Legal Curbs Said to Hamper A.T.F. in Gun Inquiries
Cindy VanDyne scanning records from a gun retailer in 2010 at the A.T.F.’s National Tracing Center in Martinsburg, W.Va. Ricky Carioti/The Washington Post, via Getty Images
Lawmakers in Congress have resisted efforts to establish a database for gun sales, and many records are still handwritten. Michael Stravato for The New York Times
By ERICA GOODE and SHERYL GAY STOLBERG Published: December 25, 2012
MARTINSBURG, W.Va. — The Bureau of Alcohol, Tobacco, Firearms and Explosives [ http://topics.nytimes.com/top/reference/timestopics/organizations/b/bureau_of_alcohol_tobacco_and_firearms/index.html ] has been without a permanent director for six years, as President Obama recently noted. But even if someone were to be confirmed for the job, the agency’s ability to thwart gun violence is hamstrung by legislative restrictions and by loopholes in federal gun laws, many law enforcement officials and advocates of tighter gun regulations say.
For example, under current laws the bureau is prohibited from creating a federal registry of gun transactions. So while detectives on television tap a serial number into a computer and instantly identify the buyer of a firearm, the reality could not be more different.
When law enforcement officers recover a gun and serial number, workers at the bureau’s National Tracing Center here — a windowless warehouse-style building on a narrow road outside town — begin making their way through a series of phone calls, asking first the manufacturer, then the wholesaler and finally the dealer to search their files to identify the buyer of the firearm.
About a third of the time, the process involves digging through records sent in by companies that have closed, in many cases searching by hand through cardboard boxes filled with computer printouts, hand-scrawled index cards or even water-stained sheets of paper.
In an age when data is often available with a few keystrokes, the A.T.F. is forced to follow this manual routine because the idea of establishing a central database of gun transactions has been rejected by lawmakers in Congress, who have sided with the National Rifle Association, which argues that such a database poses a threat to the Second Amendment. In other countries, gun rights groups argue, governments have used gun registries to confiscate the firearms of law-abiding citizens.
Advocates for increased gun regulation, however, contend that in a country plagued by gun violence, a central registry could help keep firearms out of the hands of criminals and allow law enforcement officials to act more effectively to prevent gun crime.
As has been the case for decades, the A.T.F., the federal agency charged with enforcing gun laws and regulating the gun industry, is caught in the middle.
Law enforcement officials say that in theory, the A.T.F. could take a lead role in setting a national agenda for reducing gun crime, a goal that has gained renewed urgency with the school massacre in Newtown, Conn. But it is hampered, they say, by politically driven laws that make its job harder and by the ferocity of the debate over gun regulation.
“I think that they’ve really been muzzled over the last several years, at least, from doing their job effectively,” said Frederick H. Bealefeld III, a former police commissioner in Baltimore. “They’ve really kind of been the whipping agency, caught in the political turmoil of Washington on the gun issue.”
The bureau’s struggles are epitomized by its lack of a full-time director since Congress, prodded by the N.R.A., decided that the position should require Senate confirmation. That leadership vacuum, Mr. Bealefeld and others said, has inevitably depleted morale and kept the agency from developing a coherent agenda.
At a news conference last Wednesday, Mr. Obama called on the Senate to confirm a permanent director, saying lawmakers should “make this a priority early in the year.” But given the complicated politics, it may be difficult for the White House to get a director confirmed. Mr. Obama’s Republican predecessor, George W. Bush, was unable to do so.
In 2010, Mr. Obama nominated Andrew Traver, who is now the head of the bureau’s Denver division, for the post. But Mr. Traver, whose candidacy is opposed by the N.R.A., has yet to have a hearing, and his nomination has languished in the Senate Judiciary Committee. The senior Republican on the panel, Senator Charles E. Grassley of Iowa, has raised questions about Mr. Traver’s nomination, and his prospects for confirmation looked so dim that the White House told Democrats on the committee to make nominations for other posts a higher priority, according to a Senate Democratic aide.
