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European Tribune - Comments - The Trillion $ Coin
However it is still broadly comparable to other major economies, Germany (82%), United Kingdom (83%), European Union (83%), Canada (85%,) and much lower than Japan (230%).

Link is bad, and I assume you mean EU average as the EU as such does not yet have a national debt (which must be fixed if we want to retain a common currency).

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Jan 10th, 2013 at 12:05:53 PM EST
thanks. Link fixed and diary now completed

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 02:29:46 PM EST
[ Parent ]
Some democrats have suggested that the trillion $ coin should have President Regan's likeness on one side, and GW Bush's on the other - in honor of the fact that Reagan tripled the National debt, and Dubya doubled it. The current GOP orthodoxy is that Obama is responsible for all of the debt.

However my preference would be to have Iraq on one side and Afghanistan on the other, to highlight the fact that those wars were never funded, and that wars have real costs in treasury as well as lives. Obama could go further and propose an Oil Company, Carbon, Tobin or gambling tax as a means of funding the Coin and eventually buying it back off the Fed and melting it down. Let those who benefited from the wars pay for them.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 02:35:35 PM EST
I have suggested that the obverse have a scene of the original Boston Tea Party showing 'Indians' heaving a crate of British East India tea overboard from an East Indiaman. The top of the crate would be visible and would be filled in one direction by a replica of the The Trillion Dollar Coin showing the obverse and thus this scene in miniature. As it was in the beginning....

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 04:42:38 PM EST
[ Parent ]
George W Bush on the Face, and the pulling down of the Saddam Hussein statue on the other, with the legend "Paying for the Photo-Op"

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jan 15th, 2013 at 02:42:41 PM EST
[ Parent ]
Since nobody else has quoted the law that the proponents refer to on ET, here it is: (Sorry, no link to the actual law, I found it in an article on the coin in German)

The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.

That doesn't sound as if there were legal problems. I heard anyone seriously citing economic ones either (just Weimar! Zimbabwe!), but plenty of political problems. The worst of the political problems will be the fact that Obama doesn't want a chance to politics without compromising with the Repugs.

by Katrin on Thu Jan 10th, 2013 at 03:02:17 PM EST
Thanks. My whole piece has been written under a time constraint. It needs a lot more links to evidence some of the assertions, which I will add as and when I get the time.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 03:18:49 PM EST
[ Parent ]
Deficits ??? IOKIYAR

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Thu Jan 10th, 2013 at 03:32:54 PM EST
The paridigm the US is caught up in at the moment reminds me of the Gordian knot. All you need is an Alexander to solve the problem with a fait accompli, a trillion dollar coin.

Republicans have been burdening us with their "accomplished facts" for decades. Ha Obama the mettle to serve them their due in the interest of the nation?

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Thu Jan 10th, 2013 at 03:49:35 PM EST
Obama's problem will be the fiscal and or monetary conservatives on his own side of the aisle.  It is difficult to overstate the degree to which Austrian/Chicago economics is the only economics in US discourse. However if Republican's succeed in backing Obama into a corner, he may have no option, and in that scenario even some of the most conservative Dems will probably have his back. It all depends on how the choreography of the battle is handles, and that is something Obama and his team have been reasonably adept at. But expect the crisis to drag on for months...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 04:22:44 PM EST
[ Parent ]
Fox news coin ignorance.
Here's Fox News confusing the idea of a coin-shaped pile of platinum worth $1 trillion and a $1 trillion coin that happens to be made out of platinum and can be of any size. We saw earlier this week that the National Republican Campaign Committee also doesn't understand how coins work, so perhaps I can try again to explain.


Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Jan 10th, 2013 at 04:40:07 PM EST
The usual "gold standard" confusion between the denomination of a coin and the value of the metal it contains.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 04:47:14 PM EST
[ Parent ]
To amplify Iglesia's comment, The front, traditionally, should have someone's portrait, THE UNITED STATES OF AMERICA written around the top, above the head, the denomination written around the bottom, ONE TRILLION DOLLARS, the date written in the lower right, as oriented from the face, a mark denoting the mint at which it was struck, the word LIBERTY on one side of the head and the phrase IN GOD WE TRUST on the other side. Dimes put THE UNITED STATES OF AMERICA on the back due to space limitations, but that should not be a problem with a trillion dollar coin. A milled edge is optional, not being used with pennies, nickles or the Susan B. Anthony dollar, which was a many sided polygon. The value of the metal content need have no more relation to the value of the coin than did the base metal content of the Susan B. Anthony dollar have to its face value, but it must be platinum per the requirements of the authorizing statute.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:02:46 PM EST
[ Parent ]
This coin is meant to disappear in the Fed's cellar. I should think looks don't matter, except to poke even more fun at the Repugs.
by Katrin on Thu Jan 10th, 2013 at 05:08:49 PM EST
[ Parent ]
There's a campaign to put Ronnie on one of the coins or notes, isn't there? in which case if he's on the trillion, you can't put him on another one I would think, which would be an extra bonus

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Jan 10th, 2013 at 05:18:28 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 05:36:02 PM EST
[ Parent ]
I imagine the Trillion Dollar Coin as being suitably gigantic, let's say about the size of a coffee table, so there would be plenty of space for all the Republican heroes.
by Gag Halfrunt on Fri Jan 11th, 2013 at 08:13:04 AM EST
[ Parent ]
In order to bang home the point that it is of no intrinsic value, I'd hope it would be tiny.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 02:54:14 AM EST
[ Parent ]
At the very least it should inspire a few Russell Crowe Trillion $ Heist movies where the protagonist discovers, to his horror, that no one will actually believe he has got the real thing rendering it effectively worthless...

Also perhaps a stupid and stupider 7 movie sequel where the protagonists counterfeit the coin and are caught when they attempt to "cash" it in because the one and only true coin is in the Fed and no "real" copies exist.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 05:50:53 AM EST
[ Parent ]
As specie, it is effectively worthless. Who would accept it in payment for anything?
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 05:56:31 AM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 06:08:36 AM EST
[ Parent ]
Special institutional case.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 10:27:42 AM EST
[ Parent ]
It's symbolic.

Oh, wait...

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 12th, 2013 at 06:30:44 AM EST
[ Parent ]
So's a Washington.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 12th, 2013 at 09:32:11 AM EST
[ Parent ]
Accepted without difficulty in exchanges, so has transactional value.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 10:26:21 AM EST
[ Parent ]
If Peter Sellars was still alive there'd be a new film adventure for the Dutchy of Grand Fenwick

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Sat Jan 12th, 2013 at 05:50:36 PM EST
[ Parent ]
Booman is still clinging to the "real metal value" theory and refusing to differentiate (like Fox News) between bullion and proof coins.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 06:41:44 AM EST
[ Parent ]
Booman is serious.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 07:17:09 AM EST
[ Parent ]
No, but he is desperately trying to be - getting inside White House briefings - and trying to coral some of the wild cats of the progressive blogosphere on their behalf. However I think his attitude highlights a real problem with the progressive blogosphere in the USA. Most US liberals and progressives are, more or less, economically illiterate and haven't gotten past Austrian or Chicago school economics 101. They share the same basic assumptions and theoretic constructs of  austerity economics, even if they would like to temper it's extremes by saving as much of the New Deal and Great Society as they can.

However I also think Boo is probably correct in his assessment of how the Trillion $ coin would play in the US. Obama has desperately been trying to play "the adult in the room" and keep Wall Street onside. So far he has the Republican right more or less where he wants them - unhinged from establishment Republicans who voted for the Fiscal Cliff compromise.

