Economic solutions

Discussion in 'Economics' started by FireWalker, Jan 25, 2013.

  1. The Treasury creates a T-bond and sells it to the Fed for $100,000. The Fed then sells it in their "Open Market" operations for current market price. $144,000. Nice $44,000 windfall there Fed.

    If the US Treasury simply cut out the middleman, that's an instant 44% return.

    Now. If the Treasury were smart, they would do exactly that and dump the entire allowed T-bond creation (aka debt-ceiling) on the bond market. That's quite the windfall for the Congress' bank account.

    Interestingly enough, for the lawyers out there, nothing of value is conveyed at the time the Treasury sells the bonds to the Fed. Lack of consideration null and voids that contract, so the Treasury owes nothing on prior sales. That also means a swipe of the pen from a competent judge can void all bonds sold to the Fed this fiscal year.

    Aftermath of this is transfer all debt to the various players in the bond market. 44% return (assuming the computers kick in and buy) and $12 trillion in Congress' bank account.

    I would suggest running the Treasury's check machine at that point and printing out a healthy check to each and every American (including children).

    Cut out the middleman. Pretty simple. Anyone going to assassinate the Secretary of the Treasury? I doubt it. Publicize the trade.
  2. Debt ceiling + 44% or whatever the market will bear. Do not overanalyze the trade. Dump to $100. Computers will kick in all the way down (if it even budges).
  3. piezoe


    Fed profits, ~90%, go back to the Treasury, they don't stay with the Fed. There is no "middle man". The Fed is, in effect, just an independent branch of the Treasury structured to try and prevent political interference with monetary policy. There is no creature from Jekyll Island!
  4. Think it through:

    1. The Treasury creates a T-bond
    2. The Treasury sells that T-bond to the Fed for $100k
    3. The Fed writes a check for $100k
    4. The Treasury deposits that check and spends it
    5. The Fed sells the T-bond into the market for $144k

    What is the offsetting journal entry in steps #2 & #3? IE. where does the cash come from?
  5. piezoe


    Don't forget the Fed has regular sources of income, profits, and expenses. It transfers any net profits after expenses to the Treasury. Not all "checks" that the Fed writes represent money created out of thin air.
  6. Just the biggest ones.