QE3, Treasury Style - Go Around, Not Over the Debt Ceiling Limit

Abstract

The debt ceiling debate could be ended right now given that the US Constitution bestows upon the US Treasury the authority to mint coins. Further, this simple change would lift the veil on how current monetary operations work and thereby demonstrate clearly that a currency-issuing government under flexible exchange rates cannot be forced into default against its will and is not beholden to “vigilante” bond markets. This paper provides a description of how the process would work and the implications for monetary operations.