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Subject: $1 Trillion Coin rss

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"The idea has been raised of putting a $1 trillion coin in the Fed's vaults — which in theory, at least, would mean the government has more money available to borrow against and won't bump up against its debt ceiling."

http://www.npr.org/blogs/thetwo-way/2013/01/10/169020387/cra...

If you have ever been tempted to do just one robbery in your lifetime, this would be it. Although cashing it might be a problem...
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Damian
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I'm sure I would accidentally use it in a vending machine or something.
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damiangerous wrote:
I'm sure I would accidentally use it in a vending machine or something.

That would make for a great comedy movie. I'm thinking Jim Carrey or Mike Birbiglia.

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Shushnik wrote:
tesuji wrote:
damiangerous wrote:
I'm sure I would accidentally use it in a vending machine or something.

That would make for a great comedy movie. I'm thinking Jim Carrey or Mike Birbiglia.



There is a gigantic chasm between our definitions of "great", apparently.

I see a plot like this:

1. Through an unlikely series of events, janitor-flunky Jim Carrey unknowingly ends up with the trillion coin by mistake.
2. Just as he inserts it into a vending machine, he realizes what it is.
3. (insert plot complications here, combined with increasingly high personal stakes for the janitor, and villains who want the coin for themselves)
4. Hilarity ensues
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Am I right in thinking that this is basically just quantitative easing?

And won't flooding the economy with an extra TRILLION dollars cause a massive devaluation in the currency?

It's not like the usd is particularly strong as it is...
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darkmorgado wrote:
Am I right in thinking that this is basically just quantitative easing?

And won't flooding the economy with an extra TRILLION dollars cause a massive devaluation in the currency?

It's not like the usd is particularly strong as it is...


Not really. The basic idea is:

1.) Mint coin
2.) Immediately deposit coin at the Fed
3.) Fed issues treasury bonds as new debt is required by US government

It's basically an accounting trick to allow the government to continue issuing debt to fund ongoing operations.
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Shushnik wrote:
And why wouldn't we want to do that. Free money, right?


Your entire economy depends on people believing that you will pay your debts. When you start refusing to pay your debts, then people will figure your debt is higher risk - and then you really will be in the same boat as Greece.
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Shushnik wrote:
mightygodking wrote:
Shushnik wrote:
And why wouldn't we want to do that. Free money, right?


Your entire economy depends on people believing that you will pay your debts. When you start refusing to pay your debts, then people will figure your debt is higher risk - and then you really will be in the same boat as Greece.


When you start running debt at levels it would take your GDP years of full devotion to that debt just to get back in balance, you also run a significant risk of having people figure out that you're not going to pay it back. Perhaps we should stop approaching that point.


Actually, I think having a legislature constantly on the brink of refusing to pay the nation's debts does more to make people think we're not going to pay our debts than an increasing debt level does.
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tesuji wrote:

I see a plot like this:

1. Through an unlikely series of events, janitor-flunky Jim Carrey unknowingly ends up with the trillion coin by mistake.
2. Just as he inserts it into a vending machine, he realizes what it is.
3. (insert plot complications here, combined with increasingly high personal stakes for the janitor, and villains who want the coin for themselves)
4. Hilarity ensues



It's literature too!

http://en.wikipedia.org/wiki/The_Million_Pound_Bank_Note
 
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The Million Pound Bank Note triggered this true story. Years ago a fella I knew brought a solid silver ingot into my clothing store and jokingly asked if I had change. It was inscribed 99.999 Pure Silver 100 Tr. Oz.

We passed it around and the last employee held it in both hands and read the inscription aloud. "Ninety-nine point nine nine nine pure silver. One hundred trillion ounces."
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bjlillo wrote:
Golux13 wrote:
Shushnik wrote:
mightygodking wrote:
Shushnik wrote:
And why wouldn't we want to do that. Free money, right?


Your entire economy depends on people believing that you will pay your debts. When you start refusing to pay your debts, then people will figure your debt is higher risk - and then you really will be in the same boat as Greece.


When you start running debt at levels it would take your GDP years of full devotion to that debt just to get back in balance, you also run a significant risk of having people figure out that you're not going to pay it back. Perhaps we should stop approaching that point.


Actually, I think having a legislature constantly on the brink of refusing to pay the nation's debts does more to make people think we're not going to pay our debts than an increasing debt level does.


We don't have a legislature constantly on the brink of refusing to pay our nation's debts. We have a legislature on the bring of refusing to allow us to accumulate more debt.


The debt ceiling is about borrowing money to pay the bills for things Congress has already approved - things we have already bought on credit. By threatening to refuse to allow such borrowing, Congress is effectively threatening not to pay our existing bills.