The persistent controversy over the A.T.F.’s role, historians say, also contributed to its neglect in the financing bonanza that followed the Sept. 11 terrorist attacks. While other law enforcement agencies like the F.B.I. have benefited from greatly increased budgets and staffing, the A.T.F.’s budget has remained largely stagnant, increasing to about $1.1 billion in the 2012 fiscal year from just over $850 million a decade ago.
The bureau’s tracing center performed 344,447 gun traces in the 2012 fiscal year, but its staffing is no higher than it was in 2004, according to its chief, Charles Houser. Still, he added, the center manages to complete urgent traces in about an hour, and routine traces are done within several days.
The distrust between the A.T.F. and gun rights groups is longstanding. The bitterness runs so deep that some critics of the agency are still angry about events from more than 40 years ago. Alan Gottlieb, the founder and executive vice president of the Second Amendment Foundation, cited a 1971 case in which A.T.F. agents raided the apartment of Ken Ballew in Silver Spring, Md., in the belief that he was stockpiling unregistered grenades. Agents found a cache of weapons, according to a lawsuit filed in the case, and Mr. Ballew was shot in the head after pointing a revolver in the agents’ direction.
The 1992 siege of Ruby Ridge in Idaho and the 1993 raid on the Branch Davidian complex near Waco, Tex., are also sore points, Mr. Gottlieb said.
“Waco is not something that made us feel warm and fuzzy about A.T.F.,” he said.
Mr. Gottlieb said the “low point” came with the bungled gun trafficking investigation known as Operation Fast and Furious, in which A.T.F. agents, in an effort to trace guns to a network based in Arizona, did not quickly intervene as the weapons were smuggled over the border to Mexico. Last Wednesday, in a development that may inflame the controversy further, Mr. Grassley sent letters to Attorney General Eric H. Holder Jr. and the Justice Department’s Office of the Inspector General demanding an investigation and requesting more information about why a gun bought by an A.T.F. agent involved in Operation Fast and Furious was found at the scene of a homicide in Mexico.
Marc Willis, a spokesman for the A.T.F., said the bureau could not comment on continuing investigations.
The bureau’s acting director, B. Todd Jones, who was installed in the summer of 2011 to revamp the agency after the trafficking investigation, has said he has increased oversight and has carried out changes recommended by the inspector general in a report in September.
Yet law enforcement officials and criminal justice experts who would like the A.T.F. to have greater latitude in fighting crime say its effectiveness in reducing gun violence is still hampered by a thicket of laws that limit the information it can obtain and constrain its day-to-day functioning.
The Firearm Owners Protection Act of 1986, for example, prohibits A.T.F. agents from making more than one unannounced inspection per year of licensed gun dealers. The law also reduced the falsification of records by dealers to a misdemeanor and put in place vague language defining what it meant to “engage in business” without a dealer’s license.
Both provisions, said William J. Vizzard, an emeritus professor of criminal justice at California State University, Sacramento, and a former A.T.F. special agent, made it more difficult for the bureau to go after gun sellers who broke the law.
The so-called Tiahrt amendments — named for Todd Tiahrt, a former Republican congressman from Kansas, and first attached as riders to appropriations bills in 2003 and 2004 — limited the A.T.F.’s ability to share tracing information on firearms linked to crimes with local and state law enforcement agencies and with the public. Those restrictions have been loosened in subsequent versions of the amendments. But under the most recent Tiahrt amendment, adopted in 2010, the A.T.F. still cannot release anything but aggregate data to the public. The amendment still prohibits the bureau from using tracing data in some legal proceedings to suspend or revoke a dealer’s license, and it requires that records of background checks of gun buyers be destroyed within 24 hours of approval. Advocates of tighter regulation say this makes it harder to identify dealers who falsify records or buyers who make “straw” purchases for others.
Mr. Gottlieb said the Tiahrt amendment protected data “from people who are anti-gun rights who want to manipulate things” to bolster support for gun regulation.
