When it comes to the so-called “fiscal cliff,” the stakes just got a lot higher

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Secretary of Treasury Tim Geithner announced on Wednesday that in addition to the fiscal cliff deadline at the end of the year, the United States will also hit its borrowing limit on December 31st, meaning the debt-limit will have to be raised a lot sooner than previously believed. Unlike going over the fiscal cliff, which will have very little economic impact in the short-term, refusing to raise the debt-limit and forcing the United States to default, would have immediate and catastrophic effects.

Not only would the US economy be impacted, but the entire world’s economy would as well. But that won’t stop Republicans from using the debt-limit as leverage to force the President to agree to steep spending cuts that target working families across America. Between the manufactured “fiscal cliff” and the Republicans refusal to compromise over the debt-limit, never in our nation’s history has Congress been responsible for inflicting so many economic wounds on our nation.

And we can blame the Tea Party for the chaos on Capitol Hill today, as they were elected by billionaires in 2010, they clearly have no interest in governing, and no knowledge of what the debt-limit even is. And in blaming the Tea Party, we also have to blame the Supreme Court’s Citizens United decision, which allowed billionaires to spend unlimited money electing these retrograde politicians who are hell-bent on playing disaster capitalism to remake America into a billionaires’ paradise.

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Thom Hartmann A...
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Well, once again the Pres. has the authority to direct the Treasury to stamp out a few trillion dollar coins, hand them over to the Fed and reduce the debt. Debt ceiling dealt with.

The Fed created trillions out of thin air to throw at finance with Quantitative Easing One, Two and Three...and can't print a buck for Food Stamps.

The wolf in sheep's clothing would rather cut social programs.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 3:01 pm

Can you believe the nerve of those Chinese workers, wanting to unionize? What are they commies or something? Just when we needed even lower prices at Wal Mart.

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nimblecivet
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Jul. 31, 2007 3:01 pm

Poly, you having been one, I guess would know quite a number of brilliant and otherwise decent human beings in the world of finance who are convinced that they are doing good and useful work. You would allow for there being a large number of others who endorse their expertise and authority in full sincerity.

One of my hardest lessons to learn has been how hard it is for people "at the top" to have any perspective at all. Their ability to listen to others and hear anything other than affirmation, praise or the kind of ignorant complaining that is easily dismissed is beyond limit. They find it insulting when they decide to treat the fly as worth swatting.

Being "in the know" and credentialed and making big bucks becomes a small club of extraordinaries. People ask you about what you know, as a member of the club. You get to tell or not as it suits you and feeds your ego. But, you gave it up, so you know. I never had it to give up. I just watched what it did to others.

With the austerity measures, the better image might be the sheep in wolves clothing as Our Purple Uniter tries to rescue the deathstar by running it better, becoming invested in this mission at the loss of all perspective. Dealing with constant mutiny and sabotage, he keeps coming back to see if he can get it put back together if he tries this other approach. Reach across the aisle, don't call their bluffs and leave them exposed as "losers." Preserve their illusions of integrity. No 'wolf' here other than in the results.

drc2
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Apr. 26, 2012 11:15 am

Sorry to call the bluff on your claim, Tom. You are only repeating what the corporate news media is telling everyone. I understand that.

BUT it has always been in the back of my mind that the debt would be factored into the equation of what the politicians on Capital Hill (that's an intentional misspelling, BTW ) decide to do about the so called Fiscal Cliff. Everytime they talk money nowadays the deficit/debt get brought up these days.

The timetable they are following is also meeting my expectations. The date the agreement will happen (and it more than likely will) is Dec. 30th. Everything that happens before then is political theater.

For all it is worth (which isn't very much) my opinion is that it really isn't worth worrying about very much. Already the structure of the debate is whether ordinary people get screwed a lot or a very lot, whether billionaires will pay anything at all or not. The significance of the gap between these too approaches is too small to get excited over (IMO). There is no evidence at all that any of the deal makers are at all willing to go outside these narrow bounds in their discussions.

As far as ordinary people go we need to already be adapted to the idea that it is certain that we will be going over the cliff. AND if the "too-big-to-fail" dynamic that has become the norm of late is followed in this "issue" as well, the billionaires are the ones who will be "rescued" from going over the cliff.

All the delay is there only to distract us from what is already predetermined by the people who pull our politicians' strings.

