Thursday, August 4, 2011
Ron Paul introduces bill to cancel $1.6 trillion debt held by the Fed
The first good idea EVER from Ron Paul. The Fed could essentially rip up its holdings of Treasuries and the US debt would be lowered by $1.6 trillion. This is pretty much what Rand is proposing. It's a good idea and it shows the fallacy of the debt and how easy it is to “pay it back.”
The Fed is the largest single holder of U.S. bonds and notes. The Treasury pays interest to the Fed on those holdings. So the government (the Treasury) is paying interest to an agency of the government (the Fed). Then the Fed pays the Treasury back that interest. How idiotic is this???
Why are we holding ourselves hostage to debt terrorists and the rating agencies when it all can be solved so easily? Crazy!!
Here is the article on Ron Paul's proposal.
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16 comments:
And if Mr. Paul wants to be legally clean and easy to execute, he has to just propose the platinum coin option.
Great but he is backing into this versus coming from a position of understanding this is operationally how it is anyway. He is even clueless in his own logic on why he introduced the bill. From comments in that article, he thinks the situation of the Fed buying the bonds was inflationary and now he thinks canceling the debt will reduce that inflation. If someone thinks buying the bonds was inflationary, what is the logic leap to conclude canceling it would be anti-inflationary?
Seems dangerous having someone so out of paradigm being the one proposing this. Seems like a situation of a clueless drunk person off the street getting lucky cutting the right wire on a time bomb versus having a trained bomb squad do it.
Crake, you are right, but it actually doesn't matter what Mr. Paul thinks as far as he pushes that idea in public debate.
Fullwiler has mused that it may be part of Paul's plan to end the Fed, since it would put them in a negative capital position.
It's a really odd position to reconcile if you put yourself in Paul's shoes.
Crake, this people doesn't have even an slight abstractyion and logical capacity, having so much nonsensical lawmakers is disastrous.
But if the end result in finishing the FED I'm fine. However I wouldn't be so glad about the second part of the plan (a return to the gold standard).
Mike, I'd like to hear your view of the comparative merits of using Paul's method and the recent proposal to use the Public Debt Law of 1941, 31 USC 3102. The law allows exemptions to the national debt limit and allows that "With the approval of the President, the Secretary of the Treasury may borrow on the credit of the United States Government amounts necessary for expenditures authorized by law...,"
i.e. appropriations bills that have passed. For the whole law, please see:
http://www.peaceteam.net/action/pnum1082.php
agreed completely crake.
I think this would have been a good way to handle to the debt ceiling crisis before any other idea if it could have been pulled off, but at this point, when politicians are hell-bent on cutting the deficit, this is just a drop in the bucket to them and doesn't really mean that they will not cut more things elsewhere. These guys want to cut, cut, cut...they don't want to think, think, think.
I wonder how long it will take for people to realize that they caused this huge sell-off in equities by demanding they balance the budget. It's so sad and yet so funny all at the same. People screaming and demanding that they balance the budget (but don't cut SS) and then their 401k goes!!! Man like my one good friend says, "It's one thing to earn an "A" in school...but it's another thing to keep an "A" in school. I honestly wonder if America even deserves itself anymore.
"the recent proposal to use the Public Debt Law of 1941, 31 USC 3102. The law allows exemptions to the national debt limit..."
No it doesn't, and saying it does just muddies the waters. Would you like to take a wild guess what statute comes right before section 3102? I'll even spot you the chapter (31) and the section (3101):
3101. Public debt limit
...(b) The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government (except guaranteed obligations held by the Secretary of the Treasury) may not be more than...
You can challenge the constitutionality of the debt ceiling or you can use the US Mint to go around it; what you can't do is argue that the debt ceiling doesn't apply to the "obligations issued under this chapter" in the very next section of the US Code!
Followed the links to the site with the "bogus exemption to debt limit",
here's what they're hanging their hat on--
Please take careful note of the words "EXCEPT guaranteed obligations held by the Secretary of The Treasury". By undeniably clear law as passed by Congress, such obligations are NOT constrained by any so-called debt limit.
This is akin (and more than it appears at first glance) to right wing conspiracy theory that because there because there are references in the US Code to "US Corporations", it can only mean the US Govt is a corporation owned by shadowy interests (I forget if we're suppose to be secretly owned by the the Freemasons or the Royal Family or some other hidden hand). US Corporations, of course, are more commonly known as Government-Sponsored Enterprises, chartered by Congress (some have private shareholders, others are 100% federally owned).
Which brings us to "guaranteed obligations held by the Secretary". While there's at least an implicit Tsy guarantee on all GSE-issued debt, Congress included in some GSE charters an explicit Tsy guarantee. Those are the guaranteed obligations that the debt ceiling statute is referring to.
Mario, I think the "cutters" are in a no-lose scenario. Their talking points are/will be opining that the cuts were not big enough, therefore the market sold off because bigger cuts are needed but had the market gone up, they would have said the market was cheering the cuts.
@crake
I see what you mean however that doesn't explain why wall st. keeps downgrading earnings Q after Q.
the whole notion that business is "stifled" or "scared" by large debt to gdp ratios is just hilarious and totally ludicrous. That has no way of sustaining itself in reality-land. Of course if the people forget that was the reason for all of this then it's not a difficult position to defend (remember invading iraq!!). God bless the media rampage of information.
anyway these debts will all be paid back to the Treasury anyway, so it's not exactly accurate to call them a "debt" per say. But if it got people to stop harping on about entitlement benefits then I'm all for it.
This will not be good if the Fed just raises reserve requirements to offset any stimulative effect though. And, though I know there might not be much agreement here, having the executive take that kind of control over monetary policy could risk our inflation fighting credibility. Even though we don't need that credibility now, and in fact need much looser monetary policy, it's self-defeating to have the Fed slow the economy to deal with inflation expectations above target.
This will not be good if the Fed just raises reserve requirements to offset any stimulative effect though. And, though I know there might not be much agreement here, having the executive take that kind of control over monetary policy could risk our inflation fighting credibility.
So by your reckoning, will the Fed concede defeat once Tsy chases it up to 100% reserves, or will it keep right on going Moby Dick-style?
And of course the executive should take control of monetary policy, which is after all an exercise of federal executive authority. The Constitution is rather clear on this point-- "The executive Power shall be vested in a President of the United States of America."
As I've mentioned before, if we can trust our presidents to not blow up the world, I think we can trust them to not blow up the currency.
@beowulf
agreed
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