Congress has long resisted the idea of a central transaction database.
David Kopel, a lawyer and the Second Amendment project director at the Independence Institute, a research group concerned with individual choice, said Congress was aware that a registry could be misused. “We don’t have an automated database of everybody who’s had an abortion or of anyone who owns controversial books,” he said.
But Mr. Bealefeld, the former Baltimore commissioner, said the notion that a central database would create “some Orwellian Big Brother oversight that’s going to monitor target shooters and hunters and sneak into their houses in the dead of night to steal their rifles and their pistols” was “more fiction than reality.”
“I’ve hunted since I was 7 years old,” he said, “and I don’t live in fear that anyone’s going to come and take my hunting rifles.”
Erica Goode reported from Martinsburg, and Sheryl Gay Stolberg from Washington. Michael S. Schmidt contributed reporting from Washington.
Even Gregory, who convincingly played a devil’s advocate to LaPierre Sunday, was dismissive of its effect on Sunday. “I mean the fact that that it just doesn’t work [ http://www.msnbc.msn.com/id/50283245/ns/meet_the_press-transcripts/ ] is still something that you’re challenged by if you want to approach this legislation again,” he said of the ban to New York Democratic Sen. Chuck Schumer, a supporter of the ban.
There’s a dearth of quality empirical research on the efficacy of the ban, thanks in part to Congress’ statutory limitations on the type of gun violence research the federal government is allowed to conduct. Pro-gun lawmakers made it illegal for research agencies to advocate for gun control [ http://www.salon.com/2012/07/25/the_nras_war_on_gun_science/ ], which effectively means looking for any connection between guns and gun violence, but the evidence suggests the law had positive effects, if not as much as advocates would like.
The single formal assessment of the ban [ http://www.sas.upenn.edu/jerrylee/research/aw_final2004.pdf ], as required by Congress in passing the law, was conducted by criminologists Christopher Koper, Jeffrey Roth and others at the University of Pennsylvania (Koper is now at George Mason). The National Institute of Justice, the research arm of the Department of Justice, paid for the evaluation, which was first conducted in 1999 and updated in 2004, and looked at everything from homicide rates to gun prices.
A few key findings emerged. Overall, banned guns and magazines were used in up to a quarter of gun crimes before the ban. Assault pistols [ https://www.google.com/search?q=assault+pistols&hl=en&tbo=d&source=lnms&tbm=isch ] were more common than assault rifles in crimes. Large-capacity magazines, which were also prohibited, may be a bigger problem than assault weapons. While just 2 to 8 percent of gun crimes were committed with assault weapons, large-capacity magazines were used in 14 to 26 percent of of firearm crimes. About 20 percent of privately owned guns were fitted with the magazines.
But even though assault weapons were responsible for a fraction of the total number of gun deaths overall, the weapons and other guns equipped with large-capacity magazines “tend to account for a higher share of guns used in murders of police and mass public shootings,” the study found.
This shouldn’t be surprising to anyone paying attention to the recent history of mass shootings. In just the past year, the same .223 Bushmaster AR-15 assault rifle was used in the Aurora, Colo., theater massacre, the shooting at the Clackamas Mall in Oregon, the Newtown elementary school shooting, and, just a few days ago, the killing of two firefighters in upstate New York. Jared Loughner used 33-round high-capacity magazines in a handgun to shoot former Congresswoman Gabrielle Giffords and more than a dozen others. Seung-Hui Cho used a 15-round magazine to kill 32 and wound 17 at Virginia Tech in 2007.
So, according to the official study, was the ban effective in stopping killings? The short answer is yes, though it’s a bit unclear because of the massive loopholes in the law. “Following implementation of the ban, the share of gun crimes involving AWs [assault weapons] declined by 17 percent to 72 percent across the localities examined for this study (Baltimore, Miami, Milwaukee, Boston, St. Louis, and Anchorage),” the Koper study concluded.
