Linkdump & commentdump
January 11, 2013 3 Comments
It does seem fair to wonder whether the reason that TIPS-implied inflation expectations are at a low level which seems to debunk the fears of inflation hawks is simply that CPI is total BS.
Stationary Waves points out problems with the $1 Trillion Coin idea for getting around the debt ceiling, the main one of which, to rephrase slightly, is that a $1 trillion coin made by the Treasury and handed to the Fed isn’t fundamentally different from debt in the first place. Ironically, what this shows is that the goo-goo, reformist left has embraced regulatory arbitrage on a level CDO managers could only dream of. “Let’s pay the debt in IOUs, but figure out a way to not call that ‘debt’.” “Let’s leverage an unrelated law to mint a Giant Coin and hand it to the Fed to buy our bonds with.” The common property of this crop of Clever Ideas is that they all involve getting around the clear intent and spirit of some law or definition. Goo-goos got incensed at the very thought of this sort of thing when it came to something like labeling credit-insurance contracts “swaps” so that they don’t have to be regulated as insurance, or packaging/tranching BB bonds into a “AAA” bond that will satisfy ratings-based regulations and capital requirements. Those things were done for a few billion dollars. The Coin, meanwhile, is a trillion-dollar arbitrage and goo-goos are all for it! Because, y’know, it’d be done by the government so it’s ok.
Shocker: PostLibertarian catches the Reality-Based Community cherry-picking evidence when it comes to the climate.
Why listening to David Bowie in the ’70s was a great investment.
Let’s say there’s a $1 trillion gap between what congress has said we should spend and what congress says we should tax. One option is to borrow the $1 trillion. If the Fed thinks that’s put too many bonds into circulation and not enough money, it can print money and use it to buy bonds. Another option is to deposit a $1 trillion coin at the Fed to cover the gap. If the Fed thinks that’s put too much money into circulation and not enough bonds, it can sell bonds and buy money.
A third option is to split the difference! Since there is a $1 trillion gap between what Congress has said Treasury should spend and what they will allow Treasury to (tax+borrow), isn’t it obvious? You can’t do Matthew’s first option (or The Coin, considering that it’s basically debt) without breaking the law. Nor can you respect the debt ceiling and not-spend, without breaking the law. Either way, you break the law. So? The least-bad option? Isn’t it OBVIOUS? Split. the. difference.