Obama risks uniting the Republican and conservadem establishment against him if he goes the coin route.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 07:45:29 AM EST
[ Parent ]
<>However I also think Boo is probably correct in his assessment of how the Trillion $ coin would play in the US. Obama has desperately been trying to play "the adult in the room" and keep Wall Street onside.
yeah...
There seem to be two kinds of objections. One is that it would be undignified. Here's how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he's holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac -- a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, "My god, we can't dress the secretary up as a clown!" Even when it will make him a hero who saves the day?
(Krugman)

I suppose for serious people like Booman, a great depression and a government default are better than looking foolish in the eyes of the Boeotians.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 07:57:28 AM EST
[ Parent ]
Most US liberals and progressives are, more or less, economically illiterate and haven't gotten past Austrian or Chicago school economics 101. They share the same basic assumptions and theoretic constructs of  austerity economics, even if they would like to temper it's extremes by saving as much of the New Deal and Great Society as they can.
Stephanie Kelton calls them deficit doves, as opposed to deficit hawks. Both believe deficits should be reduced, it's just that the liberal deficit doves are willing to entertain short-term stimulus policies.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 10:24:43 AM EST
[ Parent ]
When I met Kelton and Wray at a conference here some time ago, I had no idea how important they, and their ideas were about to become. I even asked her the conventional economic question about "printing money" ultimately leading to inflation and was surprised by the vehemence of her response to the contrary. Part of me wants Obama to mint the coin just to see Republican and Conservadem heads explode. Part of me wants him to face the political fall-out of a (probable) failed impeachment attempt just to overturn the whole conservative economic narrative of the right. After all he did promise to be a transformational President...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 11:49:34 AM EST
[ Parent ]
Living inside the economy that would be exploded to teach Obama a lesson, all parts of me are on the "mint the coin and see radical reactionary's heads explode" side of it.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jan 15th, 2013 at 02:49:38 PM EST
[ Parent ]
Talking Points Memo (via Krugman) has a rogue's gallery of nine options for the Coin, including Reagan and Dr. Evil.
by Gag Halfrunt on Fri Jan 11th, 2013 at 08:21:13 AM EST
[ Parent ]
Biden looks like the leather-wearing, hard partying persona the Onion has given him. ("Oh, you know, attitude, attitude! Uh... sunglasses!")

Are those moons for Gingrich? Don't get it.

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sapere aude

by Number 6 on Fri Jan 11th, 2013 at 09:00:09 AM EST
[ Parent ]
TPM might be implying Gingrich is a loony - although I couldn't possibly comment. (Maybe bat shit would have been too small and not distinctive enough.)

But it looks like the Canadians got there first.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 11th, 2013 at 09:07:15 AM EST
[ Parent ]
"Colony on the moon" promise during primaries.
Should have remembered that.

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sapere aude
by Number 6 on Fri Jan 11th, 2013 at 09:29:50 AM EST
[ Parent ]
I should think looks don't matter...

But this whole issue exists at a wonderous juncture of farce and satire on the one hand and current US law and politics on the other and is thus inherently an issue of drama and theater where appearance is of the essence.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:54:26 PM EST
[ Parent ]
And I like reclaiming the icon of The Boston Tea Party from modern day crazies.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:56:28 PM EST
[ Parent ]
However, I'd prefer it to be a minting of a few hundred $100b coins, with the President ordering the deposit of sufficient number on any Monday the debt ceiling is projected to be hit.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jan 15th, 2013 at 02:47:21 PM EST
[ Parent ]
Does anyone still remember coin operated gas/electric meters? (Before my time obviously.)

The President could put one of those smaller coins on a string and have a slot in the door at the Fed. (It's a specific building, right?)

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sapere aude

by Number 6 on Thu Jan 17th, 2013 at 10:44:18 AM EST
[ Parent ]
Except unlike one of those machines (or, more common here in the US, coin operated washer/driers in apartment buildings), its not the deposit of the coin that does the job, but the Fed having the coin in its possession. Pull on the string to retrieve the coin, and the treasury account reserves lose $1T.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Jan 19th, 2013 at 06:59:13 PM EST
[ Parent ]
Obama has a lot of work to do to educate the electorate - even many Dem voters - if the Trillion dollar coin becomes the popular solution to the problem.

Poll: Americans wary of $1 trillion coin proposal - The Hill's Blog Briefing Room

A plurality of Americans are skeptical of a proposal to bypass the federal debt ceiling by minting a $1 trillion dollar platinum coin, according to a new poll.

According to the survey by YouGov and The Huffington Post, 38 percent of voters disapprove of such a proposal. Only 19 percent say they believe the president should authorize the minting of such a coin, while 43 percent say they are not sure about the plan.

A loophole in federal law -- originally designed to allow for the manufacture of collectable coins -- appears to give the Treasury Secretary unchecked ability to mint platinum coins of any denomination. Under the scheme, the Treasury could mint a $1 trillion coin, deposit it at the Federal Reserve and continue paying bills despite exceeding the debt ceiling, all without congressional approval.

The idea has been picking up steam, with the country expected to hit the borrowing limit in about a month. But most Americans are still unaware of the idea, according to the poll.


More than half, 55 percent, said they've heard nothing at all about it. Only 7 percent say they have heard a lot about the idea, while just over a quarter say they have heard a little about the platinum coin scenario.

The White House has thus far refused to comment on the proposal, saying simply they believe it is Congress's responsibility to raise the debt ceiling.

"The president expects that Congress will fulfill its essential responsibility to pay the bills that Congress has incurred," White House press secretary Jay Carney said Tuesday. "And remember, this is a responsibility that Congress assigned to itself in order to try to get Congress to spend less and be more focused on deficit reduction. ... Congress has the power that it assigned itself to raise the debt ceiling, and it should do so, because the alternative is obviously unacceptable."

But the YouGov poll finds that voters do not necessarily agree with the White House. Of those surveyed, 41 percent say Congress should not raise the debt ceiling, while 32 percent believe their representatives should. Yet those surveyed are also wary of default. Instead, voters favor cutting federal spending by 40 percent 6-to-1 over defaulting on debt payments.

Voters are also wary of the consequences of a default, with 57 percent saying doing so would have a major negative effect on the economy, and 15 percent saying it would have some negative effect. Eight percent believed doing so would have some sort of positive influence on the economy.

My position is not that the Trillion $ coin is a popular solution, but that it will have positive results - which ultimately will result in the President's action being vindicated in retrospect. It's about the extent to which Obama has the courage and conviction to actually lead.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 04:53:05 PM EST
A plurality of Americans are skeptical of a proposal to bypass the federal debt ceiling by minting a $1 trillion dollar platinum coin, according to a new poll.

Are they, really?
But most Americans are still unaware of the idea, according to the poll.
More than half, 55 percent, said they've heard nothing at all about it.

No, they haven't heard of it.
by Katrin on Thu Jan 10th, 2013 at 05:01:15 PM EST
[ Parent ]
This is one of those fairly useless polls which asks people about something they know almost nothing about, and so their response is somewhat floundering as they struggle to fit the question into a preconceived conceptual frame.

This is one of those occasions where the President may have to just lead - and allow himself to be judged by the success of his action.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 05:40:07 PM EST
[ Parent ]
Of those surveyed, 41 percent say Congress should not raise the debt ceiling

Hasn't Congress already approved the current tax rates and all spending? And if they know arithmetic, they will know what the shortfall is?
So why is there a separate vote on saying "oh, and we realise we're short by this much, but we're good for it"?

"Debt" is a scary word. (Cue Carlin or someone.)


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sapere aude

by Number 6 on Fri Jan 11th, 2013 at 08:11:23 AM EST
[ Parent ]
Woodrow Wilson needed to reassure the public that American entry into WWI would be inexpensive.

The debt ceiling has always, since the very day it was cooked up, been a policy of bad faith.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 11th, 2013 at 11:02:51 AM EST
[ Parent ]
The US constitution was written on the assumption that the budget Congress approves is an authorization for a maximum, not a mandate to spend. Under such conditions a debt ceiling makes sense.
by oliver on Sun Jan 13th, 2013 at 04:14:58 AM EST
[ Parent ]
Interesting comment which I have not seen elsewhere. Is there any evidence to support this interpretation?

It seems to me, then, to be bad faith if Congress approves a budget with an inbuilt $1.3  deficit (2012) and then denies the President the means of funding it, and also denies him the discretion not to implement it fully. (The House is currently suing the President for not implement DOMA fully, and SCOTUS has also ruled that line item vetos of bills are unconstitutional i.e. partial implementation).

