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Imagine I owe you one trillion dollars. I pay you a trillion dollar coin. Our debt is settled. The way this works out is that every single dollar is worth slig

• lando2319 7y ago
  Ok, by expanding the money supply. Fascinating. Thanks.
  • celticninja 7y ago
    This is why debt holders are usually not in a rush to have the debt paid off. If in doing so it devalues the debt so much that it isn't worth it. If you owe the bank $100,000 you have a problem, if you owe the bank $10,000,000 the bank has a problem.
    • foobarbecue 7y ago
      Ten million? Nah. Ten billion, sure.
      • gambiting 7y ago
        Depends on the size of the bank. I know someone who needed to borrow "just" a few million to purchase a warehouse and I think 3 local banks had to pool up the money to lend him and to spread out the risk. Sure for a giant corporate bank that's literally nothing but there are still small banks all over the country which have relatively little capital.
        • foobarbecue 7y ago
          Touché.
• rags2riches 7y ago
  Prices have to change for dollars to be worth less. If prices change depends on how the coin is used.
• crdoconnor 7y ago
  Inflation doesn't kick in when money is minted it kicks in after it is spent. This is why QE didn't trigger inflation in a normal way - minted money was exchanged for bonds (financial assets) not spent on goods and services.
  • paulpauper 7y ago
    this is true. not sure why this got down-voted
    • guipsp 7y ago
      Probably because it's a very "actually..." style reply when I went for a simplistic explanation on purpose.
    • wallace_f 7y ago
      While the economics dogma may agree that this is true, I imagine many people have a hard time swallowing the idea of this never-ending of printing free money and giving it to the banks and government.
      • OscarCunningham 7y ago
        They do (in some sense) give it to the government, but not to the banks. The banks get it in exchange for bonds and shares which they sell to the Federal Reserve. So the banks aren't getting money for nothing, they're exchanging money-in-the-future for money-now, which is why inflation is created.
        • wallace_f 7y ago
          If you think about it, when the banks go bust and need a bailout, the Fed debited their balance sheet for 4 trillion dollars but the other side of the balance sheet is buying "toxic assets" or government debt from Wall St banks. So this is essentially free money. Any legitimate organization would need to provide a legitimate good or service. So if they are going to keep printing free money and play monopoly they should at least go buy people something like free healthcare. They always try to defend this with the "we are smarter than you" BS...stuff which I studied formally my degree.
• AtlasBarfed 7y ago
  Depending on the perception of the value of the valueless currency, velocity of information, and "supply" of money. Not that I'm a gold standard zealot, bitcoin self-deluder, or the like, but fiat currency is ridiculous, yet it's the basis of the global economy.
  • geofft 7y ago
    How is this different from dilution of shares in a company? That is, people are willing to invest (cash or labor) in a company in exchange for dilutable stocks, because they expect that if dilution happens, it's a transient discontinuity on the way to making the stocks more valuable overall. By taking another round of funding, the investors' stocks hopefully become worth more than they were before dilution. Don't people with large holdings of fiat currency have the same approach and risk tolerance? The purpose of raising the US debt ceiling would be to grow the US economy.
    • awinder 7y ago
      It’s exactly the same as dilution on shares except for in this theoretical, you’re talking about 1T in dilution while the asset wealth of the US is something over 270T. So this would effectively be one of the kindest dilutions ever — and even then it didn’t actually come to pass. The main reason to raise the debt ceiling is that we are carrying a percentage of debt (which has market stabilizing effects), and our assets are growing, so we should be spending more. And practically this is money already spent so this is arguing about paying the bill after eating the meal. The fact that this is somehow contentious at the highest levels of government speaks to either bad-faith acting or complete financial illiteracy.
  • antonvs 7y ago
    > fiat currency is ridiculous If you think this, it's almost certainly because you don't understand it. The basic concept is incredibly simple: it's an abstraction of value which allows us to avoid having to barter directly with actual goods. Gold and Bitcoin allow you to implement exactly the same thing, but with specific built in supply constraints that aren't connected to the underlying economy. This is a problem for both commodities being used as currency. Ideally, the money supply should be able to expand to reflect the wealth in the underlying economy - otherwise, you get severe inflation or deflation, both of which have negative effects. Of course you didn't say what aspect(s) of fiat currency you consider ridiculous. If you're just saying that governments are too free with their manipulation of the abstraction, there's some merit to that. But that's not a problem with the concept of fiat currency.
• lez 7y ago
  It's only half of the truth. The other half is, the government has to tax you out of your slightly stronger dollar to pay back the loan to the bankers. Minting the coin only cuts the bankers future profits, which - as it's a zero sum game - benefits the worker class in the long term.