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DenisePf
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drc wrote: Poly, you having been one, I guess would know quite a number of brilliant and otherwise decent human beings in the world of finance who are convinced that they are doing good and useful work. You would allow for there being a large number of others who endorse their expertise and authority in full sincerity.

poly replies: Well, that's certainly true. Most saw themselves as performing useful functions. Even I did.

I've no doubt even Romney thought he was performing a useful function as he shipped thousands of jobs abroad. Some benefited from that. Benefited from his expertise. He was performing a useful, even valuable function in the arena that mattered to him.

Not so valuable for tens of thousands ...or even the nation itself in the long run. That, however, is outside the area of interest, concern, or expertise.

drc wrote: One of my hardest lessons to learn has been how hard it is for people "at the top" to have any perspective at all.

poly wrote: The perspective often doesn't drop beneath the class they associate with. Ideological platitudes with no base in reality cover the need for any real concern.

My nephew worked for awhile in a Denver area Country Club and was warned his job was on the line if someone's daughter didn't stop smiling at him when her family brought her in. His fault that she smiled at him. A no no of a class-line crossover. Forget the Cinderella movies.

It's a much different world up there than many would suppose.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 3:01 pm

I count them among the most seriously culturally deprived. People like Romney who think I envy them don't have a clue. My visits to this club have always creeped me out and made me glad that somehow I had escaped the privilege they have internalized. Nonetheless, how easily I could have been them is part of what creeps me out. It is not that they are so different, but not that different that is haunting.

What grabbed your soul to save you from that world? Why does it not grab them? If they were just intent on doing evil and grabbing the loot it would not be any mystery at all.

What I do know is that my happiness puzzles a lot of rich people who wonder how we get by on what is actually a decent income. We don't waste a lot, but we do spend on pleasures we enjoy. No austerity plan, just focus and excellence. For those who have mortgaged their souls, our "free pass" to the good life can also cause resentment.

One of my favorite parables is the workers in the vineyard where the boss keeps hiring more workers all day long, and at the end he pays them all the same amount of money. Those who have worked from dawn to dusk question the justice of this. The great thing about learning stories is that they pull us into the situation and involve our moral thinking. Yeah, we think, those early birds did put in a lot more hours and should get proportionate wages in a just world! They earned the right to gripe.

But, what is the point? The boss tells them that they agreed to work all day for this good wage and should be satisfied with their bargain. They are being paid very well indeed, by their own standards, and would have been very happy had the others who came later not gotten the same reward for less work. What the boss asks them is why they cannot be happy for the lucky ones who came later and got in on what the earlybirds had found earlier. Why resent anyone when everyone wins?

Even were the wealthy correct in their heroic self-image as "job creators," in the spirit of the parable, they ought to be overjoyed to share their wealth and blessings with others, with only regrets for those who have not found the vineyard and its generous owner. We know there is no injustice involved in requiring the wealthy to redistribute unproductive capital, but they whine to high heaven. The reason has to lie in their own lives, not in what the poor actually "do" to them. What they resent is more about the dues they have paid and the deals they have made with their souls as collateral.

drc2
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Apr. 26, 2012 11:15 am

Cliff and associated hype.

When you are really, really, really, really small the view from the edge of anything looks like a cliff or a wall, but even ants barely slow down for man-made speed bumps on the road to... (you decide).

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Rodger97321
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Paul Krugman writes about how a lot of the talk about "fixing the debt" is really a hidden attack on Social Security and Medicare. Many people have unknowingly fallen for this trap, including recently the C.E.O. of Starbucks.

In the letter, Mr. Schultz warned that elected officials “have been unable to come together and compromise to solve the tremendously important, time-sensitive issue to fix the national debt,” and suggested that readers further inform themselves at the Web site of the organization Fix the Debt. Let’s parse that, shall we?

First of all, it’s true that we face a time-sensitive issue in the form of the fiscal cliff: unless a deal is reached, we will soon experience a combination of tax increases and spending cuts that might push the nation back into recession. But that prospect doesn’t reflect a failure to “fix the debt” by reducing the budget deficit — on the contrary, the danger is that we’ll cut the deficit too fast.

Brewing Up Confusion

miksilvr
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Jul. 7, 2011 11:13 am

1/1/13 -

It's up to the House: fiscal cliff faces Republican-controlled territory

5 things to know about the fiscal cliff

3 more fiscal cliffs loom

miksilvr
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Jul. 7, 2011 11:13 am

miksilvr posted: First of all, it’s true that we face a time-sensitive issue in the form of the fiscal cliff: unless a deal is reached, we will soon experience a combination of tax increases and spending cuts that might push the nation back into recession. But that prospect doesn’t reflect a failure to “fix the debt” by reducing the budget deficit — on the contrary, the danger is that we’ll cut the deficit too fast.

poly replies: Actually, as many economists have proposed, the debt can be reduced by the Treasury using it's Constitutional authority to issue coins and declare their value.