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 13th, 2013 at 05:04:08 AM EST
[ Parent ]
The US budget process involves separate "authorization" and "appropriation" steps. Every year, for every budget item.
In general, funds for federal government programs must be authorized by an "authorizing committee" through enactment of legislation. Then, through subsequent acts by Congress, budget authority is then appropriated by the Appropriations Committee of the House. In principle, committees with jurisdiction to authorize programs make policy decisions, while the Appropriations Committees decide on funding levels, limited to a program's authorized funding level, though the amount may be any amount less than the limit.

In practice, the separation between policy making and funding, and the division between appropriations and authorization activities are imperfect. Authorizations for many programs have long lapsed, yet still receive appropriated amounts. Other programs that are authorized receive no funds at all.[citation needed] In addition, policy language--that is legislative text changing permanent law--is included in appropriation measures.

I don't know whether that's a Constitutional requirement as Oliver implies.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 05:29:13 AM EST
[ Parent ]
The fact that the US "Budget" is not one coherent document and plan but a series of authorizations and appropriations certainly does not help the process. But as I understand it, if appropriations exceed revenues by $1.3 Trillion (and are known to do so) then the whole process is nonsensical - or in bad faith - if a funding mechanism (debt ceiling increase) is not also put in place - as was always the case until Obama got into power.

Otherwise the Republican congress can claim it authorized and appropriated for (say) medicaid, but Obama wouldn't implement it - and then sure him for not doing so. What if Obama (say) rather than cutting Medicaid cut military spending dramatically, withdrew from Afghanistan immediately, closed Guantanamo and all private prisons and let the prisoners go fee because there was nowhere to house them - do you think the House wouldn't impeach him? And yet he can claim they refused to fund those programs.

This could be fun. How quickly would the House cave on the debt ceiling then - or at least provide a specifically targeted funded mechanism for those expenditures?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 13th, 2013 at 05:57:23 AM EST
[ Parent ]
This is a state of affairs in place only since 1974 and put in place by this law:

http://uscode.house.gov/download/pls/02C17B.txt

The Supreme Court further complicated matters in Train vs. New York, reversing 170 years of previous practice. It kept in check Richard Nixon, but still it did violence to the original system as laid down in the constitution.

The overall result makes no sense.

by oliver on Sun Jan 13th, 2013 at 09:53:36 AM EST
[ Parent ]
The US Constitution was also written in the late 18th century. Are we to deduce from it that the gold standard is constitutionally mandated?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 05:34:18 AM EST
[ Parent ]
The US constitution merely states that the states must not introduce a fiat currency.
by oliver on Sun Jan 13th, 2013 at 10:05:58 AM EST
[ Parent ]
The US constitution was written on the assumption that the budget Congress approves is an authorization for a maximum, not a mandate to spend.

That is wrong, or at least irrelevant, per Nixon's experiment with unilaterally underspending.

Under such conditions a debt ceiling makes sense.

There's no constitutional basis for a debt ceiling. It was a purely symbolic act of Congress, to provide fake reassurance for the public that the first world war would be fought on the cheap.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 13th, 2013 at 07:31:36 AM EST
[ Parent ]
Yes, I was going to say that. What Congress has approved, the President must spend.

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sapere aude
by Number 6 on Mon Jan 14th, 2013 at 05:07:10 AM EST
[ Parent ]
But presumably the President can't spend money he hasn't got - so does NOT spending (say) all the military budget duly appropriated constitute a default?  Clearly if he didn't pay defense contractors, it could be construed as a default. But if he closed German military bases, Guantanamo, withdrew early from Afghanistan, didn't renew contracts for private prison operators and defense contractors etc. that is hardly a default as such - but would make Republican heads explode.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 14th, 2013 at 09:24:10 AM EST
[ Parent ]
Congressional Budget and Impoundment Control Act of 1974

[...] the President may propose to Congress that funds be rescinded. If both the Senate and the House of Representatives have not approved a rescission proposal (by passing legislation) within 45 days of continuous session, any funds being withheld must be made available for obligation. Congress is not required to vote on such a proposal and has ignored most Presidential requests. [...] The Act was passed in response to Congressional feelings that President Nixon was abusing his ability to impound the funding of programs he opposed, and effectively removed the historical Presidential power of impoundment.

I think you are correct: the president can make changes, but cannot deliberately "starve" programs he doesn't like.

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sapere aude

by Number 6 on Mon Jan 14th, 2013 at 09:35:13 AM EST
[ Parent ]
I'd like to see Republicans sue the President for (say) withdrawing early from Afghanistan or closing Guantanamo because he can't fund it and at the same time refuse him authority to borrow money to fund it...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 14th, 2013 at 09:39:59 AM EST
[ Parent ]
Change the question to, "Should the Congress raise the debt ceiling in order to comply with the 14th Amendment and maintain full faith and credit in US Treasury Securities?" and the numbers will be substantially different.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jan 15th, 2013 at 02:45:34 PM EST
[ Parent ]
Typical liberal, assuming the Constitution should apply past the 2nd Amendment. :)


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sapere aude
by Number 6 on Thu Jan 17th, 2013 at 10:45:54 AM EST
[ Parent ]
But I hold to it. While it is self evident that the right to bear arms to for militias to chase runaway slaves and put down slave rebellion is a critical civil right, I also hold firmly to the restrictions on quartering troops.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Jan 19th, 2013 at 07:01:32 PM EST
[ Parent ]


Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 19th, 2013 at 07:08:33 PM EST
[ Parent ]
This is one of those occasions where the President may have to just lead...

If only he would.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jan 12th, 2013 at 10:53:02 AM EST
[ Parent ]
Obama should borrow a page from Republican strategists and just act, leaving his opponents to analyze and react. But the action should be decisive. Don't just mint one coin, mint a run of them, perhaps a thousand. Then deposit enough of them at The Fed to fund all programs to which Republicans object for the next ten years, and then some. Then, during the State of the Union he could have some in his pocket and tell the nation that, if the Republicans want, he is prepared to pay off the national debt. He could jingle the coins in his pocket while noting that there is plenty of money available and more where that came from.

This would constitute a reassertion of sovereign independence on the part of the Government of the United States. He should also insist on using some of the deposited wealth to finance all federal election campaigns. Then freedom from Wall Street would be complete. He would only have to worry about the quality of his personal security detail.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:14:50 PM EST
So far the argument is that the Government cannot default on previous expenditure duly authorised by Congress. I think a lot of people - even on the left- would have a problem with Obama minting money to pay for expenses that haven't even been incurred yet.

But what would all the rich people who get interest for funding Govt. debt do if Obama simply paid them all off?

Where would they get their income from then?

What would they do with all the money they have accumulated? Heaven forbid that they should actually have to engage in entrepreneurial activity and invest in in productive assets.

Krugman and other economists talk a lot about the importance of managing inflation expectations. Expectations of inflation would skyrocket and general panic would ensue.

Hence my very specific proposal to fund a very specific and known past expenditure - on the Afghan and Iraqi wars. No one can deny it was a real and authorised (if unfunded) expenditure which has to be paid for.

Hence also my proposal that Obama propose a specific tax (Tobin, Carbon, Corporate) to pay for an ultimately buy back and smelt the coin.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 05:27:00 PM EST
[ Parent ]
Debts that have not been incurred yet...

Social Security, Medicare, Federal Retirement payments, etc. are debts which HAVE been incurred, not all of which are currently due. By minting a number of coins, which do not yet need to be deposited, all question of the ability to meet these obligations are answered.

But what would all the rich people who get interest for funding Govt. debt do if Obama simply paid them all off?

Perhaps they and their bought and paid for representatives in Congress should turn their 'minds' to that issue. It would be a 'Put up or shut up!' statement.

 

the importance of managing inflation expectations

But I believe that paying off the national debt would constitute a profound contraction of the money supply and thus deflationary. Federal stimulus would be what would be needed. Else Congress could behave sufficiently responsibly that they could be entrusted with a national debt in a time of historically low interest rates. Plus, it is about time some of these 'expectation' theories be put to the test.

