From Bank of America:
The trillion dollar tooth fairy
From the land of fiscal make-believe
The budget skirmishes over the past few years have spawned a lot of bad ideas. The latest is that the US Treasury issue a trillion dollar coin to get around the debt ceiling. We see several problems with this plan. First, its legality is open to question. Second, it would worsen the coming battle over spending cuts. Moreover, it would further deepen the distrust between the two political parties. Finally, it risks being the first step down a slippery slope of debt monetization....
Zero Hedge
Bank Of America On The "Trillion Dollar Tooth Fairy" Straight "From The Land Of Fiscal Make Believe"
Posted by Tyler Durden
Bank Of America On The "Trillion Dollar Tooth Fairy" Straight "From The Land Of Fiscal Make Believe"
Posted by Tyler Durden
ROFL
But BOA cuts to the chase.
But BOA cuts to the chase.
Outside of the legal questions, nothing precludes the Treasury from issuing a coin to pay down the full $16.4 trillion in debt in one fell swoop: true monetization.This is exactly Joe Firestone's proposal, which everyone else is ignoring. BOA gets it. This is a frontal attack on issuance of Treasury securities, which are not necessary operationally. As such they constitute a subsidy for savers with no evidential public purpose. They serve a special interest rather than the public interest.
11 comments:
More metaphor...
Tom, you can really see the power of false metaphor in all of this... falsehood NEEDS metaphor to be sustained...
This for example is something I wish Chomsky could look at wrt his work in cognitive studies and linguistics/semantics...
To me it is a clear cut pattern of false metaphor that opposes the truth and these poor people who listen to and hear this garbage stay completely caught up in the false... they cant get out of it... it never fails to show up...
rsp,
Methinks BOA is talking its book.
Anything a big bank like a primary dealer Bank of America is against I am for it. But only if making the debt disappear will not cause the moral dilema of oh well everyone doesnt have to pay their bills because the US government doesnt, my question if this coin idea is implemented will the ursury interest rates the primary dealers ursurp on the american people finally be defeated. This bad idea of a stupid coin might just be what is needed to combat the bad idea of having a central bank full of elites and insiders who increase their position at the expense of everyone else.
President Jackson said it best "Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."
A better approach would be for Treasury to have an overdraft at the Fed.
The Fed then send an annual report on the level of the overdraft and the state of circulation to Congress when they have their spending discussions.
When you get right down to it all of this is political bullshit, because there is no mathematical constraint or sustainability issue with the "debt".
It's sad that we have to find loopholes to properly govern our country.
An important issue has been cosmeticized so it is presentable to our ill-informed populace because they can't be trusted with the truth and as a result they will be even less well-informed after it's over.
Thus, any positive outcome will be accidental as usual.
I wrote my comment before reading the post down thread about Joe Weisenthal's column in BusinessInsider.
I didn't believe anyone in the mainstream could write something so direct and to the point, so my disgust with this whole circus has been muted.
paul,
right I thought that what Joe W wrote was pretty darn good too... this is at least revealing that he is basically in paradigm now if he wasnt before...
rsp.
A better approach would be for Treasury to have an overdraft at the Fed.
The commandment of modern central banking is no cb lending to Treasury. Traditionally, the Treasury minted coins which it debited to its asset account and credited its liability account with the metal and mint cost as expenses and its equity account with the seignorage (difference between face value of the coin and the cost to produce). It should not be too difficult to concoct some accounting fiction that follows this model and obviates the need for cb lending to the Treasury to replace the current method of Treasury creating a liability (tsys) and selling it to the private sector as an asset in exchange for cb liabilities that the Treasury books as an asset. What is sacred about a cb creating the asset by increasing its liabilities when there no longer a real asset backing into which the currency is convertible. Makes no sense to me.
1. Banking, finance, and central banking is based on smoke and mirrors to exclude everyone not in the club. It's an old boys' club.
2. Joe Weisenthal picked up on monetary economics from Cullen as I recall, and he has also been in email contact with Stephanie Kelton. He has done his homework, although I have no idea how many of the papers he has read, without which one cannot get the nuances of MMT. I also don't know how much background in economics he has and how widely read he is in PKE. He is a news junkie and posts incessantly on Twitter, so I can't see how he has much time to delve into the nitty gritty. But for the mainstream he is ahead of the pack, and along with Ezra Klein, etc., is an up-and-comer punching much above his weight. He is definitely a strong contender for a top spot in financial journalism.
Traditionally, the Treasury minted coins which it debited to its asset account and credited its liability account with the metal and mint cost as expenses and its equity account with the seignorage (difference between face value of the coin and the cost to produce).
This is a bit misleading since under modern accounting coins are booked as a liability of the Treasury. But, "traditionally," i.e, the contents of the Treasury were considered a govt asset rather than a govt liability, as the term "treasury" shows.
Right. If the Platinum Coin is logical, then so are no T-Bonds at all.
http://mikenormaneconomics.blogspot.com/2013/01/the-strange-world-of-patent-propaganda.html
We discussed this years ago, with Bill Mitchell. Australia briefly quit selling T-bonds, and no one even noticed! They went back ostensibly just to giver traders of other bonds a (legal?) reference rate.
Funny part is, none of those currently complaining would see any difference if we used the PC or stopped selling T-Bonds. We all have plenty of other options. The real game is drawing attention to the real hierarchy of options. That's the one with an effect on national security.
Even when rolling on floor, the audience may not have their noses rubbed in the joke.
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