This (somewhat irregular)) regular feature is back. The idea is that, over the weekend, you should post your thoughts in a more leisurely fashion than in ordinary comments or the Monday Message Board.
Please post your thoughts on any topic, at whatever length seems appropriate to you. Civilised discussion and no coarse language, please.
John Quiggin 
Umm, isn’t fiat currency basically a debt instrument anyway?
Cash will still be valued at $1 billion = $1 billion. But $1 billion in US treasury securities will be worth somewhat less than $1 billion. In a rollover crisis by definition the demand for US treasuries is quite low.
In the real world issuing securities in place of cash would probably only exacerbate the crisis. The securities could not really be used unless they were turned into cash first, which could only be done at a substantial discount which would then have a majorly contractionary effect on the US economy. Its probably just a facetious solution, although I am not completely sure. I had not heard it mentioned before PML posted it.
I seem to recall soem country – Russia? Argentina? – freezing bank accounts and effectively converting the holdings into government bonds which could then be sold (at a frqxtion of face value.)
I suppose in theory the US could issue thiry year zero coupon bonds with an NPV equivalent to people’s expected future social security entitlements.
I seem to recall soem country – Russia? Argentina?
It was Argentina, Ian.
No, fiat currency isn’t automatically a debt instrument. For instance, you can issue a fiat currency based on using it as a substitute for in kind requirements. It’s arguable whether that is “debt” or not, since this was used in creating cash economies in the first place (in colonies).
But French republican assignats did start out as large denomination low interest securities, backed by land revenues from seized ancien regime lands. That’s a lot closer to “debt instrument” as we understand it, while fiat currency doesn’t incorporate an interest element (though it has been used by central governments as something to be redeemed locally, in which case a discount factor substitutes).
The point about the assignat system is that as it broke down it became the sort of thing the state compelled the vulnerable to accept in place of payment in hard money. That included its weaker creditors.