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> 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

> 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).

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).