It is perfectly appropriate to have a discussion about reining in spending so we're not buying so much on credit and having to borrow more to pay for it. It is not appropriate to refuse to pay for things we've already bought in an effort to gain leverage in that discussion.
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Sigh. It's going to be a long year in politics. I'm going to try to start tuning out, I hate to admit...

Three New 'Cliffs' Threaten The Economy
http://www.npr.org/2013/01/10/168984819/three-new-cliffs-thr...
 
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People have suggested that the $1 trillion coin bear Obama's portrait, but that would be illegal in the US (since only dead people can get their pictures on coins and stamps). The obvious choice is Reagan.
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bjlillo wrote:
Golux13 wrote:
bjlillo wrote:
Golux13 wrote:
Shushnik wrote:
mightygodking wrote:
Shushnik wrote:
And why wouldn't we want to do that. Free money, right?


Your entire economy depends on people believing that you will pay your debts. When you start refusing to pay your debts, then people will figure your debt is higher risk - and then you really will be in the same boat as Greece.


When you start running debt at levels it would take your GDP years of full devotion to that debt just to get back in balance, you also run a significant risk of having people figure out that you're not going to pay it back. Perhaps we should stop approaching that point.


Actually, I think having a legislature constantly on the brink of refusing to pay the nation's debts does more to make people think we're not going to pay our debts than an increasing debt level does.


We don't have a legislature constantly on the brink of refusing to pay our nation's debts. We have a legislature on the bring of refusing to allow us to accumulate more debt.


The debt ceiling is about borrowing money to pay the bills for things Congress has already approved - things we have already bought on credit. By threatening to refuse to allow such borrowing, Congress is effectively threatening not to pay our existing bills.

It is perfectly appropriate to have a discussion about reining in spending so we're not buying so much on credit and having to borrow more to pay for it. It is not appropriate to refuse to pay for things we've already bought in an effort to gain leverage in that discussion.


There are plenty of other things that Congress could do in order to avoid defaulting on debt payments other than going deeper into debt. The debt ceiling is a great way to force that issue, so we start spending within our means.


We have to pay the bills. What are the other options? How does brinksmanship over the debt ceiling get the bills paid? How does it "force the issue" on future appropriations?
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bjlillo wrote:
Golux13 wrote:
Shushnik wrote:
mightygodking wrote:
Shushnik wrote:
And why wouldn't we want to do that. Free money, right?


Your entire economy depends on people believing that you will pay your debts. When you start refusing to pay your debts, then people will figure your debt is higher risk - and then you really will be in the same boat as Greece.


When you start running debt at levels it would take your GDP years of full devotion to that debt just to get back in balance, you also run a significant risk of having people figure out that you're not going to pay it back. Perhaps we should stop approaching that point.


Actually, I think having a legislature constantly on the brink of refusing to pay the nation's debts does more to make people think we're not going to pay our debts than an increasing debt level does.


We don't have a legislature constantly on the brink of refusing to pay our nation's debts. We have a legislature on the bring of refusing to allow us to accumulate more debt.


No, we have a legislature well past the brink of acting responsibly and doing the job there were elected to do.

It's just one big fracking realty show that makes Honey BooBoo look like reincarnation of Marie Curie.
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robigo wrote:
People have suggested that the $1 trillion coin bear Obama's portrait, but that would be illegal in the US (since only dead people can get their pictures on coins and stamps). The obvious choice is Reagan.


Or maybe a portrait representing common sense.
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I'd go full troll, put Keynes on it.
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bjlillo wrote:
Golux13 wrote:
We have to pay the bills. What are the other options? How does brinksmanship over the debt ceiling get the bills paid? How does it "force the issue" on future appropriations?


We could cut our military spending, cancel all research projects, lay off a bunch of employees in all of the worthless agencies we've got out there, reign in Medicare spending, sell some assets, and many many other things. We could increase taxes significantly and immediately to pay for the spending.

Generational theft like we're currently committing is not the answer. We have to live within our means.


Most of those things address future spending. They don't change the fact that we have incurred the bills for what we've bought to date, and those bills have to be paid.

Shutting down research, selling off assets, even raising taxes dramatically and immediately won't be instantaneous. They won't put the money in the Treasury to cover the existing debts when they have to be paid. (And hey, putting all those government employees out of work suddenly and simultaneously won't help matters much.)

I think there is plenty of room to discuss those things for future planning; I just don't see any way acting "immediately" on any of them pays the current crop of bills.

