If you've been following the clown show that is the Republicans
choosing a Speaker of the House, you'll doubtless have noticed that
the so-called freedom caucus is very likely to hold the debt ceiling
hostage next year in return for, well, who knows what, repealing
Medicare or something.

Everyone agrees that if the US hit the debt ceiling and stopped paying
treasury debt it would be very bad news for the economy. One thought
is that there is a law that lets the Secretary of the Treasury mint
any commemorative platinum coins she deems appropriate, so she could
tell the Mint to make a trillion dollar coin, deposit it at the Fed,
our debt goes down by $1T, and we're still in business. Another
observes that the 14th Amendment says:

The validity of the public debt of the United States, authorized by
law, including debts incurred for payment of pensions and bounties for
services in suppressing insurrection or rebellion, shall not be
questioned.

A lot of people interpret that to mean that the debt ceiling is unconstitutional.

So let's say the Treasury gets itself such an opinion and blows
through the debt ceiling, or mints the coin. Then what? Who would have
standing to sue? Who could claim to be injured by continuing to pay
the debt? Courts have not been sympathetic to taxpayer suits along the
lines of "this means I will have to pay more taxes later."

--
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John Levine, johnl@taugh.com, Primary Perpetrator of "The Internet for Dummies",
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"John Levine" <johnl@taugh.com> wrote:

If you've been following the clown show that is the Republicans
choosing a Speaker of the House, you'll doubtless have noticed
that the so-called freedom caucus is very likely to hold the debt
ceiling hostage next year in return for, well, who knows what,
repealing Medicare or something.

Everyone agrees that if the US hit the debt ceiling and stopped
paying treasury debt it would be very bad news for the economy.
One thought is that there is a law that lets the Secretary of the
Treasury mint any commemorative platinum coins she deems
appropriate, so she could tell the Mint to make a trillion dollar
coin, deposit it at the Fed, our debt goes down by $1T, and we're
still in business. Another observes that the 14th Amendment says:

The validity of the public debt of the United States, authorized
by law, including debts incurred for payment of pensions and
bounties for services in suppressing insurrection or rebellion,
shall not be questioned.

A lot of people interpret that to mean that the debt ceiling is unconstitutional.

So let's say the Treasury gets itself such an opinion and blows
through the debt ceiling, or mints the coin. Then what? Who would
have standing to sue? Who could claim to be injured by continuing
to pay the debt? Courts have not been sympathetic to taxpayer
suits along the lines of "this means I will have to pay more taxes
later."

I haven't researched this, but it seems to me that when Congress passes
a budget, they, by that action, authorize borrowing to pay the expenses authroized by the budget.

Your suggestion sounds good to me - the US would be creating value from
assets it already has. They wouldn't be borrowing more money, just, in
effect, selling assets that they be able to pay the bills.


--
Stu
http://DownToEarthLawyer.com

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On 1/11/2023 11:05 PM, John Levine wrote:

If you've been following the clown show that is the Republicans
choosing a Speaker of the House, you'll doubtless have noticed that
the so-called freedom caucus is very likely to hold the debt ceiling
hostage next year in return for, well, who knows what, repealing
Medicare or something.

Everyone agrees that if the US hit the debt ceiling and stopped paying treasury debt it would be very bad news for the economy. One thought
is that there is a law that lets the Secretary of the Treasury mint
any commemorative platinum coins she deems appropriate, so she could
tell the Mint to make a trillion dollar coin, deposit it at the Fed,
our debt goes down by $1T, and we're still in business. Another
observes that the 14th Amendment says:

The validity of the public debt of the United States, authorized by
law, including debts incurred for payment of pensions and bounties for
services in suppressing insurrection or rebellion, shall not be
questioned.

A lot of people interpret that to mean that the debt ceiling is unconstitutional.

So let's say the Treasury gets itself such an opinion and blows
through the debt ceiling, or mints the coin. Then what? Who would have standing to sue? Who could claim to be injured by continuing to pay
the debt? Courts have not been sympathetic to taxpayer suits along the
lines of "this means I will have to pay more taxes later."

I think the obstacles to this are more practical than legal. You're
basically talking about intentional inflation. I'm aware of at least 5 different measures of the money supply:
M0: currency in circulation
MB: M0 plus money in bank vaults plus deposits in the Federal Reserve
M1: MB plus total of all money orders, check accounts, and savings
accounts (except CDs)
M2: M1 plus non-jumbo CDs
M3: M3 plus jumbo CDs

See https://en.wikipedia.org/wiki/Money_supply#Empirical_measures_in_the_United_States_Federal_Reserve_System
for details.

