$15 Trillion in 5 Days

It's not an abstraction in the context of this topic. We are talking about the current dollar represented in the currency market by USD and which is the declared official currency of the USA. As I have stated before, since 1971, the only USD is the dollar issued by the Federal Reserve. Definitions from the late 1700s are irrelevant.

 

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FRN is an unofficial term used to describe dollars that are issued through the Federal Reserve system. It doesn't matter if they are printed or sitting in a bank account.

 

If this is the case, shouldn't I be able to do commerce in Treasuries? Or are you saying that Treasuries are part of the dollar system that FRN's are also part of as opposed to them being different flavors of dollars such as AUD and CAD for example.

If Treasuries are dollars, then shouldn't I be able to use Treasury dollars to buy these Treasury securities? That seems logically problematic. Don't you have to buy them with FRN's or FRDN's or coins?

 

But you cannot use FRN or coins to buy treasury securities. They will not sell them to you for FRN's. The dollars used to buy them have to be electronically transmitted to the seller of the treasury. When you redeem a treasury the same thing happens, they will only pay you US dollars back electronically.

When you buy something on Ebay do you use FRN's? I think you probably use Paypal. You pay in US dollars, but not FRN's. Now, at an ATM you can convert some of these electronic US Dollars into FRN's to pay for small transactions if you wish. lets think about that transaction a second. You have $100 in your savings account, but at an ATM you convert it to $100 FRN. Do you have any more or less money? Of course not, you have the same $100 you started with, but now instead of electronic $100 you have FRN $100. The reverse happens when you deposit a $100 FRN into your bank. You haven't lost $100, you converted it from FRN $ to electronic $. Either way its still a US dollar. What is the amount of money you have deposited into your bank denominated in? They are not FRN's, but they are dollars. They are not Canadian dollars, not Aussie dollars, but US dollars. And today, with debit cards, you use those electronic dollars to pay for everything, and not one single FRN has to ever change hands. You do this every day and don't realize it I guess. When you deposit your paycheck, use credit or debit cards, and write checks, all of these things are in US dollars, and not one single FRN is involved.

Again, like Cloud and others besides me have said, All FRN's are dollars, but most dollars are not FRN's. FRN's are really only useful for transactions where either you want privacy for what you are buying, or the transaction is to small to worry about doing it electronically. They are the worst form of a US dollar since it is, bottom line, an interest free loan to the Fed. I tend to have only the bare minimum amount of my dollars as FRN's in my pocket, the majority of them I keep in interest bearing accounts.

 

If I have a U.S. bank account with X amount of dollars in it that doesn't mean I have X amount of Federal Reserve Notes. That means I have dollars in the form of numbers on a computor screen or numbers printed in my bank book.
They are not actually Federal Reserve Notes until I go to the bank and withdraw my dollars and ask for cash in return. If I ask to withdraw $20.00 in rolls of quarters then I suppose I am getting U.S. dollars only in another form other than Federal Reserve Notes.
To simplify, the term dollars is a generic term which can have many different meanings where as the Federal Reserve Note means only one thing, a printed piece of paper available in different denominations with The Federal Reserve written on it.

 

If that were true there would be no need for my bank accounts to be insured by the FDIC.

 

I get that FRN's are not digital dollars (though they are a representation thereof). What I don't get is why Treasures are digital dollars under the same umbrella as what I have on my bank balance. If you have to spend digital dollars to get Treasuries, which I don't doubt, then you are not getting the same thing back that you spent to get them. If they were the same then there's no reason to buy them in the first place because you already have them. Obviously that's not the case. Now if they are different kinds of dollars then sure, I can go for that, just as I was talking about with AUD and CAD. So if it were say called a Treasury dollar, then there's a distinction I can live with, but it's not the same as the US dollar that we use for commerce. You can't buy anything with your Treasuries until you convert them back into dollars, just like stocks, just like gold and silver ETFs. You have to exchange them for dollars first.

 

Yes, same as digital dollars do you no good at a swap meet, same as FRN do you no good on Ebay. They are all dollars, just different forms. You can convert a US Treasury into electronic dollars in a few seconds at any time. Basically Treasuries are long term storage devices for digital dollars. You cannot use them to buy groceries, but every type of dollar has its functionality.

Buy at a swap meet - FRN
Buy for small piece of candy - US Coinage
Buy on Ebay - electronic dollars
Store large sums and earn interest - US Treasuries

All have their uses, all are dollars. Converting them from one form to another will not incur a currency exchange fee, like trading Euros to dollars would. There is no "exchange rate" between them, they are identical.

 

The difference is that an electronic dollar being swapped for a FRN is a 1:1 ratio, and they are both accepted as payment by the vast majority of merchants. Coins fit into this designation as well. However, when I look at my retirement portfolio the bonds are measured in units, and each unit is given a value in dollars that is not the same as $1. Am I mistaken for thinking Treasuries are the same as bonds? If indeed each Treasury note is worth $1 then I will stand corrected.

