11 ms·

USDC's Circle Moves $8.7B to Repo Agreements to Protect Reserves from US Default

27 points by harambae 3y ago

cs702 3y ago
I cannot get over the fact that the US is acting like a "less developed" country. It's both shocking and unbelievable, and also... entirely predictable. Shame on all ideologues in congress incapable of compromise.
- rsynnott 3y ago
  The original sin was introducing this debt ceiling concept in the first place. Once it existed, it was _inevitably_ going to be used like this. (A few other countries have some sort of debt limit, but they're generally expressed in terms of fraction of GDP, which is _somewhat_ less problematic, though may have undesirable effects in a financial crisis... Doing it in absolute terms is _obviously_ going to lead to problems, though.)
  - wpietri 3y ago
    Yeah, the place to solve this is within Congress. If they want to keep the debt limited, they can control that by passing budgets that fit. If they want a rule to manage that, they can make one.
    - 0zemp2c 3y ago
      when was the budget that relast time Congress passed was fiscally sound? 1980?
      - pjc50 3y ago
        Doesn't matter. The problem is that passing the budget does not automatically authorize the debt to pay for it. All that needs to happen is welding those two together.
      - acdha 3y ago
        Turn of the century. The Democrats left a balanced budget for George W. Bush but the Republicans decided that meant tax cuts were needed so they could continue campaigning against “big government spending”. https://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/ https://www.factcheck.org/2008/02/the-budget-and-deficit-und... The most significant long-term problems they created were probably exempting rich people from Social Security taxes on more than their first $125k of income and Medicare plan D, both of which created massive time bombs as the boomers headed towards retirement. The longer we delay dealing with those, the harder it’ll be to close the gap — which is exactly what they were counting on to build support for privatization.
      - wpietri 3y ago
        Do you mean balanced? The last time the US budget was in surplus was 2001. But debt can be fiscally sound, as anybody with a mortgage knows.
        flockonus 3y ago
        A healthy mortgage (like any healthy debt) has the expectation of timely repayments and reduces over time. What we see here is the exact opposite to the point debtors are worried about interest default.
  - JumpCrisscross 3y ago
    > original sin was introducing this debt ceiling concept in the first place It was for efficiency: "Between 1788 and 1917, Congress would authorize each bond issue by the United States Treasury by passing a legislative act that approved the issue and the amount. In 1917, during World War I, Congress created the debt ceiling with the Second Liberty Bond Act of 1917, which allowed the Treasury to issue bonds and take on other debt without specific Congressional approval, as long as the total debt fell under the statutory debt ceiling" [1]. There is no original sin. We just need a law that permanently authorizes the Treasury to borrow as needed to pay for the things the Congress told it to spend on. [1] https://en.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling https://en.wikipedia.org/wiki/History_of_the_United_States_d...
    - makomk 3y ago
      Having such a permanent law would be constitutionally iffy. The power to borrow money that is part of the US national debt is specifically reserved for Congress, and this is essentially part of what makes the United States a democracy in the first place: only the body made up of the country's elected representatives can tax and borrow in the name of the country. (Other countries have similar restrictions, though not necessarily debt caps; for example, in the UK Parliament must passs a budget each year or the government effectively cannot finance itself and continue operating. This would probably not work well in the USA because Congress has trouble passing budgets reliably.)
      - JumpCrisscross 3y ago
        You’d include it the language in the budget. When the Congress actually has a choice as to whether or not to spend the money. Doing it after a contract has been issued and the bill is due is asinine.
- snarf21 3y ago
  We are less developed because no other country in the world has this debt ceiling structure (Denmark's is way different and no other country even has one). It is sad that it is used to simply as a tool to cut programs for poor people to give rich people tax breaks. Biden should just print a $999T coin and make it a non-issue forever. They seem to be favoring the 14th amendment approach but that seems dubious given the current Supreme Court.