A few trillion dollar coins handed over to the Fed would pay off any debt held by the Fed. Deficit debates are really just another scam to reduce entitlement programs. Both parties engage in it.

If government is really that broke, it can do the same to pay for just about anything domestically. It's probably more convenient to just issue printed money....as Lincoln once did. It worked fine until they were heavily counterfeited. When Lincoln's "Greenbacks" were withdrawn from the economy, the nation plunged into a deep recession.

The deficit is really a non-issue. It can be solved pretty easily. That would, however, take away the excuse to gut entitlement programs.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 3:01 pm

12/28/12 -

Expert: Fiscal cliff 'artificial crisis'

miksilvr
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Jul. 7, 2011 11:13 am

latest on the "fiscal cliff" from CNN : Blog: Latest updates

{or should I say "fictional cliff" ?}

miksilvr
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Jul. 7, 2011 11:13 am

White House talking points on the fiscal cliff deal

miksilvr
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Jul. 7, 2011 11:13 am

from CNN :

10:50 p.m. ET

The Bush tax cuts lapsed at midnight last night. Every R voting for Senate bill is cutting taxes and keeping his/her pledge.


10:57 p.m. ET - The U.S. House of Representatives approves fiscal cliff deal, surpassing the 217 votes needed for passage.


Blog: Latest updates

***

House approves Senate's fiscal cliff deal

miksilvr
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Jul. 7, 2011 11:13 am

Fiscal cliff bill stops many tax hikes, but leaves big issues pending

***

just posted in the chat room:

The fiscal cliff deal that almost wasn't

miksilvr
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Jul. 7, 2011 11:13 am

As always, elected officials just postponed the inevitable with the agreement reached late last night. Now we get to watch the battle over the federal debt ceiling in two months.

Sorry, the budget deficit has to shrink, and tax increases are only a small step in that direction. The latest tax increase was nothing more than President Santa Claus saving face. It raises 60 billion a year vs. a deficit of 1 trillion a year. Big deal, symbolism over substance at its best. Spending cuts have to happen, like it or not.

And printing money is not they answer, that has hyperinflation written all over it. At least that option is not even being discussed.

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Mauiman2
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Jul. 27, 2012 6:24 am

Yep, the Capitol Bowl on New Years was another 'cliffhanger.' In the Tea Party's funk, the Boner managed to wind up with the worst deal he had been offered, but still not going to the heart of any problems on either side. But, this is not about the Dems wanting and demanding too much from the idiots, it is about there being too many idiots to have a serious and sane conversation, even within the limited frame of sanity we expect from tradtional Congress sausage makers.

For example, the idiocy of the "debt ceiling" in the first place. It is like not paying for the drinks at the end of the night at the bar. Your tab is due, but you protest against "spending" by refusing to pay it. You are not just swearing off the booze, you are sticking the bartender for your bills as if that were your sobriety pledge. AAAARRRRGGGGHHHHH!!!!!!!

We have been through this about "spending" being either investing where you get back more than you put in, or waste where you blow your cash on little or no continuing value. When we invest in people as productive fellow citizens, we get back more than we spend. When we have to pay unemployment and provide social services and human needs to people who are also broke, it is a drain on the treasury. When they are working, even if we are paying them, they will be able to pay taxes and buy stuff, and the economy will do better and the deficits shrink.

Not just to get the unproductive cash of the rich back into the system as if that amount of money were the whole point of the tax policies, the reason for a more equitable social and economic design is that when the money is being productive, it adds more value as well. The accounting is not just the one transfer of money v. the deficit, it is the dynamism of a functioning economy that allows the state to gain revenues while also improving its investment strategy in terms of long-term value.

The deficit grows because of unemployed people and capital that is not available for productive investment because it is in the wealth glut. The way to get the deficit down is to employ people and get that capital into productive use. The State has a primary job providing for the common good and a healthy society. Commerce must bow to that or become a tyrant to both the State and to us. We are in this fix because of financialists and imperial warmongers. If we don't deal with them there is nothing but more of this absurdity about 'deficit ceilings.'

drc2
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Apr. 26, 2012 11:15 am

People might take your points a little more seriously without the "President Santa Claus" RW b.s. talking point.

