Latest crazy plan from the USA

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http://www.telegraph.co.uk/finance/financialcrisis/9784898/US-seriously-considering-1-trillion-coin-to-pay-off-debt.html
You couldn't make it up.
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On Wed, 9 Jan 2013 00:24:44 -0800 (PST), harry

This is just an indication of how stupid the leftists are in this country and how far out of touch they are with reality.
http://www.washingtonpost.com/blogs/the-fix/wp/2013/01/09/trillion-dollar-coin-the-new-nuclear-option /
It is right up there with Obama's ongoing plan to have the fed buy the debt with money they print out of thin air. (80% of all new issue bonds right now). (AKA quantitative easing)
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On Jan 9, 4:06 pm, snipped-for-privacy@aol.com wrote:

We got QE over here too.
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My god, there's gonna be TWO of them. Ideal thing for hyperinflation. That would get rid of the debt.
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harry wrote:

Easier too...
1. Create "new dollars", each of which is worth 100 "old dollars"
2. Pay off the debt
3. Decide that new dollrs are unwieldy
4. Go back to old dollars.
--

dadiOH
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This version of the story doesn't even have it right. As I understand it, the scheme is *not* to reduce the outstanding debt by $1tril. It's to use the $1tril coin to make payments on the debt and the other expenses of govt if the borrowing limit is reached. Still, it would be very interesting to understand how even that is legal on the govt books.
I doubt it's seriously being considered. But then a couple weeks ago I saw the chaiman of the Senate Finance Committee on a Sunday talk show. They were asking him about the fact that the budget deal then being discussed included fictional spending cuts, like pretending that the wars in Iraq and Afghanistan were going on for another 10 years. He said, "Well you can call it ficitional spending cuts, and there is some truth to that, but at least it's fictional spending cuts offset by fictional revenue increases."
With clowns like that in control, anything is possible. Pelosi says for example that Obama should just go ahead and borrow more, citing the 14th amendment, and give Congress the finger. She had no such problem when Obama voted not to increase the debt ceiling, calling Bush unpatriotic for wanting to do so. The 14th only says that the credit of the USA shall not be put into question. There is still enough money coming in that the govt could easily make payments on the national debt. They would just have to cut other things.
So, sady, I would not put a $1tril coin out of question. That should really impress the holders of US debt.
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On Thu, 10 Jan 2013 06:13:16 -0800 (PST), " snipped-for-privacy@optonline.net"

They are already doing it without the formality of a silly piece of metal. When the Fed buys unsold bonds with money they create out of thin air, it is economically the same thing.
An actual coin that had a trillion in value in platinum would be the size of a 747
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On Jan 10, 11:04 am, snipped-for-privacy@aol.com wrote:

It's not the same thing. The FED then has bonds which have a value that is set in the open market. When they buy $1tril of bonds with new money to stimulate the economy, the process is later reversed when the economy has recovered, where they sell those bonds and get the money back. That has been going on since the creation of the FED. It's part of the business cycle. They might get more or less for the bonds than they initially paid for them, there is the interest involved, etc, so it's not going to be perfectly 1:1, but it's close enough and clearly it's very different than the govt just issuing some bogus coin and SPENDING all the money.

It doesn't need to have it's value in platinum any more so than a dime or quarter needs to have metal value of 10c or 25c. It could be the size of a silver dollar.
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On Thu, 10 Jan 2013 08:26:34 -0800 (PST), " snipped-for-privacy@optonline.net"

How is it different? They still spend money they don't have. When the government sells itself a bond, it os simply printing money. That is true of QE or the SS trust fund.

Why bother with a coin then. Just write a rubber check like QE
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On Jan 10, 12:22 pm, snipped-for-privacy@aol.com wrote:

Because when the FED buys a bond, the bond has a real value. Two years from now, they can reverse the process and get the money back. That's exactly what the FED has been doing for decades to regulate the economy. When the economy is weak, they create money and buy bonds. When the economy recovers they start to reverse the process. They sell the bonds and recover the money.
If the govt issues some coin and then spends it, it's spent and gone.

Apparently because under current law, they may be able to do it via the coin route. The rubber check would be illegal.
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On Thu, 10 Jan 2013 09:34:33 -0800 (PST), " snipped-for-privacy@optonline.net"

Both are just accounting gimmicks. The bond can be sold later and the money destroyed or money (and the coin) can be destroyed. Same thing. The difference is that Obama doesn't think a coin is "borrowing", so gets around the debt limit.

Right. QE adds to the debt. The coin "doesn't".
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On Jan 10, 3:12 pm, snipped-for-privacy@attt.bizz wrote:

I guess it depends on what they do with the coin after they create it. Nobody has explained the exact process. I guess if they then take it and deposit it at Chase and just use it as part of federal spending, then it would be similar to the FED money creation process.
Have you seen what law allegedly gives them the authority and what the law actually says?

