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In reply to the discussion: The trillion dollar coin is not about "printing away the debt". [View all]DanTex
(20,709 posts)3. But it will be payed back.
The actual amount of money that the government spends is determined by congress, as usual. As long as the Fed compensates by selling some bonds it would be identical, from a macroeconomic point of view, to if the government sold the bonds directly to raise the money. The money supply will be the same, and the amount of debt held by the public (by the public I mean anyone other than the Fed) will be the same. Then when congress decides to give up the charade and raise the debt ceiling, the treasury buys the coin back and melts it down.
We aren't talking about one trillion dollars of seigniorage. It's a temporary accounting maneuver.
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The Fed doesn't need to sell bonds at all in order for the Treasury to spend the deposited coin
FarCenter
Jan 2013
#16
The Fed is actually buying bonds every month in order to implement quantitative easing
FarCenter
Jan 2013
#19
That's the point -- the Fed can sell bonds without raising the ceiling. Read Krugman again.
DanTex
Jan 2013
#25
It's a legal and economic hack, and an effective one, which is why the right-wing's going apeshit.
backscatter712
Jan 2013
#10
Well, it's not "free money". Eventually it has to be payed back, just like real debt.
DanTex
Jan 2013
#13
So it's an accounting trick that temporarily allows us to appear to have more money
hughee99
Jan 2013
#14
No. It's an accounting trick that allows us to borrow money without issuing more bonds.
DanTex
Jan 2013
#15
Umm, yeah, all fiat money is created out of nothing. We're not on the gold standard any more.
DanTex
Jan 2013
#22
That doesn't happen if the Treasury uses the coin(s) only to retire existing debt.
Jim Lane
Jan 2013
#27