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The US can supply whatever amount of money is necessary to service any conceivable amount of debt. The US absolutely will debase its currency into toilet paper

The US can supply whatever amount of money is necessary to service any conceivable amount of debt. The US absolutely will debase its currency into toilet paper, but default is not a certitude. And it's not theater. When these debates occur the legislature is forcing the executive to face taking extraordinary steps. That's leverage used to negotiate budget deals.

immibis 3y ago
The Federal Reserve can choose to print the money the Government spent. They're not the same entity and they don't have the same goals. If the Government spent the money and the Federal Reserve doesn't want to print it, that's uncharted territory.
- topspin 3y ago
  > that's uncharted territory Thus, the "extraordinary steps" I mentioned. Some have argued the executive has the authority to do any conceivable thing necessary to ensure that the "validity of the public debt ... shall not be questioned," to include ordering the Fed to honor Treasury overdrafts. Another extraordinary step by the Treasury would be minting legal tender and depositing it with the Fed. The so called "trillion dollar coin" scheme. At the end of the day they'll do what they have to do. This story makes it very clear that the Fed is not interested in becoming the political target over US default, so don't imagine they're going to take some heroic stand.
  - JumpCrisscross 3y ago
    > include ordering the Fed to honor Treasury overdrafts The Treasury hasn't come close to proposing over drafting. It would sell Treasuries and then have cash. If that became problematic, it would mint. The Fed cannot, by law, lend money to the Treasury. It can't even purchase Treasuries from them directly.
    - topspin 3y ago
      By law the US government cannot permit default. Does that give the executive the power to trump limits on the Fed? We'll see. Others argue minting is more palatable. I think legally that's true. I think politically that's false: there is a visceral reaction to any talk of "printing." The various euphemistic ways the Fed can handle it will be preferred. Of course it will end up in front of SCOTUS, but that's a political win: SCOTUS becomes the bad gus trying to "destroy democracy". Or something.
      - JumpCrisscross 3y ago
        > Does that give the executive the power to trump limits on the Fed? The point is it’s unnecessary.
- function_seven 3y ago
  Then mint it instead? https://en.wikipedia.org/wiki/Trillion-dollar_coin https://en.wikipedia.org/wiki/Trillion-dollar_coin
- JumpCrisscross 3y ago
  > If the Government spent the money and the Federal Reserve doesn't want to print it What does this mean? Even if a Treasury auction fails, the Treasury has the power to mint currency. It could literally just deposit paper representing the $200bn of gold at Fort Knox and have money in its Fed account.
  - immibis 3y ago
    Also uncharted territory. So far, that's never been tried.
    - JumpCrisscross 3y ago
      > Also uncharted territory. So far, that's never been tried. Minting is more precedented than the Fed. Functionally doing this is trivial. It's legally asserting the supremacy of the 14th Amendment over the Public Debt Acts.

immibis 3y ago

The Federal Reserve can choose to print the money the Government spent. They're not the same entity and they don't have the same goals. If the Government spent the money and the Federal Reserve doesn't want to print it, that's uncharted territory.

topspin 3y ago
> that's uncharted territory Thus, the "extraordinary steps" I mentioned. Some have argued the executive has the authority to do any conceivable thing necessary to ensure that the "validity of the public debt ... shall not be questioned," to include ordering the Fed to honor Treasury overdrafts. Another extraordinary step by the Treasury would be minting legal tender and depositing it with the Fed. The so called "trillion dollar coin" scheme. At the end of the day they'll do what they have to do. This story makes it very clear that the Fed is not interested in becoming the political target over US default, so don't imagine they're going to take some heroic stand.
- JumpCrisscross 3y ago
  > include ordering the Fed to honor Treasury overdrafts The Treasury hasn't come close to proposing over drafting. It would sell Treasuries and then have cash. If that became problematic, it would mint. The Fed cannot, by law, lend money to the Treasury. It can't even purchase Treasuries from them directly.
  - topspin 3y ago
    By law the US government cannot permit default. Does that give the executive the power to trump limits on the Fed? We'll see. Others argue minting is more palatable. I think legally that's true. I think politically that's false: there is a visceral reaction to any talk of "printing." The various euphemistic ways the Fed can handle it will be preferred. Of course it will end up in front of SCOTUS, but that's a political win: SCOTUS becomes the bad gus trying to "destroy democracy". Or something.
    - JumpCrisscross 3y ago
      > Does that give the executive the power to trump limits on the Fed? The point is it’s unnecessary.
function_seven 3y ago
Then mint it instead? https://en.wikipedia.org/wiki/Trillion-dollar_coin https://en.wikipedia.org/wiki/Trillion-dollar_coin
JumpCrisscross 3y ago
> If the Government spent the money and the Federal Reserve doesn't want to print it What does this mean? Even if a Treasury auction fails, the Treasury has the power to mint currency. It could literally just deposit paper representing the $200bn of gold at Fort Knox and have money in its Fed account.
- immibis 3y ago
  Also uncharted territory. So far, that's never been tried.
  - JumpCrisscross 3y ago
    > Also uncharted territory. So far, that's never been tried. Minting is more precedented than the Fed. Functionally doing this is trivial. It's legally asserting the supremacy of the 14th Amendment over the Public Debt Acts.