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Why do you think Treasury bonds are issued in the first place, as opposed to just creating currency to pay for everything?
At that point, the American people must decide whose face will adorn the trillion dollar trinket. The process to determine the "specs" of the coin, U.S. Mint Public Affairs Specialist Genevieve Billia warns, must be "determined by legislation," creating the potential for another congressional impasse
I'm not sure I understand your point... I'm not in favor of treasury bonds/government debt, but to answer your question: Treasury bonds are created to sell our debt to buyers in order to maintain a level of spending higher than our level or revenue. The idea is that in the future, by the time the bond matures ideally (HA!), the government will have revenue in excess of its expenditures and can pay for the previous over-spending, with interest.
Again - why are you asking me to clarify this?
From the article:
I've seen more than a few democrats call for this over the past month or so. At least the fact that they have to get congressional approval for the design means that republicans can act like the grown-ups and stop it, which will obviously lead to more whining democrats claiming that republicans just won't compromise.
Everyone says the trillion dollar coin is like a default or raising a 5% tax on every dollar spent. It's true that devaluing the dollar in the short term with this de facto default would set the books right for years to come but you'd have to watch out for the market reaction. They know it just means Congress has no intention of cutting spending, shrinking gov or increasing revenues and as usual it would affect average to low income spenders more then the cushioned elite.
I didn't ask you to explain what government debt is. I asked you to explain why federal debt securities are used instead of simply creating money to fund spending.
Once you answer that question you will have your answer as to why such a coin will never be created.
Also, as an aside, I don't know why you brought up Keynesians in your OP. They would obviously oppose this.
Ah, I see what you were saying. The obvious answer is the immorality of simply printing money, the lack of confidence the world would have as a result in the US economy and US dollar in doing so (especially since our dollar is only backed by the US economy), the list goes on and on.
This may be an educational opportunity for me, though. It's been my understanding that Keynesians support monetary manipulation and fiscal policy manipulation to change the macro-economic outlook of the economy. Isn't that exactly what this is? In fact, Keynes' face is one of the options to be printed on this hypothetical coin.
I'm not enough of an economist to know this answer, but I pose it to you or anyone that wants to answer:
Is the only consequence market reaction? Is there not the consequence of inflation? One side will say: Creating money without increasing production means more dollar per each product in the market, so each product in the market will be worth more dollars, or said another way: one dollar will buy you less.
However, this money isn't in circulation at the moment. It's already been put into circulation when the bond was issued. Has that inflation already been seen at the time of the bond creation? Would repayment not reduce our money supply today and perhaps even cause deflation (or at least slow inflation)? What real market consequence is there from doing this? An objective answer is very difficult to come by... It's absolutely immoral and I wouldn't support it regardless of the market condition due to its immorality, but I would like to have this answer.
The money owed is to real investors and the gov itself. If they were to essentially write it off with this trillion dollars worth of uncirculated coins it would cause inflation.
I would assume the 'real investors' such as international governments, individuals and corporations would not be the ones being paid in dollars, not uncirculated coins. The write off/payoff would be for debt currently held by the government/The Fed -
The question is due to the fact that the money that this debt has created is already in circulation. Would forgiving that debt/paying off that debt really add money to circulation? I just don't see how it could cause inflation.
I'm playing devil's advocate here because I am against this policy move as a moral issue.
All economists support "monetary manipulation and fiscal policy manipulation to change the macro-economic outlook of the economy". That's the entire point of government economic policy. Even conservative economists who argue for lower taxes are advocating for a fiscal policy that "changethe macro-economic outlook of the economy."
Keynesians would oppose this because, as other posters have said, it is basically defaulting on the national debt. Keynesians, as well as myself who agrees with them on many things, realize that paying down the debt in the short- or mid-term would not only be pointless but disastrous to the US economy. There is nothing wrong with maintaining a national debt, or with deficit spending per se.
More specifically, worrying about deficit spending or the national debt right now, or in the short-term, when we are still trying to recover from the recession, is counterproductive. Keynesians advocate counter-cyclical policy, meaning that deficit reduction and tax increases should occur in boom times, while an expansionary policy should be pursued in a contractionary economic environment (i.e. deficit spending right now).
Know what man...republicans when they are in power call for the exact same thing...the debt limit has risen with every republican president...its not just a democrat thing.
The public debt has been on the rise - a rather dramatic rise - since the early 1980's. That's 30 years now. If we're talking no reason to pay the debt down in the short term when should that kick in? I mean, are we talking geologic time scales here?
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