Hence my very specific proposal to fund a very specific and known past expenditure

That would constitute paying off over two thirds of the national debt at present, but is quite acceptable to me as a start.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 06:10:10 PM EST
[ Parent ]
ARGeezer:

the importance of managing inflation expectations

But I believe that paying off the national debt would constitute a profound contraction of the money supply and thus deflationary. Federal stimulus would be what would be needed. Else Congress could behave sufficiently responsibly that they could be entrusted with a national debt in a time of historically low interest rates. Plus, it is about time some of these 'expectation' theories be put to the test.

I think one needs to break this down.

Today, the government creates money by paying, then borrows from banks that then borrow from central bank, resulting in a chain of debts going back to the central bank.

If coin(s) are minted and deposited with the central bank and then expenses are drawn from that, the thing that is removed is the chain of debts (and their associated interests). And that is only for the borrowing that otherwise would have been needed (current government bonds are not removed). Even if so many are deposited that their sum is larger then the current national debt all that means is that for the forseeable future there will be no new government bonds. This removes a subsidy to the banks in the same way as if the government borrowed directly from its central bank but has the added feature of removing the scary national debt.

This is deflationary in that expected government payout to banks over the next years will be lower, but only slightly so as the interest is very low and the banks are not very good at spending their money into the rest of the economy.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Jan 11th, 2013 at 07:10:08 AM EST
[ Parent ]
I agree, but supper was calling. :-) There could scarcely be a better time to eliminate the unnecessary hocus pocus step involving the public bond auction, along with the resulting savings from eliminating the bond interest, than when the Federal Reserve interest rate is at or near the zero bound. The current situation presents an auspicious conjunction of circumstances favoring such a move, if only we had a president who did not worship the ground upon which the wealthiest bankers walk.

 

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 11th, 2013 at 10:32:54 AM EST
[ Parent ]
Come, come ARG, everyone knows those guccis glide far above the common ground we peons navigate.
They know no such friction. Especially from regulators.  
;)

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Fri Jan 11th, 2013 at 10:48:11 AM EST
[ Parent ]
This is deflationary in that expected government payout to banks over the next years will be lower, but only slightly so as the interest is very low and the banks are not very good at spending their money into the rest of the economy.

Technically correct, but will be more than offset by having the reference interest rate at longer maturities drop to zero, which will mean that investments which were unprofitable on yesterday's interest rate will become profitable tomorrow.

And expanding the domestic capital plant is (shock, horror) inflationary (though only very slightly in the present state of demand).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 11th, 2013 at 11:07:38 AM EST
[ Parent ]
It would certainly be a boon to a project to construct windmills along the front range of the Rockies and a transmission infrastructure to tie them into both the Eastern and Western US grids. Texas also if they agree.

Undertaking any 'self liquidating' project that promoted the general welfare would be like printing money. Oh, wait....

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jan 12th, 2013 at 10:58:43 AM EST
[ Parent ]
So when up against the zero bound, the central bank needs to borrow directly to the state in order to further lower real interest rates?

Wean the banks of their government subsidies and force them to find private projects to finance!

(Then of course there is the option of having stimulus spending through the treasury.)

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Jan 13th, 2013 at 02:53:39 PM EST
[ Parent ]
Long version:
So when up against the zero bound, the central bank needs to borrow directly to the state in order to further lower real interest rates?

If you insist on using open market operations in government bonds to conduct your interest rate policy, yes. Then the CB will have to buy tsys until the interest rate on tsys drops to where the CB wants it to be. This is what QE does for you.

But the CB doesn't have to do this by buying and selling tsys (though if the CB actively refuses to treat tsys at least as well as private bonds, or to lend directly to the state on the same terms it offers private banks for rediscounting tsys, you will most likely have a constitutional crisis on your hands).

The CB can simply offer private banks the option to borrow at longer maturities against suitable collateral. This is what LTRO would do for you if it had not been a one-off event. And the CB can offer banks longer maturity deposit facilities. This is already routine in the Eurosystem.

What happens today is that the bank grants you a mortgage, and then it posts the mortgage as collateral with the CB for an overnight loan (neglecting the interbank market, which can be done without loss of generality under an interest rate targeting CB). Instead of this, the CB can offer to let the bank post the mortgage as collateral for a loan with the same maturity as the mortgage. Basically, the CB can offer the bank a fixed-rate loan, as opposed to the variable-rate loan it gets today.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 13th, 2013 at 03:18:09 PM EST
[ Parent ]
ARGeezer:
That would constitute paying off over two thirds of the national debt at present, but is quite acceptable to me as a start

My understanding is that the Afghan/Iraq/Pakistan wars have cost about 3-4 Trillion whereas total US debt is about $14 Trillion so we are talking, at max, of c. 25% of total debt.

A reasonable start IMO.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 11:11:11 AM EST
[ Parent ]
I didn't check the sums in question and probably included a top of the head estimate of the total of the current national debt added as a result of actions under Bush 43, which included debt resulting from authorized spending not covered by the tax cuts for the wealthy and the expenses incurred late in that administration and continuing into Obama's administration necessitated by the response to the GFC/GCF - the economic dump that was the outcome of the fecklessness that came to a head in the late summer of 2008.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 11th, 2013 at 12:49:43 PM EST
[ Parent ]
Call it the cost of following behind the elephant and cleaning up after it.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 11th, 2013 at 12:50:34 PM EST
[ Parent ]
I'm a bit of a self proclaimed expert on elephant dung having spent a little time tracking elephants in Tanzania/South Africa so I would suggest NOT cleaning it up! The problem with the Bush abuses is that they are now consolidated into one seamless National debt which the Republican are now trying to dump en masse on Obama. The beauty of the Trillion $ coin is that it re-fertilizes the dung heap and gives the Fed the task of recycling it among the "investor class".

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 01:21:17 PM EST
[ Parent ]
To me a deeper beauty is that, by merely getting the topic into general circulation sufficiently that those devoted to the 'money as a physical thing' have to engage in order to defend their beliefs, their minds are subtly poisoned by the very thought they are trying to suppress. If they have to attempt to make such a thing illegal they have already acknowledged its potential reality.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 11th, 2013 at 10:28:03 PM EST
[ Parent ]
Do these guys not have credit cards? Have they never seen a $10 bill consisting of a piece of paper  saying/claiming it is worth $10? And what is $10 anyway in itself? Cue angst ridden existentialist inquiry on Fox: Obama has stolen "our" money!

I am reminded of the Pharisees trying to compromise Jesus by asking him whether Jews should pay taxes to Caesar.  Taking a (Roman) Coin from his pocket Jesus asked "Who's head is on it? - you are only paying them with their own money"

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 06:02:52 AM EST
[ Parent ]
I think a lot of people - even on the left- would have a problem with Obama minting money to pay for expenses that haven't even been incurred yet.

Why? I thought he couldn't actually spend the money unless it was authorised by Congress.

by gk (gk (gk quattro due due sette @gmail.com)) on Fri Jan 11th, 2013 at 03:20:57 AM EST
[ Parent ]
Technically correct, but that is not how Republicans and the MSM would portray it. In practice the National Debt is the bogeyman they use to scare everyone off the idea off Government expenditure in the first place. It allows them to blame Democrats for spending even if they originally authorized it.  Remove the bogeyman and you scare the hell out of them that there is now no effective brake on BIG GOVERNMENT. The balance of powers between the Executive and Congress will have been shattered, and a constitutional crisis created. That is probably the (bogus) basis of any impeachment proceedings they would initiate.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 07:18:40 AM EST
[ Parent ]
Krugman and other economists talk a lot about the importance of managing inflation expectations. Expectations of inflation would skyrocket and general panic would ensue.

That's because Krugman subscribes to a built-to-fail modeling architecture, which means that he has to sweep its repeated empirical failures under the rug. Expectations and preferences form a very convenient rug to sweep empirical failure under, because they are inherently unobservable.

Whenever an economist says either of those words, you can bet your bottom dollar that he's trying to surgically remove some inconvenient empirical falsifiability from his theories.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 11th, 2013 at 04:04:20 AM EST
[ Parent ]
Don't just mint one coin, mint a run of them, perhaps a thousand.

