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US coins are not debt. Coins are minted and issued as fiat then sold at face value to 'federal reserve'. Modern US notes are debt, which is why the paper has th

US coins are not debt. Coins are minted and issued as fiat then sold at face value to 'federal reserve'. Modern US notes are debt, which is why the paper has the word 'note'. Compare that with earlier paper dollars which had the word 'certificate' as in Silver Certificate - they were backed by metals.

addicted 3y ago
This sounds like a difference without a distinction assuming non apocalyptic scenarios.
- landemva 3y ago
  The difference is US dollar notes have a liability which is paid to banks 'federal reserve' and coins do not have liabilities so coins don't cost USA when issued. Coins are just issued. Notes (paper dollars and electronic) are loaned into existence and USA pays interest to federal reserve for the USA's own money.
hgomersall 3y ago
The coins are bought with newly created money which creates the necessary liability side of money creation. All that happens is the fed spreadsheet asset is swapped for a physical token with the same asset value. What most people think of as money is the asset associated with an asset-liability pair. Even if it's not recorded as such, money is always a liability to its issuer, otherwise there would be no point issuing it.
- landemva 3y ago
  > The coins are bought with newly created money which creates the necessary liability side of money creation. Not in USA. US coins are fiat without a liability. This leads to people every few years thinking they discovered that coins are just fiat and then recycling the idea of minting some $1 trillion coins and paying off the federal debt. It is technically possible, there would be no debt for the coin issuance, and would likely lead to nobody willing to purchase future USA debt issuances. https://www.investopedia.com/terms/t/trillion-dollar-coin.asp https://www.investopedia.com/terms/t/trillion-dollar-coin.as... Really bizarre are the gift shops at the US Treasury's Bureau of Engraving and Printing where they have tours to watch the printing presses. They sell to tourists uncut sheets of dollars that they print. But they first buy the sheets at face value plus the printing costs from 'federal reserve' who bought the sheets at pennies per _sheet_ that Treasury just printed. https://www.federalreserve.gov/aboutthefed/chapter-5-federal-reserve-notes.htm https://www.federalreserve.gov/aboutthefed/chapter-5-federal... "When purchasing the notes, the BEP authorizes the Reserve Banks to charge Treasury's general account for the face value of the notes plus the cost of printing." > money is always a liability to its issuer No, though prove me wrong and show us the coin liabilities on USA balance sheet somewhere.
  - hgomersall 3y ago
    Since taxes can be paid in coin, it's clearly a liability to the treasury regardless of whether it's recorded on a balance sheet as such. In practice a coin is a token that represents a liability at the Fed much like a deposit. That token can be used to claim an actual deposit at the Fed (by agents, not little people, obviously). I'm not aware of a law that requires a coin be bought by the fed at face value. It just seems to be the historical norm. If you're aware of such a requirement please let me know. In summary, the coins are not the "money", they're just tokens that for historical reasons the fed buys from the treasury at face value and can record at face value in their balance sheet. It could in principle just as easily be the case the fed is not required to balance with anything from the treasury (e.g. not T-bills) against new money creation - they're just forced to hand over the deposits to the control of the treasury. The net effect would be exactly like the coin case (hence the trillion dollar coin nonsense).

addicted 3y ago

This sounds like a difference without a distinction assuming non apocalyptic scenarios.

landemva 3y ago
The difference is US dollar notes have a liability which is paid to banks 'federal reserve' and coins do not have liabilities so coins don't cost USA when issued. Coins are just issued. Notes (paper dollars and electronic) are loaned into existence and USA pays interest to federal reserve for the USA's own money.

hgomersall 3y ago

The coins are bought with newly created money which creates the necessary liability side of money creation. All that happens is the fed spreadsheet asset is swapped for a physical token with the same asset value. What most people think of as money is the asset associated with an asset-liability pair. Even if it's not recorded as such, money is always a liability to its issuer, otherwise there would be no point issuing it.

landemva 3y ago
> The coins are bought with newly created money which creates the necessary liability side of money creation. Not in USA. US coins are fiat without a liability. This leads to people every few years thinking they discovered that coins are just fiat and then recycling the idea of minting some $1 trillion coins and paying off the federal debt. It is technically possible, there would be no debt for the coin issuance, and would likely lead to nobody willing to purchase future USA debt issuances. https://www.investopedia.com/terms/t/trillion-dollar-coin.asp https://www.investopedia.com/terms/t/trillion-dollar-coin.as... Really bizarre are the gift shops at the US Treasury's Bureau of Engraving and Printing where they have tours to watch the printing presses. They sell to tourists uncut sheets of dollars that they print. But they first buy the sheets at face value plus the printing costs from 'federal reserve' who bought the sheets at pennies per _sheet_ that Treasury just printed. https://www.federalreserve.gov/aboutthefed/chapter-5-federal-reserve-notes.htm https://www.federalreserve.gov/aboutthefed/chapter-5-federal... "When purchasing the notes, the BEP authorizes the Reserve Banks to charge Treasury's general account for the face value of the notes plus the cost of printing." > money is always a liability to its issuer No, though prove me wrong and show us the coin liabilities on USA balance sheet somewhere.
- hgomersall 3y ago
  Since taxes can be paid in coin, it's clearly a liability to the treasury regardless of whether it's recorded on a balance sheet as such. In practice a coin is a token that represents a liability at the Fed much like a deposit. That token can be used to claim an actual deposit at the Fed (by agents, not little people, obviously). I'm not aware of a law that requires a coin be bought by the fed at face value. It just seems to be the historical norm. If you're aware of such a requirement please let me know. In summary, the coins are not the "money", they're just tokens that for historical reasons the fed buys from the treasury at face value and can record at face value in their balance sheet. It could in principle just as easily be the case the fed is not required to balance with anything from the treasury (e.g. not T-bills) against new money creation - they're just forced to hand over the deposits to the control of the treasury. The net effect would be exactly like the coin case (hence the trillion dollar coin nonsense).