Thursday, December 6, 2012

CNBC NetNet with John Carney — The Trillion-Dollar Coin Is Back

Good summary of the state of TPC.


The Trillion-Dollar Coin Is Back
NetNet with John Carney


Dan Kervick said...

Some of the comments from John's hysterical gang of CNBC Tea Party loons are priceless. Here's a fun one:

Yeah, great idea, except that Congress doesn't have the $1 Trillion. So, how does the government pay for all of the platinum?

Tom Hickey said...


Matt Franko said...

How does John reconcile his statement here:

"The amount of government issued financial assets remains the same, even though the composition of dollars and Treasury bonds changes."

With his next statement here:

"There could a long-term inflationary problem, I suppose, if the government fell in love with the idea and used platinum coins to finance ever larger deficits. But that seems unlikely. And, in any case, the Fed could step in and use its monetary policy tools to counteract the spendthrift coiners."

John all the Fed can do is change the composition of net USD financial assets on it's H.4.1 report as you correctly identify in your first paragraph here.

That and (from here) raise interest rates which will increase net interest payments and is stimulative and potentially inflationary.

The Fed cannot do anything to stop the "spendthrift coiners" who are Congress and the Treasury executing appropriations.

The Fed is nothing more than Congress/Treasury's Fiscal Agent, ie the Fed keeps track of the books for the govt.

You have got it down in your first paragraph here. Suggest stop right there.

Then focus on FISCAL from then on...


Tom Hickey said...

I suspect that he is thinking that if Congress were to realize it can fund deficits directly with issuance through minting platinum coins, then it would wake up to the fact that so-called debt financing is not patrolled by the bond vigilantes and would act in a fiscally irresponsible way. Of course, it wished to fund its deficit spending with issuance it could just remove the restrictions on Treasury issuing notes, no platinum coins needed.

The current paradigm hangs on the idea that the govt is constrained by the bond market. The reason we have a debt ceiling is supposedly because the bond vigilantes are not always on the job in a timely way to discipline Congress, so Congress itself has to pass a debt ceiling to keep itself from spending too much.

Whatever, it's nutty.

paul said...

"The current paradigm hangs on the idea that the govt is constrained by the bond market."

The MMT school has shown that there is no feedback loop to make this constraint work, there is a short in the circuit, and all evidence indicates that they are right.

This is another contribution of the many that MMT has made to economics, and what raises MMT above the other variants of PKism in my view.

paul said...

An excerpt from a post at TPM written by Josh Marshall:

"The White House has made it equally clear that the President and his advisors do not believe there’s a constitutional rabbit he can pull out of his hat to sidestep the whole issue. In other words, no ‘14th Amendment’ solution in which the President just blows through the debt ceiling and continues to sell bonds. They don’t believe the President has the power. And they also believe it’s not viable in market terms since, remember, it’s not simply a constitutional issue. It’s a market auction. You need people to buy this paper that John Boehner and company will be saying is illegitimate. And at what price will they buy? Arguing the merits is secondary. It’s clear they don’t think it’s a viable path."

The bold part raised my blood pressure 10 points and comments are not enabled. Frustrating.

Tom Hickey said...

We are ruled by morons and wimps.

Matt Franko said...

No brains OR balls Tom... sad.


John Carney said...

Matt, I largely agree with your points.