Wouldn't it be simpler to mint one quadrillion coin?

by gk (gk (gk quattro due due sette @gmail.com)) on Fri Jan 11th, 2013 at 03:19:37 AM EST
[ Parent ]
As in the Dubya joke:
"-Three Brazilian soldier killed in Iraq today, sir.
-How many is a Brazillion?"

-----
sapere aude
by Number 6 on Fri Jan 11th, 2013 at 08:14:23 AM EST
[ Parent ]
It would be completely gratuitous to mint currency in a quantity greater than than the sum of all dollar based obligations and useful economic activity.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 11th, 2013 at 10:41:34 AM EST
[ Parent ]
Daily Kos :: News Community Action
Matt Yglesias argues that President Obama appears to be legally required to pursue the trillion dollar coin option in the event that Republicans refuse to raise the debt limit:
  1. Under the Congressional Budget and Impoundment Act of 1974 it's illegal for the president to spend less money than congress has appropriated--the Nixon administration had this idea that it could enact unilateral spending cuts, but it can't.
  2. Under the terms of the statutory debt ceiling, the president can't borrow extra money without congressional authorization.
  3. I don't believe there's a specific statutory prohibition on collecting taxes that congress hasn't authorized, but this principle is pretty literally the foundation of the entire fabric of common law.
  4. The Treasury Secretary can instruct the mint to create platinum coins of any denomination.
Given those facts, Yglesias concludes, the coin must be minted if Republicans refuse to raise the debt limit.


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 05:16:28 PM EST
Another argument that the Administration can make is that they are legally required, per the 14th Ammendment, to service the debt of the United States and that, given one previous petulant attempt by an ideologically driven Republican faction to unnecessarily force the US Government to default, which, in fact, did damage the credit rating of the nation, and given the potential for another, it does not appear that the Congress, as currently constituted, is sufficiently mature to be allowed the indulgence of a national debt, so, absent legally binding and sufficient remedies, he will be forced to pay off the national debt and operate on a mixture of tax revenues and seigniorage from the mint, the consequences of which are hard to predict, but one of which might be an increased need to tax the wealthy so as to insure the value of the currency.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:41:09 PM EST
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 05:45:03 PM EST
[ Parent ]
It is advantageous to speak in terms which have a close correspondence to actual practice if the aim is to clarify monetary matters. Of course that is the opposite of the aim of many.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:48:40 PM EST
[ Parent ]
Article 4 of the 14th Amendment:

 

4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 10th, 2013 at 05:46:15 PM EST
[ Parent ]
Thanks. I have been gradually adding links to diary to evidence the points made.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jan 10th, 2013 at 05:52:16 PM EST
[ Parent ]
The trillion dollar coin does not actually "pay off" the debt, it rather gives the Treasury additional reserves to operate without issuing additional debt.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jan 15th, 2013 at 02:54:04 PM EST
[ Parent ]
Mint the coin and be done with it.

And, no, Booman is not in line with establishment Democratic thinking.  Democratic leaders have endorsed avoiding default by any means necessary.

The markets will not be spooked.  Why do people continue to insist the markets will be spooked by Austrian idiocy when the evidence says otherwise?  People said the markets would be spooked if the European periphery didn't engage in outrageous budget-cutting.  Except that's what spooked the markets.  

What will spook the markets is allowing lunatics to throw us into default.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jan 10th, 2013 at 06:04:41 PM EST
Why do people continue to insist the markets will be spooked by a lack of Austrian idiocy when the evidence says otherwise?

FTFM.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jan 10th, 2013 at 06:07:20 PM EST
[ Parent ]
Austrians talking their book?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 11th, 2013 at 10:52:29 AM EST
[ Parent ]
Drew J Jones:
The markets will not be spooked.

As ever, the markets will not feel, indeed they are merely abstractions for a large number of trades, but they will be reported as being spooked when they are supposed to be spooked. And that is what matters in the theather that is politics.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Jan 11th, 2013 at 07:22:14 AM EST
[ Parent ]
The markets will not be spooked if the perceived alternative is an actual default. Obama just needs to bring "expectations" to that point.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 07:44:46 AM EST
[ Parent ]
And a trillion dollar coin is no small change.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Jan 11th, 2013 at 07:21:45 AM EST
The Audacity to Mint?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 07:39:53 AM EST
[ Parent ]
The Trillion dollar coin is fun because it makes the debt ceiling theather understandable to a large audience and robs it of its seriousness. That is why I am surprised it has come this far. If the administration would choose to play hard ball I would have guessed that the 14th amendment option of simply instructing the treasury to pay out the money and delaying issuing new government bonds would have been more appaeling to the apparent need of looking serious. Perhaps it is the reluctance to play hard ball at all and thus choosing a strategy for it that have pushed the administration into a position where potential hard ball strategy has been settled for them.

I don't think anything will happen though. Consistent with previous negotiations I think the administration will declare hard ball off the table before negotiations are finished with the House. And the compromise will include cutting important programs. I hope I am wrong.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Jan 11th, 2013 at 07:34:34 AM EST
If nothing else, the Trillion $ Coin option has the potential to serious f*ck with their minds and political expectations. If fear of inflation is a weapon they use to prevent "excessive" government expenditure, why not use fear of the "coin" to undermine their confidence in their own negotiating position on the debt ceiling?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 07:42:52 AM EST
[ Parent ]
Daily Kos :: News Community Action
Ryan Cooper at The Washington Monthly on the debt ceiling debate:
[President Obama] should absolutely refuse to even entertain the possibility of negotiations over raising the debt ceiling. Normalizing the idea of holding the economy hostage to extract unrelated policy concessions is a terrible development, and habit needs to be broken. [...]  if the president can't acknowledge the validity of the coin option, what is the point of working through the logistics and generally talking about it so much? The real danger of the coin option is the ignorance of the national media. As we've been finding out, many members of the press have primitive, pre-Enlightenment beliefs about money. They think the government is like a household, and don't consider the implications of fiat currency. Running the government on platinum seigniorage, even temporarily, would sound deeply strange, and you can bet Republicans would be howling bloody murder. The coverage would be key. If only we had panicked reports from the likes of Judson Berger blaming the president entirely for the situation, gabbling incoherently about hyperinflation and default, then we'd likely see a big backlash and possibly impeachment.

Therefore, hashing out the debate now is critical, to give the president the confidence he needs that the platinum option is a viable one and he won't be crucified for exercising it, so he can absolutely refuse to negotiate over the debt ceiling. I'd say Team Coin has done quite well in this task so far.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 08:23:50 AM EST
Have been wondering about where to start reading on MMT. Many thanks.

(Link at "Mondern Monetary theorists" seems to have become garbled.)


-----
sapere aude

by Number 6 on Fri Jan 11th, 2013 at 09:02:41 AM EST
You can try MMT Weekly as an aggregator.

Also, the collective blog New Economic Perspectives.

And the following personal blogs:

Lots of cross-fertilization among these sites as it's a small academic community.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Fri Jan 11th, 2013 at 09:32:11 AM EST
[ Parent ]
Thank you kindly. That should keep me occupied for weeks. :)


-----
sapere aude
by Number 6 on Fri Jan 11th, 2013 at 09:59:10 AM EST
[ Parent ]
I just thought of adding them to the blogroll...

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 03:34:29 AM EST
[ Parent ]
Done.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 03:45:23 AM EST
[ Parent ]
Thanks, fixed.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jan 11th, 2013 at 09:42:45 AM EST
[ Parent ]
Stephanie Kelton: What is it About Money that Scares the Bejesus Out of People? (New Economic Perspectives, January 9, 2013)
Anyone who writes about money (or for that matter debt or finance) knows what I'm about to say.  Money scares the bejesus out of people.

Paul Krugman wrote about this in a recent post, entitled Monetary Rage, where he described the emotionally-charged reactions he gets from readers when he ventures into the dark underworld of money.  As a young graduate student at MIT, Krugman was reportedly urged to avoid the money question at all costs (see here at 2:13), lest he be branded one of the unserious types.  My colleague Randy Wray tells a story about the reaction he got from Robert Heilbroner when he asked Heilbroner to review his book Understanding Modern Money.

