I was hoping you could clarify a couple of points for me,

Does all government spending 'come out of' the Treasury's account at the Fed, or does some of it 'come out of' Treasury Tax and Loan accounts held at commercial banks?

When the Treasury receives payment to its account at the Fed, does it receive the full amount in base money?

i.e. if I owe $100 in tax, is $100 eventually transferred in full to the Treasury's account at the Fed, adding $100 to its balance, which is then debited at a later date when the Treasury spends?

Or does the Treasury just 'settle the difference'?

i.e. if the Treasury is owed $100 by a bank and owes $100 to the same bank, do they just call it quits, or does the money owed to the Treasury actually have to be payed in full into its account at the Fed?

thanks

Thanks!

another thing,

Do you know whether Federal Reserve deposits (reserve balances) are obligations of the government, like Federal Reserve notes?

(I emailed the Fed about this but they never got back!)

a trillion dollar coin sounds totally useless. a series of platinum million dollar coins sounds like something that could be auctioned off, minumum bid $1M, to wealthy collectors. especially if the series was limited, and beautifully designed.

yes–it is just a portfolio decision in private sector, giving up one asset (high powered money) for another (collector's coin). Imagine private banks buy them, using reserves, then sell their treasuries to Fed to cover loss of reserves. Banks hold coins rather than treasuries. Reduces measured debt. The only problem is that our wingnut hyperinflationists would see that as even more inflationary (altho would not be)

According to the way I was raised, if I incur a debt, I pay it back. Apparently, there are those who see things a different way, that clever manipulations and creative financial engineering (like trillion dollar coins) are somehow a better alternative (and they actually think an ad hominem like "crazies" makes their argument sound more reasoned and credible).

I think the root cause of this phenomenon is that some people don't see the positive side of making an honest and good-faith repayment of what they promised to repay. Maybe they don't know that a good feeling can come from it, the feeling of knowing you fulfilled your responsibility. Or perhaps they don't know that evading such responsibility gives one the reputation of being a deadbeat.

As soon as we start saying, "we want to be deadbeats because…", the rest of the sentence doesn't really matter all that much, does it? Or have our esteemed economists finally invented the truly free lunch?

Therefore, at the risk of sounding like a nay-sayer to this brave new world of financial creativity, I suggest we deal with the debt the old-fashioned way: just pay it.

The concept that a borrower, in the case where it is a sovereign, ought to or must become a deadbeat was not covered on the "first day" (or any day) of my economics studies at a reputable university. The question is not so much "sovereign or not" but "deadbeat or not". If we revise your statement to change "sovereign" to "deadbeat sovereign", then your position becomes clearer.

Therefore, I take your comments as less statement of fact and more promotion of an agenda. The question is, what to call that agenda? "Pro-deadbeat?" "Anti-integrity?" "U-PIIGS" (add the US to the PIIGS)?

I stand by my earlier comments.

Notice that OldNerdGuys's comments are not based on any form of economic analysis, but rather on some sense of 'morality'. i.e. "I can't mint coins therefore it's not fair that the government can mint coins, even though the government is explictly given that power by the constitution, I don't like it cos it's not fair cos I can't do it".

By the way OldGrumpyGuy, no one is saying the government shouldn't pay what it owes. However if the government eliminates its debt it eliminates net financial assets/ net savings held by the population.

Well, the evidence is clear on the quality. Complain to your former profs, not to me!

Me? I would. But I’m not crazy. I’m glad to hold the IOUs of my sovereign govt. Some crazies prefer gold, etc. I’d only hold gold (or platinum) if it was coined with a nominal value stamped on it by my sovereign.