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Why do you say the balancing should be left to the Federal Reserve? If we are going to have executive branch institutions rectify Congresses instructions by dis

Why do you say the balancing should be left to the Federal Reserve? If we are going to have executive branch institutions rectify Congresses instructions by disregarding one of them what is your principled reason for saying its the Federal Reserve's responsibility to fix the shortfall by issuing more debt in violation of the law instead of say the IRS's responsibility to fix the shortfall by collecting more taxes in violation of the law?

neilwilson 4y ago
It's not a principled reason. It is how bank accounting works. If you put the numbers authorised by Congress into the accounting then the result will be a carried forward balancing amount on the face of the Federal Reserve balance sheet. Since the Fed is mandated by law to be agent of Treasury and to follow the Treasury Fiscal manual they have no legal right to say no. And even if there was a legal right then Congress setting an unbalanced budget repeals it under the doctrine of implied repeal. The reason why you can't write checks with gay abandon is because the bank can say no, and if you sue for breach of contract the courts will back the bank. If the Fed tries that with Treasury the courts will back the Treasury. IRS can collect no more taxes by law. The Treasury can issue no more bonds by law and the Treasury cannot avoid spending what it is required to spend by law.
- voxic11 4y ago
  The Treasury could simply mint some trillion dollar coins, that is actually something they are authorized by law to do.
  - neilwilson 4y ago
    It can mint coins with 1tn on the front. Whether the Fed has to give them $1tn of bank deposits for that coin is a different matter. Once you have an unbalanced budget of this type, then Treasury dollars become like Canadian dollars. They stop having a 1-to-1 relationship with Fed dollars. Banks have the power of discount, and maintaining a discount between the Fed and the Treasury is how monetary policy is alleged to work.

neilwilson 4y ago

It's not a principled reason. It is how bank accounting works. If you put the numbers authorised by Congress into the accounting then the result will be a carried forward balancing amount on the face of the Federal Reserve balance sheet. Since the Fed is mandated by law to be agent of Treasury and to follow the Treasury Fiscal manual they have no legal right to say no. And even if there was a legal right then Congress setting an unbalanced budget repeals it under the doctrine of implied repeal. The reason why you can't write checks with gay abandon is because the bank can say no, and if you sue for breach of contract the courts will back the bank. If the Fed tries that with Treasury the courts will back the Treasury. IRS can collect no more taxes by law. The Treasury can issue no more bonds by law and the Treasury cannot avoid spending what it is required to spend by law.

voxic11 4y ago
The Treasury could simply mint some trillion dollar coins, that is actually something they are authorized by law to do.
- neilwilson 4y ago
  It can mint coins with 1tn on the front. Whether the Fed has to give them $1tn of bank deposits for that coin is a different matter. Once you have an unbalanced budget of this type, then Treasury dollars become like Canadian dollars. They stop having a 1-to-1 relationship with Fed dollars. Banks have the power of discount, and maintaining a discount between the Fed and the Treasury is how monetary policy is alleged to work.