That $1E12 coin would instantly inflate the MB by about 20%. All the
people and banks and such that lend money to the US would notice this
and ask for higher interest rates -- probably more than 20% per year --
to compensate for expected future inflation.

In short, it would be about as bad as "defaulting" on the debt (that is, failing to pay off T-bills and T-bonds as they come due), perhaps worse.



--
I do so have a memory. It's backed up on DVD... somewhere...

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According to Barry Gold <bgold@labcats.org>:

treasury debt it would be very bad news for the economy. One thought
is that there is a law that lets the Secretary of the Treasury mint
any commemorative platinum coins she deems appropriate, so she could
tell the Mint to make a trillion dollar coin, deposit it at the Fed,
our debt goes down by $1T, and we're still in business. ...

I think the obstacles to this are more practical than legal. You're
basically talking about intentional inflation.

No, not at all. The Treasury gives the $1T coin to the Fed, the Fed
makes a note on its balance sheet and puts the coin in the vault. It
doesn't affect currency in circulation. The only difference is that
the Fed's balance sheet says net borrowing is $30.5T rather than
$31.5T.

That extra trillion is technically called seignorage, the excess of
face value of currency over what it costs to produce. (I suppose it
would be $999,999,999,900 if it cost $100 to make the platinum coin,
but close enough.)

The amount of money that the government spends and the amount that it
borrows are exactly the same as if Congress had raised the debt limit,
or more sensibly had abolished it. Those amounts were already set when Congress passed tax and appropriation bills.
--
Regards,
John Levine, johnl@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

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In misc.legal.moderated, on Thu, 12 Jan 2023 13:01:28 -0800 (PST),
"Stuart O. Bronstein" <spamtrap@lexregia.com> wrote:

I haven't researched this, but it seems to me that when Congress passes
a budget, they, by that action, authorize borrowing to pay the expenses >authroized by the budget.

I like that, I agree with you, and I wish they'd all start seeing it
that way.

Similarly, when a man and woman have decided to marry and agreed to have children, they, by that action, have each (even if the man later becomes doubtful) assumed the obligation if she does become pregnant to try to
be a good parent.

Similarly, when a man and woman have consensual sex without using birth
control or while using it not carefully, they, by their action, have
assumed the obligation of parents.

Right?

Your suggestion sounds good to me - the US would be creating value from >assets it already has. They wouldn't be borrowing more money, just, in >effect, selling assets that they be able to pay the bills.

--
I think you can tell, but just to be sure:
I am not a lawyer.

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It appears that micky <misc07@fmguy.com> said:

I haven't researched this, but it seems to me that when Congress passes
a budget, they, by that action, authorize borrowing to pay the expenses >>authroized by the budget.

I like that, I agree with you, and I wish they'd all start seeing it
that way.

Sure. That is indeed how the Federal government works; the debt
ceiling was a shortcut from WW I that has far, far, outlived its
utility.

Similarly, when a man and woman have consensual sex without using birth >control or while using it not carefully, they, by their action, have
assumed the obligation of parents.

Right?

Often but not always. Life is complicated, unexpected things happen,
and people make mistakes. Attempts to pretend it is simple invariably
lead to cruel and perverse results.

Let's talk about bankruptcy. If I enter into a situation where I owe
people money, I've assumed the obligation to pay it, right? So
you agree that they should be able to pursue me for it until I die.

--
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John Levine, johnl@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

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On 1/27/2023 9:01 AM, micky wrote:

I like that, I agree with you, and I wish they'd all start seeing it
that way.

Similarly, when a man and woman have decided to marry and agreed to have children, they, by that action, have each (even if the man later becomes doubtful) assumed the obligation if she does become pregnant to try to
be a good parent.

Similarly, when a man and woman have consensual sex without using birth control or while using it not carefully, they, by their action, have
assumed the obligation of parents.

I don't remember the name of this logical fallacy, but it amounts to
"this applies here, therefore that applies there."

The two situations are not equivalent.

When Congress passes a budget, they have explicitly told the Executive
Branch that it can spend that money for those purposes. They have not
said where the money is to come from -- that's in one or more separate laws:
* taxes (a separate power of Congress, "to lay and collect Taxes,
Duties, Imposts, and Excises")
* borrowing (another separate power, "To borrow money on the credit
of the United States")
These are found in Article I, Section 8

The logic behind the debt limit comes from the second of those.