Let me go back to 1997 when I was finishing up my book titled Understanding Modern Money and I sent the manuscript to Robert Heilbroner to see if he'd write a blurb for the jacket. He called me immediately to tell me he could not do it.

As nicely as he could, he said (in the most soothing voice), "Your book is about money--the most terrifying topic there is. And this book is going to scare the hell out of everybody."

I had a similar experience in a graduate macroeconomics class at Cambridge University.  Willem Buiter was busy lecturing on IS-LM theory, when I raised my hand and asked something about endogenous money (a question I'll admit was designed to challenge the underlying assumptions (loanable funds) in his model).  I'll never forget his response.  He said:
If you are the type of person who thinks money is important, you're probably the same type of person who would enjoy sitting in your basement and beating yourself with a rubber hose.
I obviously touched a nerve. The same kind of nerve Krugman occasionally touches and Heilbroner knew Randy would touch.  Just what is it about money that tends to evoke such a visceral reaction in people?


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 07:09:41 AM EST
See Booman exhibit some similar syptoms...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 07:19:48 AM EST
[ Parent ]
Rejecting the loanable funds fallacy causes every attempt ever made to reconcile Keynes with Walras to go down the toilet.

It's like telling a Born-Again Christian that Jesus never said he could have an assault rifle.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 12th, 2013 at 09:46:03 AM EST
[ Parent ]
Buiter:
If you are the type of person who thinks money is important, you're probably the same type of person who would enjoy sitting in your basement and beating yourself with a rubber hose.

Wow. (At several levels).

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 10:23:01 AM EST
[ Parent ]
Willem Buiter is a student of James Tobin and he beats himself with rubber hoses regularly.

Examples: The unfortunate uselessness of most `state of the art' academic monetary economics (March 3, 2009)

If one were to hold one's nose and agree to play with the New Classical or New Keynesian complete markets toolkit, it would soon become clear that any potentially policy-relevant model would be highly non-linear, and that the interaction of these non-linearities and uncertainty makes for deep conceptual and technical problems. Macroeconomists are brave, but not that brave.  So they took these non-linear stochastic dynamic general equilibrium models into the basement and beat them with a rubber hose until they behaved.  This was achieved by completely stripping the model of its non-linearities and by achieving the transsubstantiation of complex convolutions of random variables and non-linear mappings into well-behaved additive stochastic disturbances.
Can central banks go broke? (May 16, 2008)
Those of you with time on your hands and a interest in spending some it it in a basement being beaten with a rubber hose, may want to take a look at my recent Centre for Economic Policy Research Policy Insight No. 24, "Can Central Banks Go Broke?"
So, Buiter was telling Kelton "welcome to the rubber hose club" in that classroom at the LSE.


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 10:30:17 AM EST
[ Parent ]
Unfortunately he was also suggesting, in a room that had, almost certainly, a great preponderance of males, that she might be a willing target for sexual sadism.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jan 12th, 2013 at 11:07:23 AM EST
[ Parent ]
I suspect Buiter is referring to beating with a rubber hose as a torture method used to extract confessions by security forces in authoritarian regimes all over the world.

I wasn't aware of the BDSM connection, but that's a faux-pas in any case. Kelton, however, doesn't seem to mind as she happily refers the anecdote.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 12:53:13 PM EST
[ Parent ]
I took it as a torture reference, but the "other interpretation" seemed inevitable too. Good thing Kelton doesn't mind.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 02:38:20 PM EST
[ Parent ]
I've also seen the reference circulate as "people who worry about central banking are the kind that like to beat themselves in the back with a rubber hose". Again attributed to Buiter, who regularly writes about central banking.

All very self-deprecatinghosing ...

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 02:56:21 PM EST
[ Parent ]
I suspect Buiter is referring to beating with a rubber hose as a torture method used to extract confessions by security forces...

But the reference was to her being one of those who beat themselves with a rubber hose - a masochist. It could have reflected just how deeply he DID NOT want to seriously consider the topic - a sort of nuclear option for cutting off a line of discussion/inquiry. It would be interesting to ask her what she thought at the time.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jan 13th, 2013 at 01:11:49 AM EST
[ Parent ]
Yes, a fellow masochist
Those of you with time on your hands and a interest in spending some it it in a basement being beaten with a rubber hose, may want to take a look at my recent Centre for Economic Policy Research Policy Insight No. 24, "Can Central Banks Go Broke?"


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 05:26:39 AM EST
[ Parent ]
It could have reflected just how deeply he DID NOT want to seriously consider the topic - a sort of nuclear option for cutting off a line of discussion/inquiry.

Naturally, he was lecturing on IS/LM and there was this smartass grad student from the US trying to derail the discussion by questioning the axioms.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 05:33:22 AM EST
[ Parent ]
One has to wonder if Buiter was ever beaten with a rubber hose.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jan 12th, 2013 at 11:08:18 AM EST
[ Parent ]
Strange folk, economists.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 11:09:27 AM EST
[ Parent ]
I avoided economics in my "Economic and Social Studies" degree because I had difficulty making the sort of assumptions about rationality and utility which seemed to be the foundation stones of their theories and models. The fact that they were generally wheeled out like Priests to bless certain Government policies or private enterprise practices may also have had something to do with it.

It never dawned on me that they might also have had a BDSM section in the basement. But then I was young and foolish and believed in human rights and the uniqueness of every person. It took a long time to beat that out of me...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 12:03:52 PM EST
[ Parent ]
...with a rubber hose?
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 02:39:05 PM EST
[ Parent ]
In a basement.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Jan 12th, 2013 at 02:47:02 PM EST
[ Parent ]
I think it is the power. Once you realise that money is created out of thin air to claim power over people and things, backed up by the armed goons of the state, then economics becomes a question of power distribution. People get high salaries because they wield power, this can come in the form of having a rare enough ability, but mostly it is just the old monkey hierarchies that show. Those that by government fiat get to create money gains power over those who do not. Etc.

Makes the invisble hand and self-structuring markets rather silly. So it must be shunned.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Jan 12th, 2013 at 02:15:40 PM EST
[ Parent ]
From Ezra Klein:

Treasury: We won't mint a platinum coin to sidestep the debt ceiling

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That's the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. "Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit," he said.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 04:05:38 PM EST
Treasury Rules Out Trillion Dollar Platinum Coin - Business Insider
Via Email, coin supporter Paul Krugman gives his take: "So, are they planning moral obligation coupons / scrip, are they willing to court disaster, or are they just hopeless negotiators? I guess we'll find out."
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jan 12th, 2013 at 04:16:27 PM EST
[ Parent ]
How about two half-trillion coins?
by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 12th, 2013 at 07:11:59 PM EST
[ Parent ]
This leaves out the worrying option: is he doing that because he wants to cave in?
Obama is not a liberal. He may actually want to promote a right-wing agenda, while keeping some pretense as he's just been re-elected.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sun Jan 13th, 2013 at 03:20:11 AM EST
[ Parent ]
Treasury: We won't mint a platinum coin to sidestep the debt ceiling
The administration's position is that raising the debt limit is Congress's responsibility until the day that Congress votes to make it the White House's responsibility, which is a resolution the Obama administration would happily accept. Until then, White House officials say, they will not negotiate over the debt ceiling, and if congressional Republicans attempt to use it as leverage, then the consequences will be theirs to bear. As White HOuse Press Secretary Jay Carney put it, "there are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default,."

The positive is that they also rule out negotiation.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Jan 13th, 2013 at 06:40:30 AM EST
[ Parent ]
Yes -hopefully. But they have similarly ruled things out in the recent past, only to change later.
So we'll see. I'm just suggesting that it is a possibility that Obama is not as bad a negotiator as we may think, and that he ends up with what he actually wanted. Not being in his head, I can't know for sure.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sun Jan 13th, 2013 at 08:43:18 AM EST
[ Parent ]
Or because he has polls that say that the public will blame the Republicans in Congress more than it will blame the White House for such brinkmanship and for the mandatory cuts that come into effect as the result of such brinkmanship.

