Saturday, July 30, 2011

billion not trillion dollar coins please

A method for the Treasury to print money has been making the rounds. Let's posit that depositing newly minted large denomination coins will directly result in inflation. To the extent that this avoids default, it's a great idea, but it should be conducted based on daily revenue short falls rather than a "trillion dollar coin." By making it clear that the money supply will be expanded as needed, future inflation expectations will be raised. With higher inflation expectations, businesses will start spending some of the crazy-high cash reserves they are sitting on, and unemployment may finally start to fall. Note that it doesn't matter if coin minting scheme actually causes inflation; it only matters that enough executives think it will.

While we are on the topic of inflation, the obvious added benefit is that it will reduce the deficit in real terms.

Wednesday, July 27, 2011

Debt Ceiling Leverage

Two ideas have recently surfaced which both involve the federal reserve. In one, the Fed destroys the treasuries they own. The result is immediate space under the debt ceiling. In a slightly modified version of this, the Fed will just destroy t-bills which will at least allow the treasury to continue issuing cash management bills and the like.

In the second idea, the Fed simply allows the US Government to overdraw its account, and continues crediting payments. Clearly this is just printing money. Assuming that these options are legally possible, Obama should at least be making unassuring noises about them.

Here's why: libertarians and tea party types have deep fears of inflation and are more or less unanimous in their view that "'inflation is always and everywhere a monetary phenomenon." They also tend to be terrified of inflation and view it as far more troublesome than, say, a ruined economy. Making their biggest economic fear (well, after being told what ketchup brand to buy) a little closer to reality might just make them slightly more flexible. Nah. For good measure, maybe Obama should hint at having to sell off the gold reserves (this assumes that they can understand the impact of drastically increased supply on a market).

Saturday, July 23, 2011

The Death of Borders

Much is being written about the death of Borders, and ebooks are often mentioned as the cultprit. While ebooks (and mp3 downloads) may have been what nudged them over the edge, they weren't the main instigator. Borders had a failed international expansion and took on huge debts. Barnes and Noble, which has survived (so far) stayed relatively debt free and always seemed to do a better job of managing their inventory. It also sounds like Border's in store inventory was mandated by company management and infrequently allowed store and regional managers to adjust for local taste.

Anyway, the upshot is that a flawed, but pleasant institution is gone. One more item, in a You've got Mail vein, in my experience bad independent book stores have suffered far more than good ones. Stores with poor selection, hours, or located in unwalkable neighborhoods have died. Other notable victims were those shops with holier than thow staff. On the other hand, stores such as The Elliot Bay Book Company and the Toadstool are still going strong.