Drastic (self-created) problems call for drastic (self-created) solutions. The "self-created" refers to Congress. It created the debt limit and also the legal basis for "the coin."
Theater of the absurd.
The International Forecaster
IS A PLATINUM COIN THE SOLUTION TO OUR DEBT CEILING DILEMMA? (Is a Ridiculous Solution the Answer to a Ridiculous Problem?)
The International Forecaster
IS A PLATINUM COIN THE SOLUTION TO OUR DEBT CEILING DILEMMA? (Is a Ridiculous Solution the Answer to a Ridiculous Problem?)
Dave Allen for Discount Gold & Silver
6 comments:
Being inherently risk-free, the debt of a monetary sovereign like the US should return, AT MOST, zero* percent MINUS overhead costs MINUS maturity premium** = (at least a little) NEGATIVE.
Then who'll object to a revenue EARNER for the US Government?
* to avoid welfare proportional to account balance.
** with the shorter maturities costing more (more negative interest and yields) with "reserve" accounts at the Central Bank costing the most.
(bold mine)
It makes much better sense not to offer a support rate at all. In that situation, net public spending will drive the overnight interest rate to zero because the interbank competition cannot eliminate the system-wide surplus (all their transactions net to zero – no net financial assets are destroyed).
So in pursuit of the “natural” policy goal of full employment, fiscal policy will have the side effect of driving short-term interest rates to zero. It is in that sense that modern monetary theorists conclude that a zero rate is natural. This article by Warren Mosler and Mathew Forstater is useful in this regard.
If the central bank wants a positive short-term interest rate for whatever reason (we do advocate against that) – then it has to either offer a return on excess reserves or drain them via bond sales.
Our preferred position is a natural rate of zero and no bond sales. Then allow fiscal policy to make all the adjustments. It is much cleaner that way.
And all those bright sparks in the central bank could be redirected (retrained) to studying cancer cures or engage in something else that is useful.
source: The natural rate of interest is zero!
“ If the central bank wants a positive short-term interest rate for whatever reason (we do advocate against that) – then it has to either offer a return on excess reserves or drain them via bond sales.”
The institutional regulations have changed so much since that was written it is now meaningless…
What is “excess reserves”? Excess of what? Reserve requirements are 0%….
And the Fed is not selling govt bonds the Treasury is… to the point that TGA can be 750B or more…
“ And all those bright sparks in the central bank”
They are not bright sparks they are dumb… they had a reserve requirement of 10% of deposit liabilities in Sept 2019 and deposits were $13T then they adjusted reserves below $1.3T under “quantitative tightening “ and FFR spiked up…
AND… AND… they STILL don’t know why that happened…
You want those morons doing pharmaceutical research?
Can’t even apply 8th grade algebra…
“It created the debt limit and also the legal basis for "the coin."
Paradox Tom… not a problem … for people trained to employ paradox it’s a nice feature…
Post a Comment