United States Debt Default

They're not supposed to but I've shown that the law says that they can, via this specific mechanism of platinum coins. Who else would have the authority to create money in the United States, CS, if not the United States Treasury?You know that the Secret Service is a department within the Treasury, right? Do you know why? Because their original task was the detection and prosecution of counterfeiting. Sure! The United States Treasury determines what is and isn't money in the United States, according to the laws created by Congress. If the Treasury was authorized by Congress to mint and issue little pieces of concrete as money, then those little pieces of concrete would be money, the same way little pieces of paper and nickel are, now. By law, they cannot. When the Treasury issues money, it is by definition legal tender for all debts public and private. If you have a debt with someone, they're legally obligated to accept United States notes as payment of that debt.

No. The Federal Reserve is just a bank, basically, whose loans are given in the form of "notes" which are accepted by the Treasury as legal tender.The Federal Reserve Act didn't cede the Treasury's authority to create money to the Federal Reserve Bank. Federal Reserve Notes are legal tender because the Treasury defines them to be, not because the Federal Reserve Bank says they are. They don't have that authority. The Treasury can continue to issue notes up to the statutory limit, they just don't as there is no longer a need for them. But even after the Federal Reserve Act, the Treasury was issuing United States Notes.

What else could it be, CS? It can't be counterfeit. How could it be? The Treasury printed it! And you're just wrong about that. Well, I quoted 31.5112(k), didn't I? Who do you think passed the United States Code if not the United States Congress? Hrm, well, I guess I was wrong about that. Regardless, why would a bank refuse $1 trillion dollars?Also doesn't your cite prove AZPaul completely wrong that Treasury coins aren't legal tender? By definition a coin struck and issued by the US Treasury would be a "United States coin." Didn't you find the exact legal statute that proves that a $1 trillion coin issued by the US Treasury would be legal tender?Edited by crashfrog, : No reason given.

Er, no, I've directly done that by noting that the US Treasury continued to issue Treasury notes after the passage of the Federal Reserve Act. You've got it completely backwards, though. The Reserve buys debt and the Treasury issues the bills. That's why they have the seal of the Treasury on them.Only the government can make something legal tender. When someone besides the Treasury prints a dollar, its not a real dollar - it's counterfeit. I've cited 31.5112(k), and now CS has cited 31.5103. The first is the law that grants the Treasury the power to coin fiat platinum coinage in any arbitrary denomination, and the second is the law that affirms it as legal tender. You've asked for a "law" that affirms that the Federal Reserve has to "buy" the dollars that the Treasury produces but there's no such law because the Fed doesn't buy dollars, it buys debt. And, again, the Federal Reserve is not the only means by which dollars are created. They're the only means by which Federal Reserve Notes are created, but I'm not talking about the Treasury creating a Federal Reserve Note. As... black? Sorry, you've completely lost me.Edited by crashfrog, : No reason given.Edited by crashfrog, : No reason given.

Obviously not, since the law is still in effect, United States Notes are still legal tender, the Treasury is still empowered to produce them (since they produced them for years after the Federal Reserve Act), and still does produce them.I mean, I don't know what more you want, I guess. Can you elaborate on what additional information you would find convincing? I'll try to find it. Money today comes from the Federal Reserve loaning money to the government, and then that debt is issued as paper money. It's sort of broken up and put into dollars. The interest rate on that loan is a way of generating inflation, and we've previously talked about how inflation is important to an economy by making sure that a growing population and a growing GDP doesn't cause people to hoard currency. It's a way of generating new dollars.But there's another way for the Treasury to generate new dollars and it's to simply generate new dollars. Well, it's a function of the utility of money. I mean, anything can be money. Like that society on the island of Yapp that bought and sold things with giant stone wheels. Ultimately, they stopped even moving the wheels when they changed ownership; everybody just remembered who the owner of each new wheel was.You could take chocolate coins or chickens as payment for things, if you wanted. But do you want to? I doubt it, since you very intelligently realize that it would be quite difficult for you to convince someone you wanted to buy from to take chocolate coins or chickens for it. A fiat currency system works because everyone agrees to treat a worthless object as a medium of exchange, to denote prices in numbers of it, and to accept those objects as payment for goods and services. Dollars are dollars because everybody agrees to treat them as dollars, and because dollars are purposefully made scarce - you can't print your own, you have to get them from somebody else in exchange for something. But they ultimately have to come from somewhere, and they come from the Constitutional monetary authority of the United States Treasury. They say so, right on them.Saying that a coin is "legal tender" is a way of making everybody think "oh, this is money" the first time they see a new design on the dollar or something. It's a way of transferring the psychological heft of old dollars - from a time when a dollar really was a certain amount of gold or silver - onto new ones. And it's worked on you, right? You still take your paycheck in fiat currency backed by absolutely nothing, right? And people still take it from you in exchange for real goods and services, right?