Those cuts may well be considered acceptable collateral damage for excluding the Republic Party from politics for a generation.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 13th, 2013 at 07:38:44 AM EST
[ Parent ]
See below.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Jan 13th, 2013 at 12:43:04 PM EST
[ Parent ]
Treasury: We won't mint a platinum coin to sidestep the debt ceiling

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That's the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. "Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit," he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don't believe it's legal and would not credit the Treasury Department's deposit, the platinum coin would be worthless. 

The idea of minting a platinum coin to invalidate the debt ceiling comes from a few key sentences tacked onto the 1997 Omnibus Consolidated Appropriations Act. "Notwithstanding any other provision of law," it reads, "the Secretary of the Treasury may mint and issue platinum coins in such quantity and of such variety as the Secretary determines to be appropriate."

---snip---

The platinum coin idea gained some powerful adherents during the debt-ceiling crisis of 2011, but it really developed traction following the 2012 fiscal cliff deal, as politicians and economics writers realized that the country would, indeed, be facing another debt-ceiling crisis in a matter of months. A Twitter campaign by Joe Weisenthal, of Business Insider, and Josh Barro, of Bloomberg View, forced it into the conversation, and subsequent endorsements by Rep. Jerry Nadler (D-NY), Nobel Prize-winning economist Paul Krugman and former U.S. Mint director Philip Diehl gave it further legitimacy.

But others, including myself, worried that the coin would be seen as an unprecedented power grab by the president, leading to a far more bitter standoff over the debt ceiling, a possible panic in the financial markets and a showdown in the courts. There was also the simple fact that it would, indeed, represent an admission that the government's executive and legislative branches could no longer be trusted to come together and effectively manage the country's finances.

Nevertheless, many top Democrats believed that the White House needed some kind of fallback option. Former president Bill Clinton said that if he were in office, he would invoke the 14th Amendment to call the debt ceiling unconstitutional "without hesitation, and force the courts to stop me."

On Friday, Senate Majority Leader Harry Reid and his leadership team sent President Obama a letter urging him to "to take any lawful steps to ensure that America does not break its promises and trigger a global crisis -- without congressional approval, if necessary."

In response, Senate Minority Leader Mitch McConnell released a statement saying that to avoid the debt ceiling, "Democrats are looking at everything from the ridiculous (printing a trillion-dollar coin) to outright abdication of Congressional responsibility. But avoiding this problem will only make it worse."

The White House seems to agree. This is, in fact, the second time that the Obama administration has ruled out a possible end run on the debt ceiling. In December, Press Secretary Jay Carney said, "This administration does not believe the 14th Amendment gives the president the power to ignore the debt ceiling -- period."

The administration's position is that raising the debt limit is Congress's responsibility until the day that Congress votes to make it the White House's responsibility, which is a resolution the Obama administration would happily accept. Until then, White House officials say, they will not negotiate over the debt ceiling, and if congressional Republicans attempt to use it as leverage, then the consequences will be theirs to bear.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 12th, 2013 at 05:05:04 PM EST
Unless Obama plans on just letting the country default it looks like he is giving up. I have trouble believing he will not cave if the Republicans won't give in. I would personally prefer default to a cave in. What would be hurt the most is the financial sector. Perhaps he is relying on them to bring the Tea Party faction to heel.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jan 13th, 2013 at 01:17:17 AM EST
[ Parent ]
[ET Moderation Technology™]

Frank - I posted this just above with a link so people could go and read it. We should avoid posting long excerpts of copyright material.

A reminder to all posters...

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Jan 13th, 2013 at 02:35:03 AM EST
[ Parent ]
OK. Irish newspapers are even trying to charge for links to their material even though the actual link does not copy any copyright material, merely points to it. Talk about shooting yourself in the foot...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 13th, 2013 at 05:17:25 AM EST
[ Parent ]
Billmon has a good argument for why the President may not want to go down the Coin route as it would let the GOP off the default hook. Unfortunately it does keep the economy on the hook.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 13th, 2013 at 05:20:14 AM EST
If Obama mints the coin, the Republicans can instantly switch (they're incredibly good at this) from threatening financial chaos to ferociously demagoguing the prevention of that chaos--in a way that the 99.9 percent of the American people who aren't constitutional lawyers or financial economists can easily understand.

We've already gotten a pretty good taste of their material: Like the National Republican Congressional Committee's brilliant argument that the weight of a $1 trillion coin would sink the Titanic.

I said brilliant and I meant it. As a monetary concept, the idea that a $1 trillion coin has to contain $1 trillion worth of precious metal may be so freaking stupid it makes Glenn Beck look like Milton Friedman. But, as a political talking point for the cable news viewing masses--the teabagger masses in particular--it's right on target: simple, intuitively obvious, and hard to refute without using words like "seignorage." It even comes with its own funny graphic.

Yeah, the public can't get their heads around money.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 05:40:16 AM EST
[ Parent ]
Why should they?  Tens of millions of dollars have been spent, at the academic and popular levels, to obscure and obfuscate what money is and how it works; something, when one gets down to it, really isn't all that hard to understand.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Sun Jan 13th, 2013 at 11:48:20 AM EST
[ Parent ]
Money, mechanically, is easy to understand as a construct, but that is in our day a simple theoretical construct with little meaning.

Money, metaphysically and epistemologically speaking, is far more interesting, given the fetishism built up round money.

Look at the Germans, monetary animists...we are still in pre-socratic turn times when it comes to them, creators of the virtual gold standard (the one they fetishize from the early 20's when they found their miracle Mark...German economics of course being stuck in a pre-Hitler time warp...and don't even get me started on real gold bugs in the US and the UK...)

The interesting things to discover are in the fetishes...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Sun Jan 13th, 2013 at 12:33:00 PM EST
[ Parent ]
By George - NYTimes.com
I get calls. The White House insists that it is absolutely, positively not going to cave or indeed even negotiate over the debt ceiling -- that it rejected the coin option as a gesture of strength, as a way to put the onus for avoiding default entirely on the GOP.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Jan 13th, 2013 at 12:41:27 PM EST
[ Parent ]
The Fed Killed Trillion-Dollar Coin
it was the Federal Reserve that killed the proposal, the official told BuzzFeed, denying a purely political rationale for the announcement, saying the independent central bank would not have credited the Treasury's accounts for the vast sum for depositing the coin.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Jan 13th, 2013 at 01:10:15 PM EST
[ Parent ]
If Obama follows the course described by Billmon I will be very happy - regardless of the consequences - even if he just lets it burn. The damage to the financial sector will be sufficient that hits (hyperbole alert) may be put out on all who had a hand in creating the Tea Party from the Koch brothers and Dick Armey to US Representatives - gladly funded by 0.01%ers. And, presuming they back down, the damage done to the batshit wing of the Republican party and the whole party itself will be serious. The Tea Party House Members will discredit themselves with their base.

I just have a hard time seeing Obama do this, given his previous history as POTUS. He has always found a way to turn a strong position into an outcome that only favors large political contributors, but, in this case, forcing the House to be responsible favors large political contributors and letting the Tea Party Caucus self immolate will be close to a US version of The Night Of The Long Knives, with the crucial difference that the guy the Brown Shirts supported is not in charge. If the Tea Party Caucus buries their swords point up and falls on them just let them bleed out. Don't be in a hurry to dial 911.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jan 14th, 2013 at 01:30:16 AM EST
[ Parent ]
One aspect of this that is not being discussed is what would happen if other nations around the world began doing this as well. What are the implications of that? What if every country in the world just began printing up coins and cash in any amounts? A related question is how would the rest of the world react to the US doing this? Would this encourage people (ie, investors) around the world to have more faith in the ability of the US government to manage the world's reserve currency or less faith? Would people conclude that this indicated that the US is seriously dealing with its economic and financial problems or that it is just attempting to paper over the problems?
by mikep on Sun Jan 13th, 2013 at 02:33:19 PM EST
All countries that use their own currency already prints the money the government needs. The difference here would be that the task to do so would be moved from the central bank to the treasury.

With trillion currency coins all that would happen compared to today's method is that:
a) banks would not get the subsidy they are used to
b) the national debt measurement would go away
c) the reference interest rate at longer maturities would drop to zero

And there would be some power reshuffling between different institutions within the states. Which is what we are seeing in the US today.

