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View Diary: The Debt Ceiling Is Not Unconstitutional, Right Now! (56 comments)

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  •  Though the author of the piece ... (3+ / 0-)
    Recommended by:
    psyched, Letsgetitdone, Roadbed Guy

    ... is referring to $250b or $500b denominations. Any "real big" denomination works, as long its a workable fraction of the debt ceiling. A single coin or a few can be used to retire some US bonds in possession of the Federal reserve and so reduce the total debt outstanding ... so there is no need to change the current day to day operations, just the occasional deposit of one or a few jumbo coins at the times when previously we went through the formality of raising the debt ceiling.

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    by BruceMcF on Thu Jun 30, 2011 at 10:26:54 AM PDT

    [ Parent ]

    •  As it happens (2+ / 0-)
      Recommended by:
      psyched, Roadbed Guy

      I'd like to change the day-to-day operations by using coin seigniorage to provide a basis for spending all Congressional appropriations, until Congress repeals its stupid requirement that the Federal Government must issue debt instruments whenever it intends to deficit spend.

      The importance of using coin seigniorage this way is that it will demonstrate a number of very important truths:

      1) when there's an output gap, spending money without issuing debt won't cause inflation;

      2) the national debt is very, very easy to pay off if we will only stop issuing debt when we deficit spend; which, in turn, should demonstrate;

      3) that our level is not very important, because however high it is has no effect at all on our spending capacity); and

      4) it is irrelevant whether we run deficits or not; but since deficits add to private sector financial assets dollar-for-dollar, what is relevant is the effects of deficit spending.

      •  On the other hand, ... (2+ / 0-)
        Recommended by:
        psyched, Roadbed Guy

        ... there is the principle of greater institutional dislocation leading to scope for greater unintended consequences.

        And if you sneak in and cancel bonds being held by the Fed, you won't be immediately taking away Wall Street income, so its far more likely to actually be done by the White House, which is when all is said and done fundamentally a Hedge Fund Democrat administration.

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        by BruceMcF on Thu Jun 30, 2011 at 06:18:21 PM PDT

        [ Parent ]

        •  At this point (2+ / 0-)
          Recommended by:
          psyched, dmh44

          Bruce, at this point, I am more afraid of the demonstrated negative consequences of the institutional arrangements we know than the unanticipated consequences of disrupting those arrangements.

          •  If so, then adding ... (0+ / 0-)

            ... unnecessary changes on top of necessary changes may not be the best.

            And its certainly not necessary to change any of the nuts and bolts of regular Treasury operations to nullify the impact of the debt ceiling in interfering with executing fiscal policy as passed by Congress.

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            by BruceMcF on Fri Jul 01, 2011 at 11:35:31 PM PDT

            [ Parent ]

            •  I think the issue (0+ / 0-)

              is not only to nullify the impact of the debt ceiling but also to nullify the impact of the debt itself on people's perceptions about whether we ought to solve our problems or not.

              Over time I think we'll be able to persuade many people that the MMT account of fiat money and its implications for deficits, debts, fiscal sustainability, and fiscal responsibility are correct. But there will still remain a very large portion of the population that thinks of Government debt in the same way they think of household debt, mainly as a negative. For those people, it would be much better if we created a system where we retained the gap between spending and tax revenues during periods where we're experiencing an output gap, and yet had declining or nearly zero public debt. This is true because if we did that much of the opposition to enacting the programs we need to enact to solve our increasingly serious national problems would melt away.

              •  So how do we "persuade" Obama to do what is right? (0+ / 0-)

                We don't seem to have a good megaphone in the media. And even in our own clusters the people do not actually understand the issue and the solution.  I had thought the seigniorage stuff would require legislation.  Now I am slowly being convinced that if the Congress wants to prevent the executive from sweeping these funds into the general revenue bucket then the Congress will have to create new legislation for that purpose and the pres would have the opportunity to veto such legislation.  The primary point here is that Obama need not capitulate to the morons. If he does then he is not protecting the constitution and this republic.  It is an Abe Lincoln moment.

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