Data from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) also shows a significant drop in assault weapon usage in gun crimes. In the five-year period before the enactment of the ban, the weapons constituted almost 5 percent of the guns traced by the Bureau (the ATF is responsible for tracking guns used in crimes), while they accounted for just 1.61 percent of gun traces after the ban went into effect — a drop of 66 percent [ http://www.bradycenter.org/xshare/pdf/reports/on_target.pdf ]. The effect accelerated over time, as the guns presumably became harder to find.
The problem with the ban, as both gun rights advocates (seeking to cast aspersions on the law) and gun control proponents (seeking to explain its limited impact) agree, is that it was weak to the point of being meaningless. As the bill made its way through Congress, gun lobbyists managed to create bigger and bigger carve-outs, the largest being the grandfathering in of guns and magazines produced and owned before the ban went into effect. The guns and magazines could also continue to be imported, as long they were produced before the law went into effect.
At that time of the ban, there were already more than 1.5 million privately owned assault weapons in the U.S. and 25 million guns equipped with large-capacity magazines. Another almost 5 million large-capacity magazines were imported during the ban. These could continue to be used and traded completely legally.
“The ban’s exemption of millions of pre-ban AWs and LCMs ensured that the effects of the law would occur only gradually. Those effects are still unfolding and may not be fully felt for several years into the future,” Koper and his colleagues added.
The other big exemption in the law was the narrow definition of what the government considers an assault weapon. The ban initially targeted 18 gun models, and then prohibited any future models that contained two or more “military-style” features. Some of these features are decidedly superficial, such as a collapsable stock or muzzle shroud, leading the NRA to dismiss the category of assault weapons as artificial and “cosmetic.” Indeed, gun manufacturers were able to legally produce and sell nearly identical guns [ http://www.salon.com/2012/12/17/is_this_an_assault_weapon/ ] to ones that were now prohibited by making a few minor tweaks.
Since the ban was allowed to lapse in 2004, there hasn’t been another comprehensive national study. There is, however, some encouraging data on the state level. A Washington Post analysis of gun seizures in Virginia showed a significant drop [ http://www.washingtonpost.com/wp-dyn/content/article/2011/01/22/AR2011012203452.html ] in the number of high-capacity magazines seized by police during the 10 years the ban was in effect, only for the number to return to pre-ban levels after the law expired. In 1994, the year the ban went into effect, police in the state seized 1,140 guns with high-capacity magazines. In 2004, its last year on the books, that number had dropped to 612. By 2006, it was back to over 1,000.
Garen Wintemute, the director of the Violence Prevention Research Program at the University of California, Davis Medical School, looked at his state’s experience and found a troubling pattern in who purchases guns that were once banned. First, “among those purchasing handguns legally, those with criminal records were more likely than others to purchase assault-type handguns,” he told Salon. Second, “among those purchasing handguns legally who had criminal records, those purchasing assault-type handguns were much more likely than those purchasing other types of handguns to be arrested for violent crimes later.” He wasn’t able to study rifles because the state’s archive of purchases was limited to handguns.
Abroad, the data is even more convincing. In Australia, a 1996 mass shooting that left 36 dead led the conservative government to act swiftly to ban semi-automatic assault weapons with a much stronger law [ http://news.yahoo.com/could-us-learn-australias-gun-control-laws-174307680.html ]. They did not grandfather in old guns and paid to buy back old ones. Gun-related homicide plummeted by 59 percent between 1995 and 2006, with no corresponding increase in non-firearm-related homicides. Meanwhile, gun suicides — which are responsible for most firearm deaths in most developed countries — dropped by a whopping 65 percent. Robberies at gunpoint also dropped significantly. In the decade prior to the ban, there were 18 mass shootings. In the decade following it, there were zero [ http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2704353/ ].
The resounding success of the Australian model shows where the U.S.’s attempt to ban assault weapons failed. By the same token, it shows where we could succeed by implementing a real ban without the carve-outs of the the 1994 law.
