Monday, September 27, 2021

Nathan Tankus — Yet Another Debt Ceiling Crisis! (Or, How Joe Biden should Learn to Stop Worrying and #MintTheCoin.)

Nathan Tankus summarizes the debt ceiling institutionally and the feasiblity of issuing the coin to get you up to speed on this.

Nathan Tankus
Yet Another Debt Ceiling Crisis! (Or, How Joe Biden should Learn to Stop Worrying and #MintTheCoin.)

13 comments:

Matt Franko said...

Pretty pathetic that Democrats now are reduced to relying on this gimmick that won’t work anyway because without Tsy issuance the increase in Reserve Assets at the depositories will soon create another credit crisis…

The Dems can just suspend the debt ceiling via reconciliation tomorrow.,, but…

NeilW said...

"because without Tsy issuance the increase in Reserve Assets at the depositories will soon create another credit crisis…"

Only because of artificial ratios imposed by the Federal Reserve that they can suspend at any time.

There is no systemic crisis. Just an operational one based upon policy.

mike norman said...

"Only because of artificial ratios imposed by the Federal Reserve that they can suspend at any time."

Correct.

Just like they could have suspended mark-to-market accounting in the GFC, but instead, Hank Paulson begged Congress for $750 bln to "recapitalize" the banks.

mike norman said...

Optics are sometimes more powerful than reason or logic. That's simply human nature. And the optics on this (#MinttheCoin) make it such that it would never be proposed.

People like Tankus, Grey, should just give it up. They don't understand psychology.

Matt Franko said...

I think they are proposing the “coin” as a figurative activity (these people all have Art degrees) or figurative proposal within a Socratic methodology to illustrate the unworthiness of letting ex post accounting lead our decisions on our future actions…

It’s a form of metaphor or analogy or something… it’s figurative… it’s dismissive of the opposing thesis that the other people are making a big deal about govt securities issuance.. they are saying “ehhhh, big deal we can just mint a $1T coin and all this goes away…”

It’s dismissive of the other sides thesis…

Scientific approach would be to explain to them the Accounting Science that UST issuance provides the regulatory function of decreasing the Reserve Assets at the depositories (it’s a “reserve drain”) and enables those Depositories then to instead issue credit assets to finance enabeconomic growth, etc…

This Art Degree method won’t work because you are just arguing with other Art Degree people .. the best that will come out of that is a synthesis of the two thesis or at worst open warfare when the dialogue fails.. and even if they minted the coin and ceased UST issuance then soon the credit function would soon cease due to Reserve increase…

Should just stick to the Science … point out to the debt doomsday morons that they are unqualified and should go back and get a Finance and Accounting Science Degree at a land grant institution…

Matt Franko said...

“ Only because of artificial ratios ”

They are not artificial they are REAL…

There is nothing wrong with those regulatory ratios… they act to regulate the amount of consolidated assets at a depository… there is nothing wrong about that..,

mike norman said...

They're risk free. Stupid to have them included.

Matt Franko said...

It regulates the size of the institution… if they didn’t have it then it would be easier for depositories to increase market share thrn you have the potential for monopolistic activities, system risk increases, etc..,

This at least makes them retain earnings as a trade off against growth… so I can see some purpose for its existence..

Might be other ways to do it no doubt.., it only becomes a problem if you have morons running it who think they have to “inject money!” in some form of reification error (they think “money!” is real and banks “lend it out!” so they have to “put it in!”) …. in any case the only reason these guys are proposing this “coin” thing is due to morons on the other side of the argument..,

Best not to deal with this stuff via Socratic dialog in the first place… just stick to the regulatory Accounting Science…

Matt Franko said...

Mike here we are doing these moron assholes job while they (Kaplan/Rosengren) are “at work” trading S&Ps….

We should bring back crucifixion….

NeilW said...

"It regulates the size of the institution"

You don't need liquidity buffers when you are regulated by a central bank. That's two things doing the same job.

The central bank should be on the hook for liquidity of solvent assets. And if they become less than solvent then that's the regulators fault for not regulating the assets of the bank properly - and they should take the cold bath, after the equity and bond holders have been through the ice first.


Matt Franko said...

It’s not for “liquidity” it’s for proportional control of consolidated assets..

They are only allowed to have some fixed multiple of retained earnings to consolidated assets…

Matt Franko said...

So if they pay out all their earnings as dividends and share buybacks they can’t increase their assets… else equal…

Matt Franko said...

Warren Buffett has 150b in retained earnings ready to go… no no buy backs no dividends…