  - sidewndr46 3y ago
    I don't actually care what the Supreme Court decides, but I really want the "14th amendment" approach to be argued in court.
    - njarboe 3y ago
      If the section of the 14th amendment regarding debts means that all US debt must be paid, I would interpret that to mean," If the debt ceiling holds interest on the debt will be paid and spending must be cut so that no more debt is incurred." Fortunately at the moment yearly debt payments are less than total US gov. income but the cuts would be drastic.
      - sidewndr46 3y ago
        Isn't the 'income' part only a minor detail. Even if there was a shortfall from tax revenue, the US has a huge amount of property it could sell off to pay it's debts. Just the National Parks alone would generate enough revenue for many years of interest payments.
        mindslight 3y ago
        "The solution came during the budget crisis of 2330, when the Brawndo corporation simply bought the Food and Drug Administration and the Federal Communications Commission, enabling them to say, do, and sell anything they wanted" Rather than selling off real assets, the answer is for the executive to create new money themselves ("mint the coin") rather than continuing to be beholden to the Federal Reserve. As we saw with this last spate of pandemic price inflation, the Federal Reserve's technocratic mandate means they will have to adjust and take money out of circulation to compensate.
- mrguyorama 3y ago
  We should not encourage compromise with an entire party that is openly threatening the country's economy for dubious merit, on a subject that they never seem to care about when the head honcho has an R next to their name.
fryry 3y ago
I'm fairly young and I remember this debt ceiling brinkmanship happening several times in the past , turning out to be a nothingburger. Is this time any different? (Genuine question I'm not American)
- dist-epoch 3y ago
  No. Both republicans and democrats are heavily invested in the US stock market which would collapse if US defaults. It's all a show.
  - LatteLazy 3y ago
    Unless they sold already and plan to buy back in after the dip and just before announcing a compromise? It's hardly rocket science...
  - wpietri 3y ago
    That's only true if you think they value money more than power. If power is what they care about more, then they could absolutely believe that creating chaos could be more to their advantage. Given the global rise in authoritarianism, and given that in times of trouble people shift toward favoring authoritarians, it's entirely plausible to me that there are political actors who will create the problems that they then claim they will solve.
    - sidewndr46 3y ago
      Isn't that a "king of the ashes" scenario?
      - pjc50 3y ago
        Yes? And?
      - wpietri 3y ago
        Not necessarily. Take the "heighten the contradictions" types, who believe in either not remediating or even increasing the pain of current societal dysfunctions. They believe that after a blowup and revolution, things will be better. You see a fair bit of that sort of logic on the right lately. Saletan's "The Corruption of Lindsey Graham" [1] documents the shift nicely, with Graham going from a senator who believed in democracy and inter-party comity to one who says Democrats "hate us" and "want to destroy us", claiming "there’s nothing they won’t do". Or look at Trump calling for the "termination of all rules, regulations, and articles, even those found in the Constitution". In that context, political actors can claim and might even believe that saving America from the boogeymen might require making things worse before they step in to put things right. [1] https://specialto.thebulwark.com/p/the-corruption-of-lindsey-graham https://specialto.thebulwark.com/p/the-corruption-of-lindsey...
banannaise 3y ago
Crypto company makes a big show about how unstable and scary fiat currency is; film at 11.
- kragen 3y ago
  that's what i thought at first too but it seems to be blackrock? https://en.wikipedia.org/wiki/BlackRock https://en.wikipedia.org/wiki/BlackRock > BlackRock, Inc. is an American multi-national investment company based in New York City. Founded in 1988, initially as an enterprise risk management and fixed income institutional asset manager, BlackRock is the world's largest asset manager, with US$8.66 trillion in assets under management as of December 31, 2022.[1] BlackRock operates globally with 70 offices in 30 countries, and clients in 100 countries.[1] BlackRock is the manager of the iShares group of exchange-traded funds, and along with The Vanguard Group and State Street, it is considered to be one of the Big Three index fund managers.[2][3]