Proof that Concealed Carry permit holders live in a dream world, Part One
Uploaded on Apr 21, 2010 by VPCvideos
The controlled study documented in these videos show that concealed carry permit holders are fooling themselves if they think they will be able to react effectively to armed aggressors. Most CCW holders won't even be able to un-holster their gun. They will more likely be killed themselves or kill innocent bystanders than stop the aggressor. For more details, see "Unintended Consequences: Pro-Handgun Experts Prove That Handguns Are a Dangerous Choice for Self-Defense." http://www.vpc.org/studies/unincont.htm
CCW permit holders don't protect innocent people. They kill them.
Proof that Concealed Carry permit holders live in a dream world, Part Two
Uploaded on Apr 21, 2010
The controlled study documented in these videos show that concealed carry permit holders are fooling themselves if they think they will be able to react effectively to armed aggressors. Most CCW holders won't even be able to un-holster their gun. They will more likely be killed themselves or kill innocent bystanders than stop the aggressor. For more details, see "Unintended Consequences: Pro-Handgun Experts Prove That Handguns Are a Dangerous Choice for Self-Defense." http://www.vpc.org/studies/unincont.htm
CCW permit holders don't protect innocent people. They kill them.
YOU KNOW YOU'RE A TRUE CONCEALED CARRY NUT WHEN...
Published on Jun 18, 2012 by MrColionNoir
Many people say carrying concealed is a life style. Well, eventually that life style will take over and you get what I like to call a, "Concealed Carry Nut". I am a self proclaimed Concealed Carry Gun Nut. Acceptance is the first step.
When my friend Robin was dying, she asked me if I knew a priest she could talk to who would not be, as she put it, “too judgmental.” I knew the perfect man, a friend of our family, a priest conjured up out of an old black-and-white movie, the type who seemed not to exist anymore in a Catholic Church roiled by scandal. Like Father Chuck O’Malley, the New York inner-city priest played by Bing Crosby, Father Kevin O’Neil sings like an angel and plays the piano; he’s handsome, kind and funny. Most important, he has a gift. He can lighten the darkness around the dying and those close to them. When he held my unconscious brother’s hand in the hospital, the doctors were amazed that Michael’s blood pressure would noticeably drop. The only problem was Father Kevin’s reluctance to minister to the dying. It tears at him too much. He did it, though, and he and Robin became quite close. Years later, he still keeps a picture of her in his office. As we’ve seen during this tear-soaked Christmas, death takes no holiday. I asked Father Kevin, who feels the subject so deeply, if he could offer a meditation. This is what he wrote:
How does one celebrate Christmas with the fresh memory of 20 children and 7 adults ruthlessly murdered in Newtown; with the searing image from Webster of firemen rushing to save lives ensnared in a burning house by a maniac who wrote that his favorite activity was “killing people”? How can we celebrate the love of a God become flesh when God doesn’t seem to do the loving thing? If we believe, as we do, that God is all-powerful and all-knowing, why doesn’t He use this knowledge and power for good in the face of the evils that touch our lives?
The killings on the cusp of Christmas in quiet, little East Coast towns stirred a 30-year-old memory from my first months as a priest in parish ministry in Boston. I was awakened during the night and called to Brigham and Women’s Hospital because a girl of 3 had died. The family was from Peru. My Spanish was passable at best. When I arrived, the little girl’s mother was holding her lifeless body and family members encircled her.
They looked to me as I entered. Truth be told, it was the last place I wanted to be. To parents who had just lost their child, I didn’t have any words, in English or Spanish, that wouldn’t seem cheap, empty. But I stayed. I prayed. I sat with them until after sunrise, sometimes in silence, sometimes speaking, to let them know that they were not alone in their suffering and grief. The question in their hearts then, as it is in so many hearts these days, is “Why?”