Then they go to a different bank. Why would banks turn away money? Oh, so you don't even need the fiat currency - you and your creditors are satisfied just by the simulation of currency being "deposited" and "withdrawn" from your accounts.

Who said anything about "bank money"? What is "bank money" supposed to be?Yes, it would be in the Treasury account and then they could write checks against it to the various claimants that Congress has already appropriated funds to.

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Federal Reserve Notes are printed by the Bureau of Engraving and Printing (BEP), a bureau of the Department of the Treasury.[8] The Federal Reserve Banks pay the BEP not only the cost of printing the notes (about 4 a note), but to circulate the note as new currency rather than merely replacing worn notes, they must pledge collateral for the face value, primarily in Federal securities.

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In contrast, the Federal Reserve pays the United States Mintanother Treasury bureauface value for coins, as coins are direct obligations of the Treasury.

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http://en.wikipedia.org/wiki/Federal_reserve_noteThe Fed buys the notes but that elides the other half of the exchange - they're printed and issued by the Treasury and backed by debt purchased by the Federal Reserve Bank. But, coinage is issued and backed directly by the Treasury. That's why I've been very clear to specify that we're talking about a platinum coin and not a $1 trillion bill. The practices and laws of the Federal Reserve Bank are irrelevant - they're not involved in coinage except as a means of getting it into circulation. But the point of trillion dollar coins isn't to circulate them, it's to use them to pay debts that the Executive Branch is lawfully and constitutionally required to pay.Edited by crashfrog, : No reason given.

Well, there are about a dozen individual banks in the Federal Reserve system. But why does it have to be a Federal Reserve Bank? Again - the coin is already money. AZPaul is absolutely wrong, as you and I have individually demonstrated. The role of the bank in this whole thing is just to make change. They get $1 trillion per coin. Why do you think they're not getting anything for it? No, they're not debt. They're money. If you have a quarter, which means that at your request the Treasury must pay you twenty-five cents, but the way they're going to pay that "debt" is by giving you a quarter, then you don't hold debt in any sense of the term, you hold money. Debts in the United States are denominated in dollars and cents. The Treasury is the source of dollars and cents. The "obligation" of a Treasury coin is to pay you the face value of the coin at your request. But the way they pay that value is in coins. It does in a system of fiat currency. That's the point of having fiat currency, that's what the "fiat" means.

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Fi-at

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1) a command or act of will that creates something without or as if without further effort.

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The reason that we're off the gold standard is precisely so that the Treasury can create money from nothing by "magic." The act of printing a Treasury note creates money. That's where money comes from. It's fiat currency. Has been for years. It's backed by absolutely nothing but the value of goods and services for sale in the United States. If the Federal Reserve wants to break a 1 trillion dollar coin, they just have to find someone with $1 trillion in smaller bills. Same as if you want to break a 20. The $1 trillion is money, and therefore it can be exchanged for money. Because it's money. Why wouldn't a bank make change?

Oh, you're talking about banknotes. Why didn't you just say "banknotes"? Money in the Treasury account is money in the bank, so checks can be drawn against it. That's the point of banking. Well, yes. Good thing banks are in that business. No, completely wrong. It works the same way when you make a cash deposit in your bank account. Does the bank "buy" the currency from you? No, of course not. They just take it and note that your account is now larger by the same amount of money you have them.And that's all that's going on, here. The Treasury is creating a trillion dollars by fiat, depositing it in a Treasury checking account at some bank, and then writing checks against it. Perfectly simple and requires the issuance of no further government debt. Well, yes. It's the difference between paying cash and writing a check. No, money.

No, it doesn't. The Federal Reserve Bank doesn't buy coins at face value because they're debt, they buy them at face value because they're already money. Just like how if you want a roll of quarters, you have to pay $10 for it - face value.They're already money. When the Federal Reserve Bank buys $10 in quarters, they're making change, not buying debt. No, it doesn't. I've already explained to CS how "direct obligation of the Treasury" just means "money."I mean, what's the "obligation"? If you present a quarter to the Treasury, they're obligated to give you 25 cents for it. But they're going to meet that obligation by giving you a quarter. There's no way in which having a quarter can be construed as owning any debt - it doesn't gain interest, there's no obligation of repayment to be met. Well, the Treasury can't issue any more US Notes. There's a statutory limit on the total number that can be in circulation - I heard somewhere that it was 300,000 - and they're always at that limit.But a platinum coin isn't a Treasury note, it's a coin. And while regular coinage, silver coinage, and gold coinage are subject to statutory limits as well, platinum coins are not. This oversight gives the Treasury unilateral authority to strike and issue platinum coins in any denomination, and by Federal law they're money. Legal tender. (CS has quoted the relevant law already.)And again all they have to do is walk the coins over to a bank and deposit them in a checking account. They're money, so the bank has no reason not to take them. And once they're in an account checks can be written against that money, just like your checking account at your bank. What does the bank give the Treasury except numbers in an account? Nothing. The money that the Treasury would write the checks against is just as "imaginary" as the money represented by a trillion dollar platinum coin. There's no difference. Hell, for that matter the people who get the checks are getting something every bit as imaginary, it's just more numbers in an account. Maybe at some point somebody down the chain actually takes it out in cash but so what? Cash is imaginary, too.It's a fiat currency. Has been for decades. No, they won't. Treasury debts are denominated in dollars, not in gold or silver. Hasn't been for decades, Jon. Don't you hear Buz complaining about that all the time? When you take your quarter to the Treasury to make a claim against their "obligation", what do you think you get?You don't get gold or silver. You get 25 cents. Debts in the United States are denominated in dollars and cents, not in gold or silver. That's because dollars are a fiat currency. I mean jesus, Jon we talked about this for weeks not too long ago. Were you just completely not paying any attention?

