Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sun Tzu who wrote (2390)	9/29/2021 8:56:12 AM
From: Sun Tzu	1 Recommendation Recommended By ajtj99 Read Replies (1) \| Respond to of 10521

We've all seen those big, scary looking national debt clocks that purport to show the U.S. drowning in red ink. But now imagine if you will, the Treasury minted a trillion-dollar coin, bought back $1 trillion worth of debt from the Fed, and retired it. Instantly that number on the top left would drop by $1 trillion. If the Treasury minted two trillion dollar coins the number would drop by $2 trillion. And there would be on real economic effect, because this would just be an asset swap between the Treasury and the Fed (which is the same reason QE hasn't had much of an affect, because it's just a swap of Fed reserves for Treasury debt). The upshot is that these numbers have very little economic meaning, they would no longer be deemed scary, and they would lose their rhetorical oomph. Politicians intent on, say, cutting back entitlement spending would have a harder time pointing to these big scary numbers as a reason to do so, once it were made clear how arbitrary and malleable they all are. I saw a tweet the other day about the " GLOBAL SPIRAL OF GOVERNMENT DEBT" showing the most indebted nations in red on the inside, with the least indebted ones on the outside in green. It looks kinda scary, until you realize some of the implications. Near the middle are some of the most wealthy, stable nations in the world, like Japan, Canada, and the U.S. On the outside, with low levels of GDP are countries like Turkey (which is famous for its inflation and volatile currency). The upshot is that you'll learn next to nothing about a country's wealth and stability from its debt-to-GDP. Again, the trillion-dollar coin would further discredit debt clocks and debt-to-GDP ratios, establishing that these numbers show us basically nothing that matters to the real economy. Politicians would no longer be able to use them as a cudgel in favor or against various spending plans. That doesn't mean politics would go away. As Stephanie Kelton explained on Odd Lots back in March, you'd still have different priorities. Some politicians might favor more military spending. Others might favor a more robust safety net. Others might favor a less robust safety net. That's all fine and what you'd expect in a democracy: Different ideas about the best use of public money. But the minting of the coin would help establish that we've been misled by debates focusing on big nominal figures or arbitrary ratios. Follow Bloomberg's Joe Weisenthal on Twitter at @TheStalwart