us fiscal cliff: what is it?

[cbeast]

How Much U.S. Debt Does China Own?

http://bonds.about.com/od/bondinvestingstrategies/a/Chinadebt.htm

about one and a half Obamacoins.

You've got an odd way of rounding:

China, which owns an estimated $1.16 trillion in U.S. Treasuries, is the number-one investor among foreign governments, according to the September 2012 figures released by the U.S. Treasury. This amounts to over 21% of the U.S. debt held overseas and more than 7% of the United States’ total debt load.

If we assume that when you say Obamacoin, you mean $1 trillion, then I could see rounding the value to any of the following:
About one Obamacoin.
About one and a fifth Obamacoins.
About one and a quarter Obamacoins.

But certainly the number is closer to one than one and a half.

According to the article it's about 7% of the U.S. Debt, and most analysts expect Japan to surpass China in 2013.

Sorry you missed the point. If we start printing Obamacoins, what will any of these numbers mean?

[1713984456]

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[1713984456]

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[DannyHamilton]

. . . Sorry you missed the point. If we start printing Obamacoins, what will any of these numbers mean?

Odd that you would call it an Obamacoin since Obama is not the one suggesting it, and has not stated that it is a solution he is going to use.

Regardless, the trillion dollar coin that you refer to as an Obamacoin is a silly solution to a silly problem.  Congress passed a deficit budget.  The executive branch is required by law to follow that budget.  Congress also created a debt ceiling.  The executive branch is required by law to follow that law as well.  Therefore, the executive branch is required by the laws created by Congress to spend more money than it receives in revenue without increasing the debt.  The only way to do this is to print up more money.

Congress can fix this by passing a balanced budget, or they can fix this by removing (or raising) the debt ceiling.  But if they do neither, then what other option does the executive branch have when it runs out of money?

[gabbergabe]

The article IS A GOOD READ!

It helped me understand just why china even bought our debt in the first place.

And that like stated above that japan is next in line behind china and I didnt know that.

However whats this deal about "obamacoin"??

[DannyHamilton]

The article IS A GOOD READ!

It helped me understand just why china even bought our debt in the first place.

And that like stated above that japan is next in line behind china and I didnt know that.

However whats this deal about "obamacoin"??

Here is a rather liberal/democratic view of:
Obamacoin

I'm sure you can find plenty of stories with whatever political view you prefer (conservative, libertarian, statist, etc)

EDIT: Link didn't go where I intended.  Fixed it.

[gabbergabe]

The article IS A GOOD READ!

It helped me understand just why china even bought our debt in the first place.

And that like stated above that japan is next in line behind china and I didnt know that.

However whats this deal about "obamacoin"??

Here is a rather liberal/democratic view of:
Obamacoin

I'm sure you can find plenty of stories with whatever political view you prefer (conservative, libertarian, statist, etc)

"In case you're not familiar with this idea: In general, the Treasury Department is not allowed to just print money if it feels like it. It must defer to the Federal Reserve's control of the money supply. But there is an exception: Platinum coins may be struck with whatever specifications the Treasury secretary sees fit, including denomination."

so the coin can be worth whatever they say and is backed by what? More debt? gold?

[thefiniteidea]

The article IS A GOOD READ!

It helped me understand just why china even bought our debt in the first place.

And that like stated above that japan is next in line behind china and I didnt know that.

However whats this deal about "obamacoin"??

Here is a rather liberal/democratic view of:
Obamacoin

I'm sure you can find plenty of stories with whatever political view you prefer (conservative, libertarian, statist, etc)

"In case you're not familiar with this idea: In general, the Treasury Department is not allowed to just print money if it feels like it. It must defer to the Federal Reserve's control of the money supply. But there is an exception: Platinum coins may be struck with whatever specifications the Treasury secretary sees fit, including denomination."

so the coin can be worth whatever they say and is backed by what? More debt? gold?

Backed by the fact that the US Treasury denominates it as $1 Trillion, and someone is dumb enough to buy a titanium coin at that price. In this case, that would be the Federal Reserve. The US normally trades US Bonds (debt) for the Fed's cash, but this is a way for the US gov to go around having to pay the Federal Reserve back, while raising money to pay for budget items.

As a side note, the instance that happens (if it were ever to, which is looking unlikely according to gov officials), inflation would skyrocket. Theoretically, they could just mint 17 of these things and pay off all the debt. Consequently, the dollar would be worthless. Even though they most likely won't go ahead with this scheme, the gov will continue to sell bonds to the FED and continue the inflation process as usual, which is still the fastest they've ever increased the money supply in our history. The USD will be worthless in 10-20 years, especially with sound competition from other currencies like Bitcoin and whatever the future brings

[DannyHamilton]

. . . As a side note, the instance that happens . . . inflation would skyrocket . . .