They already pay taxes. They pay more as a percentage of their income in taxes, in fact, than the wealthiest 400 individuals in the United States.Remember when you were schooled about your dishonest attempt to conflate taxes with income taxes? Can you explain why you're back here regurgitating the same falsehood? Probably exactly what already happens - they spend their time being productive in ways that aren't yet monetized.

No, they're giving the Treasury money in exchange for money. In other words, they're making change.When the Treasury strikes and issues a trillion-dollar platinum coin, it's money. Simply by the will of the Treasury money is created - that's what the fiat in "fiat currency" means. No, I sure did - twice. Once to CS and once to you. It's all up there, if you'd ever learn to read. Use your brain, Jon. I know it's up there somewhere. If the Treasury's "obligation" is to give you exactly what you already have - a quarter - then it what possible sense is there an obligation? Says you? But we've already established - you have no idea what you're talking about. The way you conflate Treasury notes with Treasury coins is the proof. Because you don't listen.

You're right. It just so happens, however, that on the specific matter of large platinum coinage, which has never been issued by the Treasury, Congress erred - they failed to cede total authority over money to the Federal Reserve. By essentially nothing more than legislative short-sightedness, the Treasury retains the power to strike and issue platinum coinage in arbitrary face value, which becomes currency the same as any coin. Coins may enter circulation via the Federal Reserve System but that isn't how they become money; coins become money by Treasury fiat, not by the decision of the Federal Reserve Bank. Completely wrong.1) As it is well-known, private individuals can order coinage direct from the US Mint at http://www.usmint.gov/mint_programs/$1coin/It's not necessary to get your coins via the Federal Reserve System for them to be money. The reason this is well-known is because, until last June, you could order 1 dollar coins on your credit card with free shiping, collect rewards points or travel miles, and then deposit the coins in your bank and use them to pay off the credit card - essentially collecting travel miles or rewards points or even direct cashback for free. (The Mint has since stopped taking credit card orders but you can continue to order arbitrary amounts of Treasury coinage with free shipping, because you're completely wrong - coins don't have to pass through the Fed, they're direct obligations of the Treasury.)2) When the Fed "buys" coins, they have to buy them at face value. This is because they're already money and therefore the Fed has no power except to make change. They have to get their quarters the exact same way you do - they have to exchange other denominations of money for them.Because they're already money. The Fed has nothing to do with it.

One coin worth $1 trillion. Or $2 trillion. Or 33 and 1/3 dollars. Whatever value Geithner decides it has, it has. So why do you say that they can't do anything for it, or get anything for it? It's worth a trillion dollars. It is a trillion dollars. Who would say no to a trillion dollars? You're not making any sense, CS. Hell, most banks would find it an incredible convenience. Do you know how hard it is to ship a trillion dollars in cash? You'd need every airplane in the United States and Europe stuffed with hundreds to do it. Passing around a coin, or a box of billion dollar coins, would be an enormous convenience. If the Treasury literally can't find even a single bank who will take Treasury money then we have much larger problems. What is the realistic scenario, CS, under which all American banks decide to boycott the Federal government? No particular reason; mostly, it's that it's cheaper to mint a single coin and its cheaper and safer to ship checks instead of coins. (Remember when your mother told you to never mail cash?)

It's happening because Republicans decided to start a hostage crisis, and because - as Buz is the example of - not everybody believes that fiat currency can actually work. Not even every politician, despite the fact that it's been that way for decades.As we've seen, even relatively neutral people like CS can't quite bring themselves to believe that dollars are dollars just because the Treasury says they are. It's been decades since money was backed by anything but the goods and services available to be purchased with dollars, but the psychological notion that a dollar is a real resource is persistent. Well, the scarcity of dollars is a real resource, and it's worth preserving instead of wasting needlessly. But when the need is great - to avoid a disastrous default, for instance - then it's worth exchanging a little of that scarcity for a real solution to the problem.