Or, do you just not want to be taken seriously ?

Some people just disregard every other thing in your statement after reading that crap. I mean, seriously, you're still playing that hand? Willard lost trying to use that crap because more people found it to be nothing but a b.s. label that did not stick than believed it!

Obama has given out nothing free!

miksilvr
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Jul. 7, 2011 11:13 am

Maybe there is a silver lining to all this fiscal cliff fear mongering.

Quote David E. Sanger:... military and diplomatic experts wonder whether the United States is at risk of squandering its global influence.

Fiscal Deal Fails to Allay Doubts on U.S. Global Power

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm
Quote Mauiman2:

And printing money is not they answer, that has hyperinflation written all over it. At least that option is not even being discussed.

Tsk tsk. Understand how monetary systems function.

QUOTE: "The other myth is that it is inflationary for central banks to monetize public spending. What increases prices is building interest and debt service, economic rent and financial charges into the cost of living and doing business. Debt-leveraging the price of housing, education and health care to make wage-earners pay over two-thirds of their income to the FIRE sector, FICA wage withholding and other taxes falling on labor are responsible for de-industrializing the economy and making it uncompetitive.

"Government policy has been captured to try and save – or at least subsidize – a financial system that cannot be saved more than temporarily. It is being kept on life support at the cost of shrinking the economy – while true medical spending for real life support is being cut back for much of the population."

Central bank money creation is not inflationary if it funds new production and employment. - Michael Hudson, economist/economics research prof., Univ. of Mo.

http://www.counterpunch.org/2013/01/04/the-ideological-crisis-underlying...

"Central bank money creation is not inflationary if it funds new production and employment." That's an historical fact proven many, many times. Maybe when the whole house of un-necessary debt-ridden cards comes tumbling down, you'll get it.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 3:01 pm
The other myth is that it is inflationary for central banks to monetize public spending...Central bank money creation is not inflationary if it funds new production and employment

True, but that is not what this Congress and administration are trying to accomplish. They are trying to cover current expenses with capital borrowing, which is a recipe for disaster.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm
Quote polycarp2:

Well, once again the Pres. has the authority to direct the Treasury to stamp out a few trillion dollar coins, hand them over to the Fed and reduce the debt. Debt ceiling dealt with.

With President Obama having kicked off debt ceiling negotiations by vowing not to negotiate over the debt ceiling, a new option for paying off the nation’s considerable tab is gaining momentum with cheeky fiscal and monetary wonks

wonks... monks.....

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Capital1
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Jul. 31, 2012 6:38 am
Quote stuff:
The other myth is that it is inflationary for central banks to monetize public spending...Central bank money creation is not inflationary if it funds new production and employment

True, but that is not what this Congress and administration are trying to accomplish. They are trying to cover current expenses with capital borrowing, which is a recipe for disaster.

Some of the borrowing they are doing is going towards retiring older high interest rate securities and replacing them with today's lower interest rate securities.

miksilvr
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Jul. 7, 2011 11:13 am
Quote miksilvr:Some of the borrowing they are doing is going towards retiring older high interest rate securities and replacing them with today's lower interest rate securities.

That is a smart move and is good for taxpayers. It doesn't do much for immediate economic stimulation.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm
Well, once again the Pres. has the authority to direct the Treasury to stamp out a few trillion dollar coins, hand them over to the Fed and reduce the debt. Debt ceiling dealt with.

A few? Why not a whole lot?

Why coin two or four or ten trillion dollar coins when you can just as easily coin two hundred, trillion dollar coins? Hell, with that kind of money, we can buy the entire planet.

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stuff
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Nov. 24, 2012 3:59 pm

Because minting more than what will fill idle capacity will lead to inflation. Moderation in all things.

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Phaedrus76
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Sep. 14, 2010 7:21 pm
Quote stuff:
Quote miksilvr:Some of the borrowing they are doing is going towards retiring older high interest rate securities and replacing them with today's lower interest rate securities.

That is a smart move and is good for taxpayers. It doesn't do much for immediate economic stimulation.

I did not say it did; what it does is decrease the cost of borrowing, which can decrease the deficit.

miksilvr
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Jul. 7, 2011 11:13 am
I did not say it did

I know that you didn't. I was trying to relate your comment to the subject of the thread, which is the effect of the fiscal manuvering on American workers.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm
Moderation in all things.

