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View Diary: House Republicans mock idea to save economy from threat of GOP sabotage (146 comments)

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  •  And also (1+ / 0-)
    Recommended by:
    aitchdee

    as I've gathered from my reading, "real" debt becomes bank reserves which are used to back a pyramid of money creation through lending.  Because the coin would NOT become "capital reserve" in a commercial bank's accounts, it wouldn't form the basis for direct monetary multiplication.
     

    •  As I understand it (3+ / 0-)
      Recommended by:
      offgrid, aitchdee, cynndara

      the credits from PCS would go to the treasury general account which is not included in reserves, unlike the TT&L accounts where they accumulate taxes and bond proceeds. The money is only transferred into reserves when it is spent. Bank lending is not constrained by reserves, and reserve requirements are made up ex post facto over a 14 day averaging period. The Fed is lender of last resort and automatically makes up any shortfall in reserves if the bank fails to do so in the interbank market. The Fed now pays 25bp on reserves and doesn't currently soak them up with treasuries.

      The private sector may pine away for those treasuries that aren't being offered, but there are plenty of other investment opportunities in our economy in the private sector. Let them put their money into something productive instead of the free lunch treasuries offer. That might actually be a little stimulative.

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