The truest answer is: I don’t know. I have theological training to help me to offer some way to account for the unexplainable. But the questions linger. I remember visiting a dear friend hours before her death and reminding her that death is not the end, that we believe in the Resurrection. I asked her, “Are you there yet?” She replied, “I go back and forth.” There was nothing I wanted more than to bring out a bag of proof and say, “See? You can be absolutely confident now.” But there is no absolute bag of proof. I just stayed with her. A life of faith is often lived “back and forth” by believers and those who minister to them.
Implicit here is the question of how we look to God to act and to enter our lives. For whatever reason, certainly foreign to most of us, God has chosen to enter the world today through others, through us. We have stories of miraculous interventions, lightning-bolt moments, but far more often the God of unconditional love comes to us in human form, just as God did over 2,000 years ago.
I believe differently now than 30 years ago. First, I do not expect to have all the answers, nor do I believe that people are really looking for them. Second, I don’t look for the hand of God to stop evil. I don’t expect comfort to come from afar. I really do believe that God enters the world through us. And even though I still have the “Why?” questions, they are not so much “Why, God?” questions. We are human and mortal. We will suffer and die. But how we are with one another in that suffering and dying makes all the difference as to whether God’s presence is felt or not and whether we are comforted or not.
One true thing is this: Faith is lived in family and community, and God is experienced in family and community. We need one another to be God’s presence. When my younger brother, Brian, died suddenly at 44 years old, I was asking “Why?” and I experienced family and friends as unconditional love in the flesh. They couldn’t explain why he died. Even if they could, it wouldn’t have brought him back. Yet the many ways that people reached out to me let me know that I was not alone. They really were the presence of God to me. They held me up to preach at Brian’s funeral. They consoled me as I tried to comfort others. Suffering isolates us. Loving presence brings us back, makes us belong.
A contemporary theologian has described mercy as “entering into the chaos of another.” Christmas is really a celebration of the mercy of God who entered the chaos of our world in the person of Jesus, mercy incarnate. I have never found it easy to be with people who suffer, to enter into the chaos of others. Yet, every time I have done so, it has been a gift to me, better than the wrapped and ribboned packages. I am pulled out of myself to be love’s presence to someone else, even as they are love’s presence to me.
I will never satisfactorily answer the question “Why?” because no matter what response I give, it will always fall short. What I do know is that an unconditionally loving presence soothes broken hearts, binds up wounds, and renews us in life. This is a gift that we can all give, particularly to the suffering. When this gift is given, God’s love is present and Christmas happens daily.
by David Andolfatto and Li Li in Federal Reserve Bank of St. Louis Economic Synopses, 2013, No. 5
Under this latter scenario, the Fed is not monetizing government debt—it is simply managing the supply of the monetary base in accordance with the goals set by its dual mandate.
The Federal Reserve System of the United States creates the country’s monetary base. The monetary base consists of currency (Federal Reserve notes and coins) in circulation and deposits (Federal Reserve credits) held by depository institutions at regional Federal Reserve Banks. Since August 2008, the Fed has tripled the monetary base from about $0.8 trillion to $2.7 trillion. More than half of this new money was used to purchase U.S. government bonds (Treasury debt),1 which has led some commentators to complain that the Fed is “monetizing government debt.” The concern is that the Fed’s actions are somehow enabling excessive government borrowing and possibly risking future inflation.
Before proceeding, we have to be clear what we mean by “monetizing the debt.” To this end, we review some basic principles. The Fed is required by mandate to keep inflation low and stable and to stabilize the business cycle to the best of its ability. The Fed fulfills its dual mandate primarily by open market sales and purchases of (mainly government) securities. If the Fed wants to lower interest rates, it creates money and uses it to purchase Treasury debt. If the Fed wants to raise interest rates, it destroys the money collected through sales of Treasury debt. Consequently, there is a sense in which the Fed is “monetizing” and “demonetizing” government debt over the course of the typical business cycle.
