yalloc t1_j28cew2 wrote
>taken out of the economy instantly
They wouldn’t be. Paying debts with printed money by definition is injecting money into the economy. You would “take it out” by a central bank exchanging it for the same value in cash, created by printing new cash.
Anyways this idea has been floated, particularly in 2013. Ultimately the problem is no one knows what would happen. Classical economics says we would see a mass loss of faith in the currency alongside the natural inflation added supply creates. Issue is no one knows anything about economics anymore since classical economics has been shown over this past century to not be entirely correct and it’s a bit of a fear of the unknown at this point. I would imagine we would see significant inflation still, but how much is something only god knows.
The coin itself is not important. No one realistically is going to use it to pay anything. The only reason the coin is important is that it essentially acts as a “voucher” to be exchanged for a truckload of regular cash if by no one else then the central bank. In the end the effect is just a slightly more ceremonial way of printing a truckload of Benjamins.
DavidRFZ t1_j28nyg2 wrote
I was under the impressions that the “trillion dollar coin” proposal was an accounting trick to try to get around the artificial “debt limit” that Congress imposes on itself.
There have been structural budget deficits for over twenty years, so every couple of years the debt limit is raised.
Every so often, a group of newly-elected House members decides they are going to engage in brinksmanship with raising this limit — not fully comprehending the global financial meltdown that would occur if the government actually defaulted on its debt. In the end, the debt limit is ALWAYS raised. There is no other option.
So, people get annoyed with this game and try to find ways to render the “debt limit” meaningless. You could pass a law eliminating the debt limit! But if you don’t have the votes for that you get creative.
This old proposal was for the treasury to mint an trillion dollar coin and then deposit it in the Federal Reserve. It is not circulated. I don’t think something like that could even be “spent” (anyone got change for a trillion?). But in accounting terms it would count as an asset which would keep us below the “debt limit”. The government wouldn’t default. Brinksmanship by newly-elected Congressmembers is no longer a thing.
They’ll never do it though. It sounds too insane and “it’s just an accounting trick” is not an explanation that would sit well with potentially horrified voters.
Derikoopa OP t1_j28d7db wrote
Thank you! I'm imagining the economic nightmare of trying to pay for your weekly shop, and all you have is a 1 billion dollar coin xP Man, I thought my billion dollar coin idea was ludicrous, but according to your link, I should have been thinking in the trillions xP
Surplus_32 t1_j297kqq wrote
But what if one country was in debt to another country and to pay back the debt, they give them a shitload of money printed specifically just to pay off the debt? Wouldn't it then be the case that this surplus of money is instantly taken out of the first country's economy and then it shouldn't cause inflation there?
Moskau50 t1_j29xc4r wrote
Then the lender country has billions of dollars of the borrower's currency. They're either gonna spend it in the borrower country, or they're gonna sell the currency for another currency. If they simply spend it in the borrower country, that will inject the currency right back into their economy, causing inflation.
If they sell the currency, the massive surplus of that currency will cause the international value (exchange rate) of the borrower currency to fall, weakening it on the international market. That makes it harder for the importers in the borrower country to buy foreign goods, so they have to charge more domestically to make up the difference. That will cause a rippling price increase across the borrower's economy.
If your money supply was X and then you increase it to 1.5X, you can't get away from the fact that your money supply increased 50% overnight, no matter where it goes.
T-T-N t1_j2b2tyn wrote
Every government are classical economist in good times and Keynesian in bad time. That really frustrates me
Viewing a single comment thread. View all comments