  - JumpCrisscross 3y ago
    Until recently Circle were parking their cash in uninsured deposits [1]. Moving to repos may be about the debt ceiling, but it's more likely that someone hired a treasurer. [1] https://www.ft.com/content/7c9b2234-c298-4508-b59a-fce49f6bc40a https://www.ft.com/content/7c9b2234-c298-4508-b59a-fce49f6bc...
    - kragen 3y ago
      okay but the article says > The Circle Reserve Fund, managed by global investment management giant BlackRock, added $8.7 billion in overnight repurchase (repo) agreements i think blackrock already had a treasurer? also is this jeremy allaire as in coldfusion?
      - JumpCrisscross 3y ago
        > i think blackrock already had a treasurer? Circle didn't always use BlackRock. The "someone" is Circle. Maintaining a mix of Treasuries and repos is standard treasury management. I don't see a link between this rebalancing and the debt limit fight.
netbioserror 3y ago
I'm always bemused by debt ceiling debates. If colossal spending unsustainable by any real resource measure is a moral imperative, then a hyperinflation correction after a scant few generations is also a moral imperative. The universe will correct our hubris with a necessary punishment.
- makestuff 3y ago
  I saw this quote by buffet where he was talking about the top 10 stocks by market cap 40 years ago. I think 4/10 were Japanese companies. Japan has a very high debt to GDP ratio. As of 2023 none of those companies are in the top 10 anymore. The highest ranked Japanese company is in the 50s (Toyota). I wonder if the US will be in a similar position in 30 years or if the debt to GDP ratio and the USAs spending. I see people say all of the time it doesn't matter because "it's not like household debt" but I fail to see how it doesn't catch up to the US eventually. Maybe correlation != causation here though and the decline of Japan's dominance in the stock market has nothing to do with their debt to GDP ratio.
  - netbioserror 3y ago
    When the state's debt growth is unbounded with the feature (not bug) of money printing and suppressed interest rates, eventually that printing and spending outstrips the real economy's ability to extract and utilize resources to generate value; people are unable to produce faster than the currency can inflate. Thus, you then have a net negative economy, where the state's deficits are consuming all newly generated wealth PLUS the wealth generated by previous generations. An inflection point. A country begins to quite literally eat itself alive.
    - brookst 3y ago
      Good platonic philosophy, but it breaks for anyone aware of productivity increases.
      - netbioserror 3y ago
0zemp2c 3y ago
Default isn't even on the table...both McCarthy and Biden have both said that Its just a matter of what deal is made and when This is a fake crisis! The market freaks out and sells into the fear, then buys on the solution Meanwhile, institutions do the opposite - they buy into the fear and sell on the solution Its all engineered once every two years or so to make a fake buying opportunity Frankly for most people reading HN, you would be better off if there was a true legit crisis, it might actually set in motion legit change that would allow you to buy into the system on better terms
- acdha 3y ago
  This is a problem the Republicans created. They want to roll back some of his accomplishments and collapse the economy and have it blamed on Biden so of course they’re not going to _say_ they’ll force a default, but that doesn’t mean one won’t happen. The only guarantee will be them voting to end their hostage crisis.
  - m348e912 3y ago
    Blaming one party vs the other in this case seems shortsighted. Either party could have completely removed the debt ceiling. Let's face it, there isn't one already. The "debt ceiling" as we see it is always going to be increased as needed.
    - mrguyorama 3y ago
      Horseshit. The republican party recently added 3 trillion to the debt. They don't care about the debt. This is just an attempt to be destructive so they can blame it on Biden. You cannot "both sides" one party trying to run the country semi-functionally against the other party hell bent on making things dysfunctional.
      - m348e912 3y ago
        I'm not blaming both sides, I am saying there aren't any sides. It's a systemic issue that in recent history has transcended whichever party controls congress or the executive branch.

