For those more knowledgeable than me:

How would it play out if the Treasury decided to ignore the debt-ceiling outright, and continue to service the national debt? Imagine a policy that says, "In accordance with the Fourteenth Amendment, we will continue to pay bondholders their due monies" or something like that.

I don't think the 14th amendment gives the Treasury that power, but that's not what I'm asking. Imagine they decide to interpret it that way. The Supreme Court rules against them. They ignore the Court and continue to pay.

What happens then?

I guess what I'm getting at is: what is worse, a Constitutional Crisis? Or a default on our debt? To me it seems like the better outcome would be to ignore the Court altogether on this issue.

(I'm sure I'm making naive assumptions in this questions. Let me know!)

The memo itself can be found here: https://www.federalreserve.gov/monetarypolicy/files/FOMC2011...

As Mosler has maintained for many years "Government Checks Don't Bounce"

https://moslereconomics.com/mandatory-readings/innocent-frau...

sounds like an eminently responsible response to potential political sabotage of the economy

So basically they've been printing money and giving it to institutions who serviced reckless people who took on debts that they could not afford and did not repay. Guess who ended up paying for that? Every decent person who did the right thing; tax payers, salary earners (through devaluation of their salary contracts via inflation), those who did pay back their debts.

Then you wonder how all these reckless people ended up in positions of power.

Literally someone is going to be 'too big to fail' and cause this to happen.

We all know how to catch this falling knife, the problem is that you basically uproot the Rule of Law to do it. After that you are going to have a disgruntled population angry that someone didn't have to play by the rules and we picked up the pieces.

We get some Band-Aid legislation that says 'this will never happen again'. Sometimes it does happen again.

> ... On that call, Powell and most of his colleagues reluctantly endorsed buying defaulted Treasury securities — an unprecedented move to maintain financial stability — if a legislative debt ceiling solution did not come in time.

This is a red herring. The Fed doesn't "buy" treasuries. It can't, at least not with dollars. The Fed conducts an asset swap in which it accepts a treasury, and credits the Fed account of the seller with bank reserves. These reserves are not spendable outside of the Federal Reserve system. No new money is created.

QE has done nothing to aid economic recovery - not here, not in Europe, and not in Japan, except to influence the psychology of people who don't understand what's going on.

If it ever comes to the Fed doing QE on defaulted treasuries, the same thing will happen. Big psychological boost for gullible investors, but nothing in terms of actual help to the economy.