 

The face value for these notes typically are $1000. You give them $1000, periodically they pay you interest, and you get back $1000 when they mature. On their face they show $1000 US Dollars as the amount. This is just like the first US bills that paid interest. These just require to be registered nowadays for security and ease of paying interest, but if they weren't they would function identically to $1000 bills.

 

This is simply wrong. The Federal Reserve counts all money that is held as Cash, in Bank Accounts, and even currency used by the US Treasury as Federal Reserve Dollars. You can check this yourself by going to their website. The fact that we are referring to them as FRNs, a nickname, is irrelevant to where the dollars are issued from. The US Treasury does not issue dollars for circulation anymore. If you do business with them, you will pay with FRNs and if they pay you it will be on an account drawn against the Federal Reserve system. This includes all payments.

US Securities are not USD.

 

Maybe you guys simply don't realize that FRN is a nickname for all dollars issued by the Federal Reserve. This includes all dollars sitting in electronic form in bank accounts.

 

OK this is starting to make more sense. I completely agree that these are used as dollar storage, but so are stocks, so are precious metals. I still have one hangup which is that these things all have fluctuating markets. You pay $1,000 for a T-note, but it's under the expectation that the return will be different. You buy $1,000 in 50 cent pieces, assuming they are all 1970 and newer, they will be worth exactly what you paid for them when you go to convert them back to digital, or to FRN's. An investment such as a bond can't be interwoven into the existing dollar system, because the value thereof is variable in comparison.

 

The only variability is in the interest rate portion of the bond. Nothing changes as far as the Treasury is concerned, they got $1000, they will return $1000, and every six months pay out interest on its face. What you are seeing on statements is including accrued interest due. If you have a bond and it will pay its 6 months interest next week, you don't want to sell it for $1000, but $1000 and most of that interest payment. Take away interest from bonds and they would trade every single day for $1000, every single one of them. Just like a $100 bill right? It never goes down to $99 or up to $101, this is because they do not pay interest. Again, if you think of the $100 bill as the $100 interest free bond issued by the Fed, (that it truly is), then it makes it easier to understand the entire system in place. Its the interest on treasuries that changes them from $1000 day in day out. No interest means no registration, and then you simply created the $1000 bill.

 

Thank you for making the effort to explain this Chris. I think I finally get it. Hope it wasn't too much of a bother ;] So Treasuries are just another form of FRN really with a different denomination, a different marketplace, and they provide you with interest because you're parking your money with the government, much like a bank. Whether you hold FRN's or Treasuries, you have to have the money in the first place to exchange for them (unless you're getting paid under the table hehe). I have a feeling this will only get more complicated in time.

 

I agree, but for the sake of clarity I am distinguishing paper FRN's from digital currency even though they are both notes of the Fed.

 

There is no such thing as USD digital currency. This incorrect notion was established here to justify the position there is more than one type of dollar. Instead There are digital (paperless) transactions that allow for the movement of $ currency from one account to another. This is from the Federal Reserve of NY, which is the actual banker for the US government.

Financial Services
The New York Fed and the other Reserve Banks provide several important services to the Federal government...

As the banker for the Federal government, the Fed clears checks drawn on the Treasury's account. Acting as fiscal agents for the government, the Reserve Banks sell, service and redeem Treasury securities. Further, currency and coin are placed into or are withdrawn from circulation in response to seasonal and cyclical shifts in the public's need for cash. Almost all U.S. currency now consists of Federal Reserve notes, which were first issued in 1914.

The New York Fed operates two types of electronic funds transfer (EFT) systems, which permit the rapid nationwide clearing and settling of electronically originated credits and debits among financial institutions. One system, Fedwire, developed and maintained by the Fed and overseen by the Fed's Wholesale Product Office, transfers large-dollar payments among Federal Reserve offices, depository institutions and federal government agencies. The New York Fed serves as the Wholesale Product Office for the Federal Reserve System. In this capacity, it is responsible for strategic planning and oversight of the Fed's large-dollar funds and securities transfer businesses, as well as its net settlement services. The majority of U.S. Fedwire transactions originate from Second District financial institutions.​

Thus, the electronic payment system that is being referred to as "digital dollars", is nothing more than the Fedwire system operated by the Federal Reserve. All money flowing through this system are Federal Reserve dollars. This includes the money from sales of US Treasuries. There is no other type of USD in use now.

 

Most likely an electronic funds transfer of some sort. It most certainly isn't a truckload of FRNs.

 

What you apparently are unable to grasp is that the currency you take to the supermarket in the form of FRNs is not the same thing as the currency traded in the international markets [except perhaps the international drug trade], yet both are USDs.

 

Even going to the supermarket, nothing stops you from either bringing rolls of quarters or dollar coins, or paying electronically. Either way you are paying with US dollars but not a single FRN is involved. I have not used a FRN in a supermarket for a decade or longer, but they still want their $100 each time, and I give it to them.