27 points by harambae 3y ago

I cannot get over the fact that the US is acting like a "less developed" country. It's both shocking and unbelievable, and also... entirely predictable. Shame on all ideologues in congress incapable of compromise.

rsynnott 3y ago
The original sin was introducing this debt ceiling concept in the first place. Once it existed, it was _inevitably_ going to be used like this. (A few other countries have some sort of debt limit, but they're generally expressed in terms of fraction of GDP, which is _somewhat_ less problematic, though may have undesirable effects in a financial crisis... Doing it in absolute terms is _obviously_ going to lead to problems, though.)
- wpietri 3y ago
  Yeah, the place to solve this is within Congress. If they want to keep the debt limited, they can control that by passing budgets that fit. If they want a rule to manage that, they can make one.
  - 0zemp2c 3y ago
    when was the budget that relast time Congress passed was fiscally sound? 1980?
    - pjc50 3y ago
      Doesn't matter. The problem is that passing the budget does not automatically authorize the debt to pay for it. All that needs to happen is welding those two together.
    - acdha 3y ago
      Turn of the century. The Democrats left a balanced budget for George W. Bush but the Republicans decided that meant tax cuts were needed so they could continue campaigning against “big government spending”. https://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/ https://www.factcheck.org/2008/02/the-budget-and-deficit-und... The most significant long-term problems they created were probably exempting rich people from Social Security taxes on more than their first $125k of income and Medicare plan D, both of which created massive time bombs as the boomers headed towards retirement. The longer we delay dealing with those, the harder it’ll be to close the gap — which is exactly what they were counting on to build support for privatization.
    - wpietri 3y ago
      Do you mean balanced? The last time the US budget was in surplus was 2001. But debt can be fiscally sound, as anybody with a mortgage knows.
      - flockonus 3y ago
        A healthy mortgage (like any healthy debt) has the expectation of timely repayments and reduces over time. What we see here is the exact opposite to the point debtors are worried about interest default.
- JumpCrisscross 3y ago
  > original sin was introducing this debt ceiling concept in the first place It was for efficiency: "Between 1788 and 1917, Congress would authorize each bond issue by the United States Treasury by passing a legislative act that approved the issue and the amount. In 1917, during World War I, Congress created the debt ceiling with the Second Liberty Bond Act of 1917, which allowed the Treasury to issue bonds and take on other debt without specific Congressional approval, as long as the total debt fell under the statutory debt ceiling" [1]. There is no original sin. We just need a law that permanently authorizes the Treasury to borrow as needed to pay for the things the Congress told it to spend on. [1] https://en.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling https://en.wikipedia.org/wiki/History_of_the_United_States_d...
  - makomk 3y ago
    Having such a permanent law would be constitutionally iffy. The power to borrow money that is part of the US national debt is specifically reserved for Congress, and this is essentially part of what makes the United States a democracy in the first place: only the body made up of the country's elected representatives can tax and borrow in the name of the country. (Other countries have similar restrictions, though not necessarily debt caps; for example, in the UK Parliament must passs a budget each year or the government effectively cannot finance itself and continue operating. This would probably not work well in the USA because Congress has trouble passing budgets reliably.)
    - JumpCrisscross 3y ago
      You’d include it the language in the budget. When the Congress actually has a choice as to whether or not to spend the money. Doing it after a contract has been issued and the bill is due is asinine.
snarf21 3y ago
We are less developed because no other country in the world has this debt ceiling structure (Denmark's is way different and no other country even has one). It is sad that it is used to simply as a tool to cut programs for poor people to give rich people tax breaks. Biden should just print a $999T coin and make it a non-issue forever. They seem to be favoring the 14th amendment approach but that seems dubious given the current Supreme Court.
- sidewndr46 3y ago
  I don't actually care what the Supreme Court decides, but I really want the "14th amendment" approach to be argued in court.
  - njarboe 3y ago
    If the section of the 14th amendment regarding debts means that all US debt must be paid, I would interpret that to mean," If the debt ceiling holds interest on the debt will be paid and spending must be cut so that no more debt is incurred." Fortunately at the moment yearly debt payments are less than total US gov. income but the cuts would be drastic.
    - sidewndr46 3y ago
      Isn't the 'income' part only a minor detail. Even if there was a shortfall from tax revenue, the US has a huge amount of property it could sell off to pay it's debts. Just the National Parks alone would generate enough revenue for many years of interest payments.
      - mindslight 3y ago
        "The solution came during the budget crisis of 2330, when the Brawndo corporation simply bought the Food and Drug Administration and the Federal Communications Commission, enabling them to say, do, and sell anything they wanted" Rather than selling off real assets, the answer is for the executive to create new money themselves ("mint the coin") rather than continuing to be beholden to the Federal Reserve. As we saw with this last spate of pandemic price inflation, the Federal Reserve's technocratic mandate means they will have to adjust and take money out of circulation to compensate.
mrguyorama 3y ago
We should not encourage compromise with an entire party that is openly threatening the country's economy for dubious merit, on a subject that they never seem to care about when the head honcho has an R next to their name.

fryry 3y ago

I'm fairly young and I remember this debt ceiling brinkmanship happening several times in the past , turning out to be a nothingburger. Is this time any different? (Genuine question I'm not American)

dist-epoch 3y ago
No. Both republicans and democrats are heavily invested in the US stock market which would collapse if US defaults. It's all a show.
- LatteLazy 3y ago
  Unless they sold already and plan to buy back in after the dip and just before announcing a compromise? It's hardly rocket science...
- wpietri 3y ago
  That's only true if you think they value money more than power. If power is what they care about more, then they could absolutely believe that creating chaos could be more to their advantage. Given the global rise in authoritarianism, and given that in times of trouble people shift toward favoring authoritarians, it's entirely plausible to me that there are political actors who will create the problems that they then claim they will solve.
  - sidewndr46 3y ago
    Isn't that a "king of the ashes" scenario?
    - pjc50 3y ago
      Yes? And?
    - wpietri 3y ago
      Not necessarily. Take the "heighten the contradictions" types, who believe in either not remediating or even increasing the pain of current societal dysfunctions. They believe that after a blowup and revolution, things will be better. You see a fair bit of that sort of logic on the right lately. Saletan's "The Corruption of Lindsey Graham" [1] documents the shift nicely, with Graham going from a senator who believed in democracy and inter-party comity to one who says Democrats "hate us" and "want to destroy us", claiming "there’s nothing they won’t do". Or look at Trump calling for the "termination of all rules, regulations, and articles, even those found in the Constitution". In that context, political actors can claim and might even believe that saving America from the boogeymen might require making things worse before they step in to put things right. [1] https://specialto.thebulwark.com/p/the-corruption-of-lindsey-graham https://specialto.thebulwark.com/p/the-corruption-of-lindsey...

