Welcome to Gaia! ::

Wendigo's avatar

Manly Explorer

8,750 Points
  • Invisibility 100
  • Money Never Sleeps 200
  • Super Tipsy 200
Je Nique vos Merdiers
Wendigo
Je Nique vos Merdiers
Less Than Liz
Because some of us understand what the rule of law is and how that is important regardless of petty Congressional games. Further, if Congress can rely on executive circumvention every time they get in a tiff, there's even less incentive to cooperate.

I'm pretty sure everyone knows what the rule of law is. It's just that not all of us are retarded enough to consider the rule of law to be a higher priority than a possible existential threat.
The rule of law is sure as s**t more important than the Tea Party.

Who's talking about the tea party?
They'd be the only existential threat involved, regarding the federal government's ability to pay its debts.
Complex Systems
azulmagia
Complex Systems
Jesus, I thought, "hey, maybe they're be some decent discus-" hit the link, and then went, "- OH GOD MY EYES. MY EYESSSSSS."

Both the treasury and the fed have turned down printing A Magical Bill worth $1 Trill. Link. People who continue to talk about it are just coming off as progressively more crazy. What will happen if the debt ceiling is hit is that Obama will have to prioritize executive spending towards particular item, for which interest payments will be first.


You forgot that the United States' credit rating will be downgraded. Again.

As for the Treasury and the Fed, it's one thing for the Treasury not to mint the coin (which it wouldn't do anyway except at the behest of the President), but it's another thing entirely for the Fed to say that it would not accept the coin. That would mean the Fed would be taking upon itself that some things are the legal tender of the United States, and other things are not - which is entirely not the Fed's place.


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.

Quote:
Secondly, the Federal reserve wouldn't be deciding what is legal tender, it would be deciding not to expand the money supply by $1 trillion in exchange for magical fairie dust. It does have something called autonomy. Wouldn't you know, independence of central banks is a clearly correlated with inflation just because central banks can decide when to laugh at gov'ts.

User Image - Blocked by "Display Image" Settings. Click to show.


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.
Complex Systems's avatar

6,000 Points
  • Tycoon 200
  • Wall Street 200
  • Money Never Sleeps 200
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.
Complex Systems
...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.


Wait just one ******** minute.

The Fed will refuse to increase the money supply by the amount it would be increased anyway as a result of raising the debt ceiling?!?!

The trillion dollar coin is NOT inflationary. I believe that has been pointed out already.

Hell, even QE has turned about not to be inflationary. (relevant link)
azulmagia
The Fed will refuse to increase the money supply by the amount it would be increased anyway as a result of raising the debt ceiling?!?!


increasing the debt ceiling doesn't increase the debt

~silly azulmagia
Game-of-Hope's avatar

Tipsy Hunter

6,300 Points
  • Treasure Hunter 100
  • Forum Explorer 100
  • Dressed Up 200
I'm not going to pretend to know all the variables and factors involved on the subject. I just hope the U.S. knows what they're doing, because if there economy crashes, crap is going to hit the fan.
Game-of-Hope
I'm not going to pretend to know all the variables and factors involved on the subject. I just hope the U.S. knows what they're doing, because if there economy crashes, crap is going to hit the fan.


It's already hitting the fan in that the economy is starting to slow down.

Horror of horrors, who coulda thought austerity would be contractionary?

Quick Reply

Submit
Manage Your Items
Other Stuff
Get Items
Get Gaia Cash
Where Everyone Hangs Out
Other Community Areas
Virtual Spaces
Fun Stuff
Gaia's Games