Ha-ha! That's rich for a government that has borrowed itself into virtual oblivion.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm

Considering government didn't have to borrow in the first place should be the concern. The fact that it needn't continue to borrow...especially under current economic conditions...should be another. It can simply print/spend money to increase productive output and employment. In turn, that would increase government revenues from taxation in a vibrant economy. The more people who are working...the greater the tax revenues... and the less the demand for safety net programs like unemployment ins, food stamps and Medicaid.

As for trillion dollar coins, they can simply be stamped out and handed over to the Fed. Debt held by the Fed would be retired. The coins would siimply be held in the Fed vaults...or could immediately be de-monetized if that's a concern. .It's just an accounting procedure.

Can't do that with non-Fed held debt. We're stuck with it.

Retired Monk - "Ideology is a disease"

polycarp2
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Quote stuff:
Moderation in all things.

Ha-ha! That's rich for a government that has borrowed itself into virtual oblivion.

We are the richest, most powerful, and culturally dominant nation on Earth. Under what definition are we in oblivion?

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Phaedrus76
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Quote polycarp2:

...

As for trillion dollar coins, they can simply be stamped out and handed over to the Fed. Debt held by the Fed would be retired. The coins would siimply be held in the Fed vaults...or could immediately be de-monetized if that's a concern. .It's just an accounting procedure.

Can't do that with non-Fed held debt. We're stuck with it.

Retired Monk - "Ideology is a disease"

The trillion dollar coin was one of the subjects that came up on one of this mornings talk shows. Rep Jerrold Nadler of NY said you could mint platinum coins worth 1 trillion or any denomination, and for effect, even put John Boehners face on it! Chris Hayes even joked about working on a movie script involving a heist of one of those coins in transit, in case anyone is interested in buying the script. There are other "fiscal curb" segments from today on that page from earlier in the show that were also interesting.

Nadler: GOP debt ceiling threats are ‘legal blackmail’

miksilvr
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Jul. 7, 2011 11:13 am

Well, it's a power way above a mere statute of law. Article 1, Section 8 of the Constitution gives government the authority to coin money and regulate its value. It can produce coins, declare their value to be a trillion bucks each, and hand them over to the Fed for payment of debt held by the Fed. It can also simply deposit them in the U.S. Treasury and write checks on them to increase domestic production and employment.

The coin idea was first proposed by U.S. economists of a pretty high stature.

Opponents to it are economists trained in Chicago School Theory....rather recent on the world scene...going back only to the Reagan era. We've seen how that theory is working out.

Economists have four sources of employment. Government, Universities, Banking/Finance, and major corporations. They don't bite the hands that feed them. The idea that government can simply create money without borrowing it from the elite classes gives their private employers chills. Their no risk ride from financing government debt and holding claims against national assets would come to an abrupt end. Bankster threats to crash economies without bailouts for themselves would be laughable.

The dirty secret is, that with fractional reserve banking, banks can loan government money that banks don't even have. They can loan out nearly ten times their assets/deposts. When government receives the loan of non-existent money (with an accounting entry) it can then write checks and spend money that didn't exist anywhere on this planet before the debt. It's a messed up system benefiting only banksters. If government creates money without indebting itself to banksters...banksters scream inflation. People buy it.

If a bankster holds ten billion in Treasury Bonds, he can use that as an asset to loan the government nearly 100 billion more with an accounting entry. And on he goes collecting interest on money he didn't even have.

The only time governments have to borrow money from the economy is when emergency needs exceed the productive capacity of the nation...such as a major war. Then it borrows to from the economy to reduce the inflationary pressure (As with War Bonds). Other than that, they can simply create money equal to the productive capacity of the country or to increase productive capacity/employment.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 3:01 pm
We are the richest, most powerful, and culturally dominant nation on Earth. Under what definition are we in oblivion?

I said "government," not "country." There is a difference.

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stuff
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Nov. 24, 2012 3:59 pm
Quote miksilvr:The trillion dollar coin was one of the subjects that came up on one of this mornings talk shows. Rep Jerrold Nadler of NY said you could mint platinum coins worth 1 trillion or any denomination, and for effect, even put John Boehners face on it!

Why waste good platinum? Why not make coins out of horse sh*t?

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm
Considering government didn't have to borrow in the first place should be the concern. The fact that it needn't continue to borrow...especially under current economic conditions...should be another.