Analogy time: We've run up a bunch of debt, living beyond our means. We bought a fancy car and a bunch of guns, and we bought Aunt Mabel that respirator she's always had her eye on. Plus food for the kids and a bunch of necessities. And the lawn and laundry and other services we hire for domestic management are costly. Meanwhile, we took a voluntary pay cut so there was less money coming in, and we started a couple of time-consuming and expensive lawsuits against a couple of other families we accused of doing us wrong. Bills are coming due and we have to make sure the money is in the bank. We can take out a loan to cover them, but you're refusing to cosign because you think we shouldn't be spending so much. You say "We can sell the car, we can quit the Gun-of-the-Month Club, we can insist on a big raise, we can fire the lawn guys and the servants, and get cheaper lawyers for those lawsuits, and just not buy so much!" I say "Fine, we can do all those things, and we should definitely talk about it, but right now, we have bills to pay for the things we DID buy; we have car payments, and servant wages; and our income this month is still what it was last month; so how do we avoid defaulting on THOSE debts while we're waiting for the effects of all these drastic changes to kick in?"
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Use a portrait of Will Rogers with the inscription "Be thankful we're not getting all the government we're paying for."
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robigo wrote:
People have suggested that the $1 trillion coin bear Obama's portrait, but that would be illegal in the US (since only dead people can get their pictures on coins and stamps). The obvious choice is Reagan.

I'm not sure if that's true. I've seen passing mention that it's Federal law that only dead people can be on coins, but the actual law I've been able to dig up only seems to apply that rule to quarters and dollars.
 
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bjlillo wrote:
cancel all research projects

That would be the end of you.
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bjlillo wrote:
Golux13 wrote:
We have to pay the bills. What are the other options? How does brinksmanship over the debt ceiling get the bills paid? How does it "force the issue" on future appropriations?


We could cut our military spending, cancel all research projects, lay off a bunch of employees in all of the worthless agencies we've got out there, reign in Medicare spending, sell some assets, and many many other things. We could increase taxes significantly and immediately to pay for the spending.

Generational theft like we're currently committing is not the answer. We have to live within our means.


Isn't it generational theft to lower NGDP enough that our children will have lower salaries than they would otherwise? Because enough cuts to balance a budget right now would send us towards a nice recession, barring extraordinary behavior from the fed.

 
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Frankly, the White House's hands are tied.

Because of the Congressional Budget and Impoundment Act of 1974, the executive branch has no choice but to spend the money which Congress has appropriated- it would be illegal for them to stop paying the bills which Congress has enacted into law.

However, it would also be illegal for them to exceed the debt ceiling.

Therefore, the White House, caught between a statutory Scylla and a statutory Charybdis, has literally no choice but to seek another way to pay the bills, all the bills, without technically exceeding the debt limit. And they are specifically authorized to engage in platinum coin seignorage, so unless and until another proposal with the same effect is cleared, it seems to me their hand is forced.

In any case,



Mint it.
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bjlillo wrote:
Golux13 wrote:
Analogy time: We've run up a bunch of debt, living beyond our means. We bought a fancy car and a bunch of guns, and we bought Aunt Mabel that respirator she's always had her eye on. Plus food for the kids and a bunch of necessities. And the lawn and laundry and other services we hire for domestic management are costly. Meanwhile, we took a voluntary pay cut so there was less money coming in, and we started a couple of time-consuming and expensive lawsuits against a couple of other families we accused of doing us wrong. Bills are coming due and we have to make sure the money is in the bank. We can take out a loan to cover them, but you're refusing to cosign because you think we shouldn't be spending so much. You say "We can sell the car, we can quit the Gun-of-the-Month Club, we can insist on a big raise, we can fire the lawn guys and the servants, and get cheaper lawyers for those lawsuits, and just not buy so much!" I say "Fine, we can do all those things, and we should definitely talk about it, but right now, we have bills to pay for the things we DID buy; we have car payments, and servant wages; and our income this month is still what it was last month; so how do we avoid defaulting on THOSE debts while we're waiting for the effects of all these drastic changes to kick in?"


So you're advice to that family would be to get another credit card?


You haven't answered my question: How do they pay the bills that are due right now?

I agree with you that the debt needs to be addressed. But leaving the debt ceiling where it is when the amount of debt subject to the limit is rising above that level is not going to address the debt - it's just going to put us in default of some obligations somewhere, which can have very negative effects on our credit rating.

Given that the debt ceiling has not come close to doing what it's supposed to do - i.e., force the government to "live within its means" - since it was first imposed, there's some question why we even need it at all.
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Chris White
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Golux13 wrote:
Given that the debt ceiling has not come close to doing what it's supposed to do - i.e., force the government to "live within its means" - since it was first imposed, there's some question why we even need it at all.


Well what the debt ceiling currently does is serve as a tripwire with which to trigger the potential for economic hostage-taking and a Constitutional crisis. I think there is no question that we need it to not exist at all.
 
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