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Thread: Can Trillion Dollar Coins Save the Economy?

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    Re: Can Trillion Dollar Coins Save the Economy?

    They could always ask Zimbabwe.

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    Re: Can Trillion Dollar Coins Save the Economy?

    Everyone says the trillion dollar coin is like a default or raising a 5% tax on every dollar spent. It's true that devaluing the dollar in the short term with this de facto default would set the books right for years to come but you'd have to watch out for the market reaction. They know it just means Congress has no intention of cutting spending, shrinking gov or increasing revenues and as usual it would affect average to low income spenders more then the cushioned elite.
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    Re: Can Trillion Dollar Coins Save the Economy?

    Quote Originally Posted by grip View Post
    Everyone says the trillion dollar coin is like a default or raising a 5% tax on every dollar spent. It's true that devaluing the dollar in the short term with this de facto default would set the books right for years to come but you'd have to watch out for the market reaction. They know it just means Congress has no intention of cutting spending, shrinking gov or increasing revenues and as usual it would affect average to low income spenders more then the cushioned elite.
    I'm not enough of an economist to know this answer, but I pose it to you or anyone that wants to answer:

    Is the only consequence market reaction? Is there not the consequence of inflation? One side will say: Creating money without increasing production means more dollar per each product in the market, so each product in the market will be worth more dollars, or said another way: one dollar will buy you less.

    However, this money isn't in circulation at the moment. It's already been put into circulation when the bond was issued. Has that inflation already been seen at the time of the bond creation? Would repayment not reduce our money supply today and perhaps even cause deflation (or at least slow inflation)? What real market consequence is there from doing this? An objective answer is very difficult to come by... It's absolutely immoral and I wouldn't support it regardless of the market condition due to its immorality, but I would like to have this answer.

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    Re: Can Trillion Dollar Coins Save the Economy?

    What should be obvious to most by now is the path our dear leaders have chosen to <ahem> "get us through this crises".

    The choices are:

    1.) Default. We haven't defaulted yet, so #1 is off the table.

    2.) Tax our way out. Taxes ARE going up. #2 is in play.

    3.) Grow our way out. Does anyone really believe we can grow our economy by 40% over the next few years?

    4.) Inflate our way out. DING DING DING!! We have a winner!

    5.) "Cut" our way out. The government DOES NOT cut spending! Period!

    Looks like 2 and 4 is our path to prosperity. Taxes and inflation! Tried and true cornerstones of sound economies!

    <puke>
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    Re: Can Trillion Dollar Coins Save the Economy?

    Quote Originally Posted by Khayembii Communique View Post
    I didn't ask you to explain what government debt is. I asked you to explain why federal debt securities are used instead of simply creating money to fund spending.

    Once you answer that question you will have your answer as to why such a coin will never be created.

    Also, as an aside, I don't know why you brought up Keynesians in your OP. They would obviously oppose this.
    Ah, I see what you were saying. The obvious answer is the immorality of simply printing money, the lack of confidence the world would have as a result in the US economy and US dollar in doing so (especially since our dollar is only backed by the US economy), the list goes on and on.

    This may be an educational opportunity for me, though. It's been my understanding that Keynesians support monetary manipulation and fiscal policy manipulation to change the macro-economic outlook of the economy. Isn't that exactly what this is? In fact, Keynes' face is one of the options to be printed on this hypothetical coin.

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    Re: Can Trillion Dollar Coins Save the Economy?

    If you listen to the people that advocate for this their reasoning goes something along the lines of:

    "The more we tax the more demand there is for our dollar and since we print our own dollars we can spend as much as we want as long as we tax enough to keep up the demand for money"

    It's called "Modern Money Theory" and we have a few advocates of it running around the site. It's a great theory as long as people retain confidence in the dollar that you keep printing but for some reason or other these MMT knuckleheads can't get it through their heads that people don't value things which have a limitless supply. If we did someone would be selling air for $20 a gallon.