Oh, dear, poly.Where to begin?

Regulating the nation's money supply is not the same thing as financing the operations of the federal government. Taxing and spending is called fiscal policy; regulating the money supply is called monetary policy. I know you know the difference.

The two are related, of course, with a change in one resulting in a change in the other.

It can simply print/spend money to increase productive output and employment. In turn, that would increase government revenues from taxation in a vibrant economy. The more people who are working...the greater the tax revenues... and the less the demand for safety net programs like unemployment ins, food stamps and Medicaid.

Oh, dear, there you go again, poly.

Printing money to stimulate economic activity and employment destroys savings and the lot of those on fixed incomes (i.e., the old). It also wrecks the value of the dollar in foreign exchanges, which might please you in that the result would be higher prices for imports and lower prices for exports (when valued in other currencies). On the other hand, it would make U.S. fixed assets cheaper and thus more attractive to foreign investors (oh, no! here come the Chinese!).

Hard to believe America's trade partners would sit back and not retaliate for such blatant currency manipulation.

As for trillion dollar coins, they can simply be stamped out and handed over to the Fed. Debt held by the Fed would be retired. The coins would siimply be held in the Fed vaults...or could immediately be de-monetized if that's a concern. .It's just an accounting procedure.

This is so absurb that I find it difficult to respond.

At the close of business on Friday, platinum bullion was trading for $1,560 an ounce. A single, one trillion dollar platinum coin would weigh 641 million ounces, or 40 million pounds, or 20 thousand short tons, Note, that only about 12 million pounds of platinum exist on the planet. So, where do we find the remaining 28 million pounds of platinum for our (single) coin? The solar system, which means we now have to invest who knows how many trillions of dollars to establish mining bases on the moons and planets.

If, as you say, "it's just an accounting procedure," then we should save ourselves the effort and just mint a coin or two out of horse sh*t.

Can't do that with non-Fed held debt. We're stuck with it.

We are not "stuck" with anything. All it takes is an act of Congress and the Federal Reserve System disappears in a flash.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm
Well, it's a power way above a mere statute of law. Article 1, Section 8 of the Constitution gives government the authority to coin money and regulate its value. It can produce coins, declare their value to be a trillion bucks each, and hand them over to the Fed for payment of debt held by the Fed. It can also simply deposit them in the U.S. Treasury and write checks on them to increase domestic production and employment.

If it is just that simple, then save the platinum and make the coins out of horse sh*t. Oh, wait, here's another great idea for trillion dollar coins: used dental floss!

The coin idea was first proposed by U.S. economists of a pretty high stature.

Who? Are they still employed? Have they been kicked out of the American Economic Association yet? Was world-class economist Michael Hudson one of the advocates?

Opponents to it are economists trained in Chicago School Theory....rather recent on the world scene...going back only to the Reagan era. We've seen how that theory is working out.

That settles it. If the Chicago School is opposed, it must be a great idea. Maybe they heard about my horse sh*t/used dental floss idea?

The idea that government can simply create money without borrowing it from the elite classes gives their private employers chills. Their no risk ride from financing government debt and holding claims against national assets would come to an abrupt end. Bankster threats to crash economies without bailouts for themselves would be laughable.

Laughable is one word that comes to mind.

Once again, poly, you fail to distinguish fiscal policy and monetary policy.

The dirty secret is, that with fractional reserve banking, banks can loan government money that banks don't even have. They can loan out nearly ten times their assets/deposts. When government receives the loan of non-existent money (with an accounting entry) it can then write checks and spend money that didn't exist anywhere on this planet before the debt. It's a messed up system benefiting only banksters. If government creates money without indebting itself to banksters...banksters scream inflation. People buy it.

If a bankster holds ten billion in Treasury Bonds, he can use that as an asset to loan the government nearly 100 billion more with an accounting entry. And on he goes collecting interest on money he didn't even have.

You conflate reserve requirements (purchasing government securities) and reserve requirements (ratio of commercial assets to liabilities).

The only time governments have to borrow money from the economy is when emergency needs exceed the productive capacity of the nation...such as a major war. Then it borrows to from the economy to reduce the inflationary pressure (As with War Bonds). Other than that, they can simply create money equal to the productive capacity of the country or to increase productive capacity/employment.

What?

