Quote from noob_trad3r:
If the problem with the economy is due to the large debts Americans are in, and the banks.
What if the US prints a special dollar that can only be used to pay debts.
Print enough to cover all debts.
Then the banks can take this debt denominations and give it to the Federal reserve, then the banks get credited in regular dollars.
Inflation would not go up since what you did was turn.
-1,000,000,000
into 0.00
the black hole absorbed the new cash till it hits zero.
so you don't have new money circulating just removal of debt.
FYI: This tactic was essentially addressed in great detail by the MMTers (Modern Monetary Theory practitioners) in the debate leading up to raising the debt ceiling back in early August.
Here is the background on that debate:
<a href="http://johnsville.blogspot.com/2011/07/debt-watch-coin-trick-trillion-dollar.html">Debt Watch / Coin Trick: the Trillion Dollar Coin</a>
The MMT tactic for reducing the debt involves using "coin seigniorage." This is the "right of the lord to coin money," or the right of the U.S. government to mint and make a profit on its money. The U.S. Treasury has the legal right to mint a trillion, or 5 trillion, or 15 trillion dollar platinum coin. Seigniorage also refers to this profit a lord or government makes on its coinage. Obviously a coin stamped with a trillion dollar denomination did not cost 1 trillion to make.
This is the MMT "trillion dollar coin" scenario:
1. The Treasury mints a $1 trillion coin, or whatever amount is desired.
2. The Treasury deposits the coin into the Treasuryâs account at the Fed.
3. The Treasury buys back bonds
4. The retirement of bonds is an asset swap, no different from QE2
5. The increase in reserve balances is not inflationary, as Credit Easing 1.0, QE 1.0, and QE 2.0 already have shown.
6. These operations by the Treasury create no new net financial assets for the non-government sector
7. The debt ceiling crisis is averted
This tactic could, I guess, be used to pay down the debt at any time.
You are welcome to argue against this tactic: its inflationary, or its monetizing the debt, etc, etc...
However, you have to refute the arguments of dozens of MMT economists and the hundreds if not thousands of their followers and disciples. Trust me, they have the supporting data and the academic chops to slap down anyone that I've read so far on this thread.
Noted MMTers:
<a href="http://bilbo.economicoutlook.net/blog/">Bill Mitchell â billy blog</a>
<a href="http://moslereconomics.com/">The Center of the Universe - Warren Mosler</a>
<a href="http://rodgermmitchell.wordpress.com/">Monetary Sovereignty â Mitchell</a>
<a href="http://neweconomicperspectives.blogspot.com/">New Economic Perspectives</a>
for reference:
<a href="http://moslereconomics.com/2011/08/04/mmt-history-and-overview/">MMT history and overview</a>
And please don't shoot the messenger. I'm just saying...