Can't see how it would affect the dollars status as reserve currency.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Jan 13th, 2013 at 02:46:01 PM EST
[ Parent ]
One aspect of this that is not being discussed is what would happen if other nations around the world began doing this as well.

The only countries in the world which are not doing it are the Eurozone countries. And we know how well that works.

What if every country in the world just began printing up coins and cash in any amounts?

Then it would suck to be a bondholder. My heart bleeds.

A related question is how would the rest of the world react to the US doing this?

With relief.

Would this encourage people (ie, investors) around the world to have more faith in the ability of the US government to manage the world's reserve currency or less faith?

Fuck the "investors." If your economic policy requires "investor confidence," then You're Doing It Wrong.

Would people conclude that this indicated that the US is seriously dealing with its economic and financial problems or that it is just attempting to paper over the problems?

The US has no financial problems.

And since the debt ceiling is a prima facie bad-faith policy which is being used to obstruct any serious attempt to deal with America's economic problems, it is difficult to imagine that scrubbing it altogether would impact negatively on any reality-based forecasts.

Also, fuck what the "investors" think. "Investors" exist to serve the government's macroeconomic planning, not the other way around.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 13th, 2013 at 03:16:38 PM EST
[ Parent ]
In the case of the US, 'investors' are in serious need of some real serious taxes on their wealth, the results of which should be used, via sane fiscal policy, to get the economy out of the toilet and begin to put in place infrastructure that can allow the population to survive the rest of the 21st century. We can still make things much better than they will be if we continue the course we are following.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jan 14th, 2013 at 01:36:20 AM EST
[ Parent ]
And absent serious Tobin and other taxes on wealth, the next best thing is inflation and currency devaluation to reduce their wealth relative to the poor and middle class. Keeping the money supply high, and interest rates low are thus key par of any progressive strategy.

The difficulty is that the Fed is run by private banks for their own benefit. Hence, part of the beauty of the coin strategy was to remove the Fed's monopoly on money creation. If I am understanding MMT correctly, Governments shouldn't be borrowing at all - but creating money ex nihilo to fund thir programs. Those who don't like the long run inflationary implications of this can always approve taxes/interest rates to reduce the money supply in the economy more generally at times of growth

It makes no sense to me that the Government should be paying interest on its own money.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 14th, 2013 at 09:35:28 AM EST
[ Parent ]
Governments shouldn't be borrowing at all - but creating money ex nihilo to fund thir programs

In an MMT framework, government debt plays a role in providing the private sector with a menu of assets to distribute their savings. But, yes, interest on government debt does constitute a subsidy:

It makes no sense to me that the Government should be paying interest on its own money.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Mon Jan 14th, 2013 at 09:40:09 AM EST
[ Parent ]
That's because government is the executive and legislative branch of the investor class, not vice versa.

This is political reality btw, not drive-by cynicism. Just ask Greece and Spain.

Government that isn't by investors for investors would look rather different.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jan 14th, 2013 at 10:44:23 AM EST
[ Parent ]
Krugman blog: So What Will You Do, Mr. President? (January 12, 2013)
If I'd spent the past five years living in a monastery or something, I would take the Treasury Department's declaration that the coin option is out as a sign that there's some other plan ready to go. Maybe 14th Amendment, maybe moral obligation coupons or some other form of scrip, something.

...

The thing is, the coin option sounds silly, but it clearly obeys the letter of the law. As far as I can tell, none of the other options -- other than outright surrender -- has the same virtue. Failing to pay debt service would be a breach of contract. Paying contractors, and maybe Social Security recipients, in scrip would violate the law, which says that they should be paid -- not given IOUs. Deciding that the president has the right to ignore the debt limit after all would avoid these legal breaches at the expense of another breach.

...

As I said, if we didn't have some history here I might be confident that the administration knows what it's doing. But we do have that history, and you have to fear the worst.



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 03:31:10 PM EST
Tim Duy: On The Disruptiveness of the Platinum Coin (January 12, 2013)
Apparently fiscal and monetary cooperation is alive and well - the US Treasury and the Federal Reserve conspired to kill the platnium coin idea.  In retrospect, we should have seen this coming.  As the debate continued, it became increasingly evident that the platinum coin threatened the conventional wisdom in very deep and profound ways.   It was a threat that could not be endured by Washington.

...

And then we come to the platinum coin, which threatened to expose the illusion that cash and debt are different at the zero bound.  By extension, the platinum coin threatened to expose as folly any near-term deficit reduction plan.  If you could issue a coin to support near term spending without inflationary consequences, what exactly is the rational for tighter policy now?  There is none - but that would run directly contrary to the conventional wisdom among Very Serious People on both sides of the aisle that the debt needs to be addressed right now.  

...

Ip argues that interest on reserves gives the Fed the power to control interest rates, and consequently the power to control inflation, regardless of the size of the balance sheet.  If you follow Ip's analysis through to its logical conclusion, then why should the Treasury issue debt at all?  Why not just issue platinum coins? Could cash and government debt combine to serve the same functions together that they serve separately?  Consider the disruptiveness of that outcome to the status quo.  



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 03:40:15 PM EST
Treasury securities are not required to finance spending, they are required to drain reserves. At present, the Fed holds ample Treasury securities for any forseeable needs to drain reserves from the system, so additional Treasury debt is redundant to our needs at this point in time.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jan 15th, 2013 at 02:57:22 PM EST
[ Parent ]
And if you pay a support rate on excess reserves, not even that.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 17th, 2013 at 04:11:40 PM EST
[ Parent ]
A support rate on excess reserves may reduce the amount of reserves that must be drained from or injected into the system, but that would affect the quantity of Treasury securities required, rather than whether they are required. The Panic of 2008 highlighted why we shouldn't have the bulk of a reserve bank balance sheet made up of private financial assets subject to default.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Jan 19th, 2013 at 06:56:53 PM EST
[ Parent ]
... the panic of 2007/8 demonstrated (again) that the CB is going to end up holding the bag for private sector defaults anyway. The only difference between using open market operations and using rediscounts is that in the latter case the CB gets to be in the loop from the day the loan is made, rather than coming in two years late and a tn dollars short.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 19th, 2013 at 07:05:40 PM EST
[ Parent ]
Krugman blog: Lazy Jon Stewart (January 12, 2013)
So, yeah, as Chait says, Stewart seems weirdly unaware that there's more to fiscal policy than balancing the budget. But in this case he also seems unaware that the president can't just decide unilaterally to spend 40 percent less; he's constitutionally obliged to spend what the law tells him to spend. True, he's also constitutionally prohibited from borrowing more if Congress says he can't -- which is a contradiction. But that's the whole point of the discussion.

...

Above all, however, what went wrong here is a lack of professionalism on the part of Stewart and his staff. Yes, it's a comedy show -- but the jokes are supposed to be (and usually are) knowing jokes, which are funny and powerful precisely because the Daily Show people have done their homework and understand the real issues better than the alleged leaders spouting nonsense. In this case, however, it's obvious that nobody at TDS spent even a few minutes researching the topic. It was just yuk-yuk-yuk they're talking about a trillion-dollar con hahaha.

Hey, if we want this kind of intellectual laziness, we can just tune in to Fox.

Ouch.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Jan 13th, 2013 at 04:19:09 PM EST
Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com

Martin Wolf has a piece in today's FT making the case that (shock!) the deficit is not America's biggest problem, or indeed a problem at all right now. His case is pretty much the same one I've been making; also, unlike Larry Summers yesterday, his piece doesn't blur its point by starting with an extended exercise in dutiful deficit-bashing.

Wolf also puts this in the context of what has been happening to the private sector. As he says, the collapse of the housing bubble and a sharp rise in saving (due both to wealth destruction and to deleveraging) has led to a sharp movement from financial deficit to financial surplus in the private sector. Those who claim to be deeply upset about public sector deficits should be asked, what would have happened, given this attempt by the private sector to move into surplus, if the public sector had tried to stay in balance. Can you say Second Great Depression?



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jan 23rd, 2013 at 11:53:24 AM EST

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