What is usually meant by “monetizing the debt,” however, is the use of money creation as a permanent source of financing for government spending. Thus, to ascertain whether the Fed has in fact monetized its purchases of $1.2 trillion in government bonds since 2008, we have to know what the Fed intends to do with its portfolio of assets over time.2
If the recent rapid accumulation of Treasury debt on the Fed’s balance sheet constitutes a permanent acquisition, then the corresponding supply of new money would be expected to remain in the economy (as either cash in circulation or bank reserves) permanently as well. As the interest earned on securities held by the Fed is remitted to the Treasury, the government essentially can borrow and spend this money for free. If, on the other hand, the recent increase in Fed Treasury debt holdings is only temporary (an unusually large acquisition in response to an unusually large recession), then the public must expect that the monetary base at some point will return to a more normal level (through sales of securities or by letting the securities mature without replacing them). Under this latter scenario, the Fed is not monetizing government debt—it is simply managing the supply of the monetary base in accordance with the goals set by its dual mandate. Some means other than money creation will be needed to finance the Treasury debt returned to the public through open market sales.
For the record, Fed Chairman Ben Bernanke has repeatedly propounded this latter view (see, for example, Bernanke, 2012). The credibility of Fed policy is arguably reflected in the time path of inflation and inflation expectations. Since 2008, inflation has averaged less than the Fed’s official long-run inflation target of 2 percent per year. Moreover, market-based measures of inflation expectations remain well anchored (see Pasaogullari and Waiwood, 2012). So it seems that to this point, at least, the Fed’s credibility is passing the market test.
Of course, the claim that Fed policy is exerting downward pressure on interest rates, especially at the short end of the yield curve, has some merit. The quantitative impact of Fed policy on longer rates, however, is debatable. The reason for this is because an elevated worldwide demand for U.S. Treasury securities is keeping yields low independently of Fed policy. The possibility that forces outside the Fed have a large impact on yields is suggested by the data in the chart. As the chart shows, the vast majority (85%) of marketable U.S. Treasury debt is held outside the Fed and is close to the average ratio held over the past 20 years.
Notes
1 Most of the remaining new money has been used to purchase mortgage-backed securities.
2 Thornton (2010) offers a somewhat different definition; he argues that debt monetization should be defined in terms of whether the Fed is intentionally helping the government finance expenditures.
In many countries the government has assigned exclusive power to issue or print its national currency to a central bank. The government treasury must pay off government debt either with money it already holds or by financing it by issuing new bonds which are sold to either the public directly or the central bank, in order to raise the funds required to repay bonds that have come due. The central bank may purchase government bonds by conducting an open market purchase, i.e. by increasing the monetary base through the money creation process. If government bonds that have come due are held by the central bank, the central bank will return any funds paid to it back to the treasury. Thus, the treasury may 'borrow' money without needing to repay it. This process of financing government spending is called 'monetizing the debt'.
Central banks are usually forbidden by law from purchasing debt directly from the government. For example, the Maastricht Treaty (article 104) expressly forbids EU central banks' direct purchase of debt of EU public bodies such as national governments. Their debt purchases have to be from the secondary markets. Monetizing debt is thus a two-step process where the government issues debt to finance its spending and the central bank purchases the debt, holding it till it comes due, and leaving the system with an increased supply of money.
.. yup .. am still trying to get all this economic stuff to some sort of better nut&bolts understanding .. Oh!/aha! .. just remembered .. this has been sitting on tab for awhile ..
Financial Crisis for Beginners
We believe that everyone should be able to understand how the financial crisis came about, what it means for all of us, and what our options are for getting out of it. Unfortunately, the vast majority of all writing about the crisis – including this blog – assumes some familiarity with the world of mortgage-backed securities, collateralized debt obligations, credit default swaps, and so on. You’ve probably heard dozens of journalists use these terms without explaining what they mean. If you’re confused, this page is for you. Over time, we will be adding more explanations and more links to external sources, so check back for updates. (Some of the explanations on this page are simplified and not 100% accurate; their goal is to explain the key concepts to a general audience.)
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