There is a real private (and public) demand for U.S. securities because they are considered to the be safest possible investment.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm

If we can take 1 cent worth of nickel and call it 5 cents, why can't we take 1 cent worth of nickel and call it a trillion dollars?

chilidog
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Jul. 31, 2007 3:01 pm
If we can take 1 cent worth of nickel and call it 5 cents, why can't we take 1 cent worth of nickel and call it a trillion dollars?

Why waste nickel? I'm thinking toe nail cuttings might make a good trillion dollar coin.

stuff's picture
stuff
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Nov. 24, 2012 3:59 pm

Actually, Stuff, the U.S. Treasury can mint coins out of anything. Wood, paper or metal. Even horse sh--t if that's your preference. It can Constitutionaly declare their value.

100 pennies are declared to have the value of $1...though in actuality, their metal value is way less than a cent. A nickle is worth about 4 cents but is declared to be worth 1/20th of a dollar. You can trade 80 cents worth of metal for a dollar. It can stamp out as many dollar coins as it wants...without borrowing them. It can just as easily stamp out trillion dollar coins...without borrowing them.

Printing money into existence is no different than borrowing money into existence through fractional reserve banking. The difference is, when government borrows, the banks have to be paid back money they didn't have in the first place...with interest.

Governments can simply print/spend money into existence up to the maximum economic output capabilities of a country without inflation. That's a proven historical fact.

At one time, England even issued notched sticks. It did so for nearly 400 years...one of the most prosperous periods in English history. They were called chits.

Rome conquored the world by issuing an abundance of cheap copper coins. Not a banker in sight. It screwed up when it switched to gold. There wasn't enough gold for economic functioning in a world-wide empire.

Hitler nearly conquored the globe by simply issuing money to raise the production of armaments...without inflation...while the rest of the world remained mired in the Great Depression. Increased productive ouput backed the currency.

Governments simply issued money way, way before the advent of bankers. The only limitation is, they can't issue more than the economic capability of a nation can support.

Current U.S. economic output is about 75% capacity. That translates into several trillions per year that government can print/spend to bring production/employment up to full capacity.....without inflation and without borrowing. Increased production of goods/services backs the money. It absorbs it.

Probably you should study economics rather than mouthing the propaganda issued daily by economic prostitutes on behalf of their well-heeled employers.

I'd suggest the Univ. of Missouri at Kansas City. If you prefer to become an economic prostitute mouthing nonsense, head for a Univ. that teaches Chicago School theory...popularized by Reagan and sometimes referred to as voodoo. Do well at memorizing voodoo and the current Admin. might even give you a post on its economic team...same as a Romney Admin. would have.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 3:01 pm
Actually, Stuff, the U.S. Treasury can mint coins out of anything. Wood, paper or metal. Even horse sh--t if that's your preference. It can Constitutionaly declare their value.

I hope the Chinese like horse sh*t.

Let's get serious for a moment. The idea of minting a one trillion dollar coin from platinum or anything else is absurd. Whether it can be done is not the same thing as whether it ought to be done.

The government could do so if it is willing to wreck its currency and destroy investor confidence in the full faith and credit of the U.S. government. By effectively renouncing the federal debt, the U.S. government would have a hard time ever borrowing another dime. The owners of Fed Member Institutions would dump their shares, virtually obliterating the balance sheets of banks. Currency markets would dump dollars, the cost of U.S. imports would soar, and the Americans would lose once and for all their leadership of the world financial and trading regimes.

The notion of a one-trillion dollar coin is preposterous and naive, poly.

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stuff
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Nov. 24, 2012 3:59 pm
Probably you should study economics rather than mouthing the propaganda issued daily by economic prostitutes on behalf of their well-heeled employers.

Ad hominem attacks are uncalled for and probably violate Board rules, poly.

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stuff
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Nov. 24, 2012 3:59 pm

When Fiction becomes Fact the Truth becomes a perjorative.

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Scappoose
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Mar. 30, 2012 6:49 am
When Fiction becomes Fact the Truth becomes a perjorative.

I believe the Board's rules require civility even in cases where it might not otherwise be warranted.

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stuff
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Nov. 24, 2012 3:59 pm

At this point I wonder if even stimulus would have all the desired effects. Once a dollar that has changed hands x number of times and the bank gets its hands on it, how much of its notational value is assigned toward interest payments made by depositors who are in debt? If the government does not sort out through a political and/or legal process who actually owns what then short term capital will continue to come at the cost of higher interest, unless short term measures such as "printing more money" can somehow keep interest rates down. Since the whole thing is contrived in the first place, I don't see any reason the middle class won't continue to be required to pay more in taxes while suffering the closure of parks, mental health clinics to keep people out of their shopping malls, crumbling infrastructure, price gauging insurance companies, etc. if this "bankruptcy process" never happens. "Never forget the bailouts."