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    Re: Can Trillion Dollar Coins Save the Economy?

    Quote Originally Posted by fredmertzz View Post
    Ah, I see what you were saying. The obvious answer is the immorality of simply printing money, the lack of confidence the world would have as a result in the US economy and US dollar in doing so (especially since our dollar is only backed by the US economy), the list goes on and on.

    This may be an educational opportunity for me, though. It's been my understanding that Keynesians support monetary manipulation and fiscal policy manipulation to change the macro-economic outlook of the economy. Isn't that exactly what this is? In fact, Keynes' face is one of the options to be printed on this hypothetical coin.
    All economists support "monetary manipulation and fiscal policy manipulation to change the macro-economic outlook of the economy". That's the entire point of government economic policy. Even conservative economists who argue for lower taxes are advocating for a fiscal policy that "change[s] the macro-economic outlook of the economy."

    Keynesians would oppose this because, as other posters have said, it is basically defaulting on the national debt. Keynesians, as well as myself who agrees with them on many things, realize that paying down the debt in the short- or mid-term would not only be pointless but disastrous to the US economy. There is nothing wrong with maintaining a national debt, or with deficit spending per se.

    More specifically, worrying about deficit spending or the national debt right now, or in the short-term, when we are still trying to recover from the recession, is counterproductive. Keynesians advocate counter-cyclical policy, meaning that deficit reduction and tax increases should occur in boom times, while an expansionary policy should be pursued in a contractionary economic environment (i.e. deficit spending right now).
    "I do not claim that every incident in the history of empire can be explained in directly economic terms. Economic interests are filtered through a political process, policies are implemented by a complex state apparatus, and the whole system generates its own momentum."

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    Re: Can Trillion Dollar Coins Save the Economy?

    "After all, you know, there are worse things in life than death. I mean, if you've ever spent an evening with an insurance salesman, you know exactly what I mean."
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    Re: Can Trillion Dollar Coins Save the Economy?

    Quote Originally Posted by fredmertzz View Post
    I'm not enough of an economist to know this answer, but I pose it to you or anyone that wants to answer:

    Is the only consequence market reaction? Is there not the consequence of inflation? One side will say: Creating money without increasing production means more dollar per each product in the market, so each product in the market will be worth more dollars, or said another way: one dollar will buy you less.

    However, this money isn't in circulation at the moment. It's already been put into circulation when the bond was issued. Has that inflation already been seen at the time of the bond creation? Would repayment not reduce our money supply today and perhaps even cause deflation (or at least slow inflation)? What real market consequence is there from doing this? An objective answer is very difficult to come by... It's absolutely immoral and I wouldn't support it regardless of the market condition due to its immorality, but I would like to have this answer.
    The money owed is to real investors and the gov itself. If they were to essentially write it off with this trillion dollars worth of uncirculated coins it would cause inflation. When sovereign debt has risen to 100% of GDP it takes inflation to jolt an economy stuck out of zero bound closer to potential output. The fear of the investor is to not have a diversified portfolio with hard assets like real estate and precious metals to weather an inflationary period, where debt is being monetized. Nobody knows what the real outcome will be except that I doubt very seriously that they'll consider writing off debt yet.
    Einstein, "science without religion is lame, religion without science is blind."

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    Re: Can Trillion Dollar Coins Save the Economy?

    Quote Originally Posted by grip View Post
    The money owed is to real investors and the gov itself. If they were to essentially write it off with this trillion dollars worth of uncirculated coins it would cause inflation.
    I would assume the 'real investors' such as international governments, individuals and corporations would be the ones being paid in dollars, not uncirculated coins. The write off/payoff would be for debt currently held by the government/The Fed -

    The question is due to the fact that the money that this debt has created is already in circulation. Would forgiving that debt/paying off that debt really add money to circulation? I just don't see how it could cause inflation.

    I'm playing devil's advocate here because I am against this policy move as a moral issue.

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