banannaise 3y ago

Crypto company makes a big show about how unstable and scary fiat currency is; film at 11.

kragen 3y ago
that's what i thought at first too but it seems to be blackrock? https://en.wikipedia.org/wiki/BlackRock https://en.wikipedia.org/wiki/BlackRock > BlackRock, Inc. is an American multi-national investment company based in New York City. Founded in 1988, initially as an enterprise risk management and fixed income institutional asset manager, BlackRock is the world's largest asset manager, with US$8.66 trillion in assets under management as of December 31, 2022.[1] BlackRock operates globally with 70 offices in 30 countries, and clients in 100 countries.[1] BlackRock is the manager of the iShares group of exchange-traded funds, and along with The Vanguard Group and State Street, it is considered to be one of the Big Three index fund managers.[2][3]
- JumpCrisscross 3y ago
  Until recently Circle were parking their cash in uninsured deposits [1]. Moving to repos may be about the debt ceiling, but it's more likely that someone hired a treasurer. [1] https://www.ft.com/content/7c9b2234-c298-4508-b59a-fce49f6bc40a https://www.ft.com/content/7c9b2234-c298-4508-b59a-fce49f6bc...
  - kragen 3y ago
    okay but the article says > The Circle Reserve Fund, managed by global investment management giant BlackRock, added $8.7 billion in overnight repurchase (repo) agreements i think blackrock already had a treasurer? also is this jeremy allaire as in coldfusion?
    - JumpCrisscross 3y ago
      > i think blackrock already had a treasurer? Circle didn't always use BlackRock. The "someone" is Circle. Maintaining a mix of Treasuries and repos is standard treasury management. I don't see a link between this rebalancing and the debt limit fight.

netbioserror 3y ago

I'm always bemused by debt ceiling debates. If colossal spending unsustainable by any real resource measure is a moral imperative, then a hyperinflation correction after a scant few generations is also a moral imperative. The universe will correct our hubris with a necessary punishment.

makestuff 3y ago
I saw this quote by buffet where he was talking about the top 10 stocks by market cap 40 years ago. I think 4/10 were Japanese companies. Japan has a very high debt to GDP ratio. As of 2023 none of those companies are in the top 10 anymore. The highest ranked Japanese company is in the 50s (Toyota). I wonder if the US will be in a similar position in 30 years or if the debt to GDP ratio and the USAs spending. I see people say all of the time it doesn't matter because "it's not like household debt" but I fail to see how it doesn't catch up to the US eventually. Maybe correlation != causation here though and the decline of Japan's dominance in the stock market has nothing to do with their debt to GDP ratio.
- netbioserror 3y ago
  When the state's debt growth is unbounded with the feature (not bug) of money printing and suppressed interest rates, eventually that printing and spending outstrips the real economy's ability to extract and utilize resources to generate value; people are unable to produce faster than the currency can inflate. Thus, you then have a net negative economy, where the state's deficits are consuming all newly generated wealth PLUS the wealth generated by previous generations. An inflection point. A country begins to quite literally eat itself alive.
  - brookst 3y ago
    Good platonic philosophy, but it breaks for anyone aware of productivity increases.
    - netbioserror 3y ago

0zemp2c 3y ago

Default isn't even on the table...both McCarthy and Biden have both said that Its just a matter of what deal is made and when This is a fake crisis! The market freaks out and sells into the fear, then buys on the solution Meanwhile, institutions do the opposite - they buy into the fear and sell on the solution Its all engineered once every two years or so to make a fake buying opportunity Frankly for most people reading HN, you would be better off if there was a true legit crisis, it might actually set in motion legit change that would allow you to buy into the system on better terms

acdha 3y ago
This is a problem the Republicans created. They want to roll back some of his accomplishments and collapse the economy and have it blamed on Biden so of course they’re not going to _say_ they’ll force a default, but that doesn’t mean one won’t happen. The only guarantee will be them voting to end their hostage crisis.
- m348e912 3y ago
  Blaming one party vs the other in this case seems shortsighted. Either party could have completely removed the debt ceiling. Let's face it, there isn't one already. The "debt ceiling" as we see it is always going to be increased as needed.
  - mrguyorama 3y ago
    Horseshit. The republican party recently added 3 trillion to the debt. They don't care about the debt. This is just an attempt to be destructive so they can blame it on Biden. You cannot "both sides" one party trying to run the country semi-functionally against the other party hell bent on making things dysfunctional.
    - m348e912 3y ago
      I'm not blaming both sides, I am saying there aren't any sides. It's a systemic issue that in recent history has transcended whichever party controls congress or the executive branch.