to establish, but actions that undermine confidence can very rapidly drop market confidence  (inflation and devaluation of the dollar).

      Having a successful fiat currency requires that markets believe the government will increase the money supply no more than modestly faster than economic growth (its actually more complex than this).

      There is great concern in financial markets that the US is having unsustainable increases in government debt from already very high levels.  The battle with Congress is partly over how rapidly US debt will increase.  Using the coin loophole to continue the growth in Federal spending at a faster rate than previous expected and increasing debt would undermine confidence, and tell markets that the historic controls on this increase in debt have failed.

      The debt rating agencies who have not already downgraded US debt would have little choice but the do so.

      Other countries will ramp up efforts to develop alternatives to the dollar as a world currency.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Tue Jan 08, 2013 at 11:04:38 AM PST

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      •  In which case… (0+ / 0-)

        …we'd be better off minting 16 coins thereby wiping out the debt.

        Teh stoopidTM, it hurts. Buy smart, union-printed, USA-made, signs, stickers, swag for everyone: DemSign.com. Get your We are the 99% Yard Sign.

        by DemSign on Wed Jan 09, 2013 at 12:15:46 AM PST

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        •  Why not then make 310 million (0+ / 0-)

          Tiny $1 T coins and give one to every citizen!  No more wealth inequality.  If Buffett has $1040 billion, and I have $1000 billion , he is only 4% more wealthy.  As we would all be wealthy nobody in the country would need to work if they did not want to.

          The most important way to protect the environment is not to have more than one child.

          by nextstep on Wed Jan 09, 2013 at 12:29:08 AM PST

          [ Parent ]

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