azulmagia
Complex Systems
People
still care about credit ratings? Man, are we
that stupid? They're structured
stupidly and have never predicted much of anything- besides in hindsight.
Even if that is true, it wouldn't do to have downgrades in back-to-back years resulting from, well, stupidity.
First of all, who gives a s**t about inflation? How about we worry about crossing that bridge once we get to it?
Secondly, if the government says magical fairy dust is money, magical fairy dust is money. I don't see what is so hard to grasp about that.
And thirdly, since you seem to think the idea itself is silly, do you have a solution to this dilemma that would actually work? I mean, you're supposed to be the closest thing we got here to an expert, supposedly.
Again, credit rating agencies are garbage, and most institutional investors are probably no longer caring about them when buying bonds (I would hope, at least!
sweatdrop ). So two downgrades in back to back years, I don't really care about, or find very meaningful. I think the actual pragmatic and physical effects of failing to increase the debt ceiling are more important to worry about.
FUTHERMORE, if we cared about our credit rating, probably one of the worst things we could do would be to print a coin. It would break the current rule of law substantially on increasing the money supply via Treasury Bonds, whose value is tied to the underlying value of the USD. This is why we have inflation and non-inflation adjusted bonds with various yield rates.
By minting the coin, we drastically increase the money supply, which while not a perfect barometer of inflation, is one of the myriad of underlying structural influences on the measure. This will drop a lot of assurance in the expected inflation of the USD which is how a lot of people pick the opportunity costs between T-bills and other investment choices.
As for your second point, here was the line of argument you made.
If the federal reserve doesn't accept the coin, it's deciding what is legal tender and not.
rebuttal: No, it's deciding not to increase the money supply by $1 trillion USD.
And that forcing it to do such via rule of law could jeopardize long run US inflation rates above their historical trends. Giving any politician the ability to force the federal reserve to inflate our currency is going to be a bad idea.
Secondly, the government can say whatever it wants is money, but it cannot decide the value of the money. It prints "dollars," in various denominations, for which it trades for "real" goods and services. However, printing a coin, saying it's worth $1 tril, and then having
no one take it from you won't actually fix anything. The only way it works is if the federal bureau of minting under the treasury prints it, and then exchanges it with the federal reserve for $1 trillion USD. If the Treasury mints the coin, and the Fed or other bodies don't pony up the $1 Tril, it's "face value" becomes a farce.
And no, I don't have an actual solution. I got out of Washington, DC because I grew tired of politics. Studying economics and studying politics are two different things, this is a political issue. But hey, I can show you some cool math proofs, if you want.
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