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View Diary: Platinum coin might be legally required in absence of debt limit increase (144 comments)

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  •  Of course it's silly ... (15+ / 0-)

    But as Krugman wrote yesterday:

    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. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, “My god, we can’t dress the secretary up as a clown!” Even when it will make him a hero who saves the day?
    Sure it's undignified to engage in such a ploy, but is it really more important that the administration retain its dignity than it is to prevent economic terrorism from succeeding?

    “What’s the use of having developed a science well enough to make predictions if, in the end, all we’re willing to do is stand around and wait for them to come true?” - Sherwood Rowland

    by jrooth on Wed Jan 09, 2013 at 09:55:11 AM PST

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    •  Krugman thinks it's silly only because he (6+ / 0-)

      has only recently begun thinking through the logic of fiat currency -- he's only begun admitting that bond vigilante's role is different with fiat, that the gov makes money out of thin air, and he wiggles about some other stuff.

      In other words, he is slowly moving more towards MMT.

      The Coin idea isn't silly for MMT, because MMT realizes that all money is like the Coin -- simply produced out of thin air.

      •  Well, independent of how theoretically sound (5+ / 0-)

        it may be, there is something basically undignified about twisting a law intended to allow the striking of commemorative coins of nominal denomination to this far more consequential purpose.  But as I said we ought not let that stop us if momentary indignity can save us from disaster.

        As for MMT - I am studying up on it but it but I'm not ready to embrace it totally.  I've seen too many other theories of elegance and simplicity founder on the stormy lee shores of reality.

        “What’s the use of having developed a science well enough to make predictions if, in the end, all we’re willing to do is stand around and wait for them to come true?” - Sherwood Rowland

        by jrooth on Wed Jan 09, 2013 at 10:35:38 AM PST

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        •  At it's most basic, MMT is simply a description (1+ / 0-)
          Recommended by:
          joanneleon

          of how a fiat money works.

          •  Yes I understand that. (2+ / 0-)
            Recommended by:
            pdx kirk, Kay Observer2

            But there is no edict from the omnipotent power of your choice decreeing that even such a lovely and useful concept as fiat money will always work as we would like it to in every real-world circumstance.

            Models are wonderful things and I use them all the time professionally and in personal life (as do all thinking beings.)  That doesn't mean they're always right.  And when we're trying to model anything as messy as human behavior, even in aggregate, there's a lot of potential for the appearance of previously unanticipated complications.

            So I'll ask you to excuse my caution with regards to this (and any) wonderful new idea.

            “What’s the use of having developed a science well enough to make predictions if, in the end, all we’re willing to do is stand around and wait for them to come true?” - Sherwood Rowland

            by jrooth on Wed Jan 09, 2013 at 10:55:13 AM PST

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            •  Got ya. I'm not an economist, so I just go (5+ / 0-)
              Recommended by:
              jrooth, Garrett, pdx kirk, Remillard, mbguenth

              for the big picture:

              Fiat money is created out of thin air.

              The Fed Gov can never go broke.

              Taxes don't pay for Fed Gov spending.

              The deficit hawks are either lying or ignorant when they compare the Fed Gov budget to a household's, and same with most Dems.

              And some other pretty simple facts.

              •  But we have a set of leaders (2+ / 0-)
                Recommended by:
                jrooth, slinkerwink

                that no matter how valid those facts are, have been pushing the idea that the federal budget is like a family budget which requires a concept that the money in the system is finite (even though we know it is not).

                We have a ruling class that is hyperparanoid of inflation.

                And basically, if the president decided to do the trillion dollar coin and start talking about MMT, would that not completely contradict everything he has been lecturing the country about for the last four years?


                "Justice is a commodity"

                by joanneleon on Wed Jan 09, 2013 at 01:18:12 PM PST

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              •  Actually, in MMT (1+ / 0-)
                Recommended by:
                jrooth

                fiat money has value because the government demands it be used to pay taxes and because the government demands a vendor accept it as having value (for government purchases as well as purchases by any person presenting that currency).  That's why your dollars have a statement on the front saying the note is legal tender for all debts public and private.  Government can never go broke as long as it can make or persuade citizens and other countries it has the power to compel tax collection in the currency it specifies, and as long as it has the power to compel vendors to accept its currency.  Weaken government enough, cut taxes enough, and you can find yourself in a world of hurt.  That's the world Republicans and the idiot Grover Norquist want to bring to pass, though they clearly haven't imagined the impact their policies will have on defense expenditures.  The Euro is a currency under joint governments control, and no one government issues it.  If we turned the Fed into a currency that required all 50 states to agree to change the volume of issuance (and made votes by states roughly proportional to their economies), then we might have problems like those in Europe.  I would hate to live in Mississippi or the other Red states that get more from the Federal government than they contribute (it would make them get the same treatment Europeans are giving Greece).  Currency board systems like Hong Kong's peg their currency to the "value" of other currencies as determined by trade in that currency.  Since international trade is conducted in currencies of account as negotiated by the trade partners, there is a lot more limitation on value imposition by government action in the trade sphere.  The  Hong Kong system is not a fiat system, even though it is based on the fiat currency of the US, because of that intervening market/trade function.  MMT has a lot of complex implications and ramifications that need a great deal of work yet to understand.  But the fact is, MMT explains a lot of phenomena standard economics fails to explain and more importantly, fails to predict.

                America needs a UNION NEWS channel. We (unions) have the money, we have the talent. Don't buy 30 second time slots on corporate media, union leaders; fund your own cable news channel and tell the real story 24/7/365

                by monkeybrainpolitics on Wed Jan 09, 2013 at 01:30:18 PM PST

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        •  Like Shutting Down the world economy in a hostage (5+ / 0-)
          Recommended by:
          DRo, pdx kirk, Kay Observer2, aaalb, cazcee

          crisis is dignified?

          /Pshaw

          Happy little moron, Lucky little man.
          I wish I was a moron, MY GOD, Perhaps I am!
          —Spike Milligan

          by polecat on Wed Jan 09, 2013 at 11:03:08 AM PST

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      •  Right you are, katiec. And... (3+ / 0-)
        Recommended by:
        katiec, Remillard, joanneleon

        there is more. A couple of times in his blog he has written about the times he was wrong on some issue. He proudly said that new facts and new understanding led him to do the right thing and change his mind. And he is right, and he has lived up to his words.

        So, he has a tough problem right now. He built his career as an economist of some variety. I can't name it but I'm sure that he knows what label applies. But whatever it is, those old labels are over now, and new ones need to be developed. So, he doesn't know what to do about becoming a new kind of economist.

        I think he should become an expert in the macro view of democrato-Capitalism.

        But whatever the label, he will have to abandon much of what he built his career on.

        Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

        by hestal on Wed Jan 09, 2013 at 10:56:59 AM PST

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      •  The bond markets will go ape. But they're already (0+ / 0-)

        in funky shape with the yields on the T-bill being so low, so I say go for it.

        It would be nice to fully fund things that Congress hasn't gotten around to as well, but that may not be legal.

        Happy little moron, Lucky little man.
        I wish I was a moron, MY GOD, Perhaps I am!
        —Spike Milligan

        by polecat on Wed Jan 09, 2013 at 11:02:34 AM PST

        [ Parent ]

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