"Similarly" -- watch out for words like that.

"When a man and woman have consensual sex without using birth control or
while using it not carefully, they, by their action, have assumed the obligation of parents"

This ignores the fact that the states with the strictest anti-abortion
laws also insist that the schools teach "abstinence only".

Sex is pleasurable. If it weren't, nobody would go to the trouble of
finding a suitable partner, and the species would become extinct. There
are steps you can take to reduce the chance of conception ("birth
control") but (a) none of them are 100% effective, and (b) using them
properly requires knowledge. Those states make it more difficult for
young people to acquire that knowledge.


--
I do so have a memory. It's backed up on DVD... somewhere...

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On Thursday, January 12, 2023 at 11:07:58 PM UTC-4, John Levine wrote:

According to Barry Gold <bg...@labcats.org>:

treasury debt it would be very bad news for the economy. One thought
is that there is a law that lets the Secretary of the Treasury mint
any commemorative platinum coins she deems appropriate, so she could
tell the Mint to make a trillion dollar coin, deposit it at the Fed,
our debt goes down by $1T, and we're still in business. ...

I think the obstacles to this are more practical than legal. You're >basically talking about intentional inflation.

No, not at all. The Treasury gives the $1T coin to the Fed, the Fed
makes a note on its balance sheet and puts the coin in the vault. It
doesn't affect currency in circulation. The only difference is that
the Fed's balance sheet says net borrowing is $30.5T rather than
$31.5T.

You are mistaken. The "Fed" does not hold the note to the public debt. That is through T-bills. If the government used the trillion dollar coin to somehow pay part of the public debt, that would reduce the debt, but that is no different than printing
a trillion $1 bills and using them to pay off some of the debt.

You are confusing debt, with net worth, the sum of all assets, minus the sum of all debts. With companies, they can claim as an asset, "good will". Not sure how much the government's "good will" is worth.

That extra trillion is technically called seignorage, the excess of
face value of currency over what it costs to produce. (I suppose it
would be $999,999,999,900 if it cost $100 to make the platinum coin,
but close enough.)

And does nothing for the debt if they don't pay down the debt with it.

The amount of money that the government spends and the amount that it
borrows are exactly the same as if Congress had raised the debt limit,
or more sensibly had abolished it. Those amounts were already set when Congress passed tax and appropriation bills.

No... the debt has not changed, so the limit remains the same.

At some point, if the debt continues to increase, faster than the revenue from taxes and fees, the money required to service the debt will be so much, there will be too little money left to run the government. That's why we need to limit the federal
debt and why states are not allowed (by their own laws) to run at a deficit.

We simply can't pretend that creating currency to pay debt is remotely logical. If it made sense, we could let everyone do it!

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On 2/24/2023 9:29 PM, Lorem Ipsum wrote:

At some point, if the debt continues to increase, faster than the revenue from taxes and fees, the money required to service the debt will be so much, there will be too little money left to run the government. That's why we need to limit the federal

debt and why states are not allowed (by their own laws) to run at a deficit.

We simply can't pretend that creating currency to pay debt is remotely logical. If it made sense, we could let everyone do it!

Exactly. Germany tried that in the 1920s and it was a disaster.

--
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It appears that Barry Gold <bgold@labcats.org> said:

We simply can't pretend that creating currency to pay debt is remotely logical. If it made sense, we could let everyone do it!

Exactly. Germany tried that in the 1920s and it was a disaster.

Many people believe that, but it is completely wrong.

In 1923, the Weimar government deliberately inflated the German
currency to infinity to make it impossible to pay the Versailles
treaty reparations. It worked, too. In late 1923 they introduced the Rentenmark, nominally backed by mortgages, and the inflation stopped.
Shortly afterward, the Dawes Plan and the Young Plan, had the US loan
money to Germany which it used to pay reparations to France and the
UK, which they in turn used to pay back WW I loans to lenders in the
US. If that sounds absurd, it was.

Ten years later, in 1933, chancellor Heinrich Brüning imposed economic austerity with severe deflation to produce a trade surplus to raise
money to pay what was left of reparations. That was a disaster, it
caused economic chaos, and led to the takeover by you-know-who.

The inflation was a decade old memory at that point, and deflation
ended the Weimar republic, but you'll find amazingly few people, even
within Germany, who know that.

--
Regards,
John Levine, johnl@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

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