There's apparently a commemorative coin law. . . .
Not a law, an idea. The Constitution restricts the issue of "coin" to the Federal Government. Dollars, paper and electronic, aren't literally coins. (Paper was very rare in the Constitution's day.) Therefore, the Mint would create a single trillion dollar penny and lock it in a vault. This would raise Treasury's assets by one billion dollars. Need more? Make more coins.
Treasury would then pay off bonds with this money. On the back of every bond is legalese explaining that the holder can be issued paper money at any time by the debtor (Treasury), instead of allowing the bond to accrue interest through its term.
Sadly, the value of both a bond and a bill are the same: what people believe they are. Bond holders would not be happy to lose the even modest interest.
There's another, really, really big problem with this. If it was done, bonds that were time dependent would become dollars overnight. The only way to get value from a dollar is to spend it. If there were not enough products available for sale, we could create overnight hyper-inflation as the unleased dollar supply swamped the markets and drowned everyone's purchasing power.
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Date: 17/10/13 20:12 (UTC)Not a law, an idea. The Constitution restricts the issue of "coin" to the Federal Government. Dollars, paper and electronic, aren't literally coins. (Paper was very rare in the Constitution's day.) Therefore, the Mint would create a single trillion dollar penny and lock it in a vault. This would raise Treasury's assets by one billion dollars. Need more? Make more coins.
Treasury would then pay off bonds with this money. On the back of every bond is legalese explaining that the holder can be issued paper money at any time by the debtor (Treasury), instead of allowing the bond to accrue interest through its term.
Sadly, the value of both a bond and a bill are the same: what people believe they are. Bond holders would not be happy to lose the even modest interest.
There's another, really, really big problem with this. If it was done, bonds that were time dependent would become dollars overnight. The only way to get value from a dollar is to spend it. If there were not enough products available for sale, we could create overnight hyper-inflation as the unleased dollar supply swamped the markets and drowned everyone's purchasing power.