Quantitative easing does not add to the debt. Spending money adds to the debt. It's like me selling a car. I'm swapping one asset for another. My balance sheet has not changed. I don't owe and more or less than I did before. A month later I can buy my car back and we're back to where we started, assuming the price is the same. The current federal debt of $16tril, the debt limit, etc has nothing to do with QE.
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On Thu, 10 Jan 2013 12:34:57 -0800 (PST), " snipped-for-privacy@optonline.net"

The idea was that the Fed would put the coin in the vault and "pay" the government its face value; an accounting gimmick.

I've only read reports that the law doesn't allow the government to coin copper, silver, or gold without Congress' approval. The idea was that the mint could make commemorative coins using other metals without Congressional approval. It's a case of what the definition of "is", is.

Only because the debt is in the form of an IOU to the Fed, and the balancing money is gone. It's a debt. OTOH, if a coin is minted, it's not borrowing. It's "creating" money.

It certainly does! No one else is buying the government debt so the Fed is buying it. The government is spending the money the Fed is loaning them.
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On Jan 10, 5:00 pm, snipped-for-privacy@attt.bizz wrote:

QE is exactly that, creating money. The FED uses money that never existed before to buy bonds.

That is nonsense. US treasuries are widely held and there is a huge and deep market. They trade about $1tril a DAY. About half of the total 16 tril is owned privately or by foreign govts/institutions. Those securities trade every day with a wide variety of buyers and sellers in the marketplace, not just the FED. Yeah, the FED has a big influence there, but it's nonsense that no one else but the FED is buying them. Around the world, US debt is still viewed as one of the safest investments.
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On Thu, 10 Jan 2013 17:18:33 -0800 (PST), " snipped-for-privacy@optonline.net"

Right, which the government spends, leaving the debt with no assets to offset it. ...about $1.6T this year alone.

You haven't been paying attention:
http://cnsnews.com/news/article/fed-now-largest-owner-us-gov-t-debt-surpassing-china
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On Jan 10, 11:50 pm, snipped-for-privacy@attt.bizz wrote:

That assumes there are no other players in the bond market. That no one else buys any US debt. That is untrue. They are two seperate processes. Yes, it's true that some of the debt the US issues is ultimately bought by the FED. OF the $16til outstanding, the FED doesn't own the majority.
Let's move forward a bit. Let's say a year or two from now the economy is growing at 4% GDP. Do you not agree that the FED will then start selling the bonds it has bought to decrease the money supplyy, reversing the process that put new money into the system? That this is not exactly what has been done in other business cycles to regulate the economy, prevent inflation, etc?
Also, where did $1.6T come from? The budget deficit for the year just ended was $1.1tril. That is about the estimate for 2013 as well.

I've been paying attention. Obviously you haven't, because the link you just posted refutes your whole argument above. It clearly says that the FED owns just $1.6tril in US bonds. That's of a total debt outstanding of $16 tril. Exactly consistent with what I've been saying. You claimed that no one else was buying US bonds. $6tril has been added in new US debt since Obama was elected. Even if the FED bought the entire $1.6tril that they own during that period, it still leaves $4.4 tril that was purchased by other buyers. You make it sound like there is no market for US bonds other than the FED. Actually there is a huge market, trading $1tril a day with participants worldwide.
Your argument is like saying because hedge fund XYZ owns 10% of say Apple, making it the largest single holder, that no one else is buying Apple stock.
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wrote:

china is the big buyer of our debt
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wrote:

True at $1.2 Trillion right now
They had slowed down but they are back
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On Fri, 11 Jan 2013 07:06:32 -0800 (PST), " snipped-for-privacy@optonline.net"

The Fed is buying 80% of new debt

Unless we get a handle on the deficit, there will not be enough liquidity to buy new debt plus selling this old debt. Simply raising GDP growth to 4% is not going to raise that kind of revenue.
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On Jan 11, 11:42 am, snipped-for-privacy@aol.com wrote:

And your source for that would be? krw provided a link that shows the fed owns $1.6tril, or only 10% of the outstanding debt. The FED owns $1.6tril, yet the deficit last year alone was $1.1 tril, $6tril has been added in the last 4 years, so how can they be buying 80%, yet hold only $1.6tril?

Complete avoidance of the questions noted. The questions pertain to routine FED measures to regulate the economy through the money supply that are part of it's most basic function. That have been going on since it's creation, without regard to whether there was a federal deficit or surplus. They are in response to what the economy is doing.
And there is a direct corelation between govt revenue and economic growth. If you had that 4% economic growth, the deficit would shrink dramatically for two reasons. One is that with economic growth the govt takes in more tax revenue from everything from personal income tax, to capital gains and corporate tax. At the same time, some expenses drop, eg unemployment claims, food stamps. You sound like a conservative. This has been a core conservative principle forever. That a vibrant, growing economy greatly increases revenue without raising taxes and will have a significant impact on the deficit as long as new spending is not initiated. Will it close the deficit? No, but getting back to growth of 4% or 5% can cut it in half.
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