From a link in the linked article:

. . . If the Fed was worried about all that newly created money being pumped into circulation, it could always counteract the inflationary effects by selling off the $2 trillion in securities it owns from quantitative easing (thereby taking an equivalent amount of money back out of the economy) . . .

[Seth Otterstad]

Danny I like your economic thinking a lot better than the Austrian posts that have overrun every internet forum.  I was an Austrian for a long time just because the arguments are easy to learn and it's easy to just repeat the same answer and relate everything to household economics and apples and oranges.  What finally threw me off the wagon was when I learned that they do not believe you can use mathematical models in economic theory.  As an engineer, I cannot accept this, and it seems to be a big reason Austrians have been shut out of economic literature lately.  You can't just ignore the language of science and expect people to take you seriously.  It seems kind of sad because they made such HUGE contributions and were way ahead of everyone else for so long, and then they sat on their lead and lost it by contributing nothing for the last 50 years.

So I am smart enough to realize that I should not be an Austrian anymore, but I am not sure what to replace it with yet.  The other schools seem like they will take a lot longer to learn.  Can you give me some advice on what to study?

[xxjs]

So I am smart enough to realize that I should not be an Austrian anymore, but I am not sure what to replace it with yet.  The other schools seem like they will take a lot longer to learn. 

Yes, you have to aquire god-like capabilities, create a parallell world, turn the knobs one by one and compare the effects on one world, using the other as control.

[DannyHamilton]

. . . The other schools seem like they will take a lot longer to learn.  Can you give me some advice on what to study?

Me? Nah.  I'm not one to commit firmly to any one opinion on such matters.   Generally I learn what I can about many opinions and accept that the real world tends to be more fluid than most people like to accept. What works to explain one situation won't always work in every situation, and the number of variables that the world gets to play with makes it difficult to say with certainty which model fits best in any large system.

I'm not really in a position to influence any authority regarding the monetary decisions they make, so I don't worry to much about how various situations "should" handled. Instead I tend to focus more on understanding the decisions that others make after they've made them and adapting myself to how situations "have been" handled.

[thefiniteidea]

. . . As a side note, the instance that happens . . . inflation would skyrocket . . .

From a link in the linked article:

. . . If the Fed was worried about all that newly created money being pumped into circulation, it could always counteract the inflationary effects by selling off the $2 trillion in securities it owns from quantitative easing (thereby taking an equivalent amount of money back out of the economy) . . .

Hahaha sure, and maybe they'll hire Jesus to be their salesman too. So easy to sell off $1 trillion in non-liquid toxic assets, that's why the Fed bought them (and the trillion dollar coin) in the first place...

They obviously make good investments!!!! :-P

I think we're living in that parallel world xxjs was talking about, where we just turn jobs, use our imaginations, and everything just works...

[gabbergabe]

Id like to see what the coin may look like though after reading some of these article it is not going to happen.

But that doesnt mean we dont deserve some eye candy to go along with this joke!

Would obamas head be on one side and eagle whos aged poorly and looks like it has a disease to symbol our economy?

[paulie_w]

[sounds]

Everyone I talk to seems to have an opinion one way or the other about inflation.

"Inflation is good. Without the ability to pump money into the market and drive consumer spending, nobody would invest."

Me? I think that's obviously false. If inflation pumped money into the market, why hasn't Obama mailed me my "inflation check" yet?

I think it's obvious inflation (in its current form) is bad. Printing new dollars is simply stealing from every dollar that already exists.

If an existing manufacturer cuts spending on maintenance and new build-out, even if she is doing it in a recession, she's only hurting herself. Only a monopoly can affect demand by reducing supply; otherwise, the supply/demand curve will climb until the price is high enough to spur investment.

To me, it's simple: the Federal Reserve's ability to print money directly attacks supply/demand, distorting the economy and forcing a boom/bust cycle.

There can be cycles without a Federal Reserve, but they are feedback on real decisions by manufacturers and other participants in the economy. The force boom/bust does the exact opposite, distorting that vital information and turning decision-making over to the Federal Government. Since I don't think a planned economy will ever work, I oppose it.

I don't agree with everything Adam Smith said. I think he's just the most famous person who picked up on the simple concept of supply and demand.