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nimblecivet
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Jul. 31, 2007 3:01 pm
Quote stuff:

Let's get serious for a moment. The idea of minting a one trillion dollar coin from platinum or anything else is absurd. Whether it can be done is not the same thing as whether it ought to be done.

The government could do so if it is willing to wreck its currency and destroy investor confidence in the full faith and credit of the U.S. government. By effectively renouncing the federal debt, the U.S. government would have a hard time ever borrowing another dime. The owners of Fed Member Institutions would dump their shares, virtually obliterating the balance sheets of banks. Currency markets would dump dollars, the cost of U.S. imports would soar, and the Americans would lose once and for all their leadership of the world financial and trading regimes.

So we won't borrow money. We'll just print it. The "full faith and credit" won't be abandoned, they'll get their dollars, those dollars just won't be exchangeable for what they used to be exchangeable for. It's not like this would be shocking to investors.

I don't think anyone is suggesting that there wouldn't be adverse consequences to printing this sum of money. But it's better than the path we're headed on.

chilidog
Joined:
Jul. 31, 2007 3:01 pm
So we won't borrow money. We'll just print it. The "full faith and credit" won't be abandoned, they'll get their dollars, those dollars just won't be exchangeable for what they used to be exchangeable for. It's not like this would be shocking to investors.

In fact, printing money is the same thing as borrowing money. Read closely and you will find on each Federal Reserve Note, "This note is legal tender for all debts, public and private."

Monetizing debt is a delicate procedure but hardly unusual for the United States. Its success depends on how quickly the debt is monetized and whether or not it unnerves financial markets. The U.S. dollar was slowly devalued after World War II to liquidate the nation's huge wartime debt. The same technique was used to pay for both Vietnam and the Great Society.

After Jerry Ford's disasterous "Whip Inflation Now" (WIN, get it?) debacle, the Carter administration made a serious effect to halt inflation under the Fed chairmanship of Paul Volcker. The resulting explosion in real interest rates plunged the nation into a recession, crippled third world debtors, and produced the most furious political demand for protectionist tariffs since the Great Depression.

Carter's anti-inflation policies helped Reagan win in 1980, a lesson not forgotten by today's crop of politicians.

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stuff
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Nov. 24, 2012 3:59 pm
Quote stuff:
Probably you should study economics rather than mouthing the propaganda issued daily by economic prostitutes on behalf of their well-heeled employers.

Ad hominem attacks are uncalled for and probably violate Board rules, poly.

Probably Stuff, if you're going to make economic statements, you should at least quote reputable economists to back them them up. Ideological platitudes just don't cut it with me. Give me the science and historical data.

http://www.counterpunch.org/2011/08/03/war-and-debt/

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 3:01 pm

Come to think of it, Carter could run for a second term...

But, no- we're all anxiously waiting for house prices to keep going up again, right? As long as my monthly payments are low...

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nimblecivet
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Jul. 31, 2007 3:01 pm

Probably since banks have slowed sending out foreclosure notices, at least the housing market won't continue to crash. It won't recover either. Too many forecloseable properties in the waiting line.

In fact the number of distressed homes in the pipleline is still humongous. Here’s a conservative estimate from LPS’s Mortgage Monitor report for May:

* 1,967,000 loans less than 90 days delinquent.

* 1,575,000 loans 90+ days delinquent.

* 2,027,000 loans in foreclosure process

That’s a total of 5,569,000 loans that are delinquent or in foreclosure as of May 2012. Keep in mind, that some experts predict that we are just barely halfway through this foreclosure deluge and that –according to The Big Picture’s Barry Ritholtz, “We may end up with a total of 8-10 million foreclosures before we are finished.” How do you think that’s going to effect prices?

http://www.counterpunch.org/2012/07/13/a-market-in-ruins/

Retired Monk - "Ideology is a disease:

polycarp2
Joined:
Jul. 31, 2007 3:01 pm

Currently Chatting

The Death of the Middle Class was by Design...

Even in the face of the so-called Recovery, poverty and inequality are getting worse in our country, and more wealth and power is flowing straight to the top. According to Paul Buchheit over at Alternet, this is the end result of winner-take-all capitalism, and this destruction of the working class has all been by design.

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