CIO Vantage Point;
Economic Outlook
January 08, 2013 Posted by:
Joe Morgan, CFA
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.
For the love of money
People will steal from their mother
For the love of money
People will rob their own brother
- O'Jays
An idea is gaining press-space (if not actual attention) in Washington: Forget the debt ceiling and simply mint a trillion dollar coin, deposit it into the Treasury's account at the Fed and use the balance to grow spending without growing the deficit.
Very elegant, right?
Stopping to think about this it becomes clear this is simply an exercise in printing money - which is fully in the rights of the Treasury. So, what's the big deal?
There are two ways the Treasury can pay for spending overages: borrowing and printing.
Borrowing does not increase the money supply, leaving the Fed free to manage our monetary policy. Printing money, obviously, does increase the money supply, putting upward pressure on inflation.
Simply cranking out a trillion dollars (or, why not ten of these coins?) does not address the challenge of increased government spending. But then again, neither does the debt ceiling.
Discussions on the "spending cliff" coming in March will be highly interesting, and, hopefully, more solution-oriented than this.
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or SVB Asset Management, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB Asset Management are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value.
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Coinage CatastropheJanuary 08, 2013 Posted by: Joe Morgan, CFAThe views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.
For the love of money
People will steal from their mother
For the love of money
People will rob their own brother
- O'Jays
An idea is gaining press-space (if not actual attention) in Washington: Forget the debt ceiling and simply mint a trillion dollar coin, deposit it into the Treasury's account at the Fed and use the balance to grow spending without growing the deficit.
Very elegant, right?
Stopping to think about this it becomes clear this is simply an exercise in printing money - which is fully in the rights of the Treasury. So, what's the big deal?
There are two ways the Treasury can pay for spending overages: borrowing and printing.
Borrowing does not increase the money supply, leaving the Fed free to manage our monetary policy. Printing money, obviously, does increase the money supply, putting upward pressure on inflation.
Simply cranking out a trillion dollars (or, why not ten of these coins?) does not address the challenge of increased government spending. But then again, neither does the debt ceiling.
Discussions on the "spending cliff" coming in March will be highly interesting, and, hopefully, more solution-oriented than this.
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