There seem to be two kinds of objections. One is that it would be undignified. Here’s how to think about that....The professor is about to teach us how to think. Get ready!
... 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.Okay. A hypothetical. I'm up for hypotheticals. And it's an analogy, because the trillion-dollar-coin thing isn't promoted as a solution to terrorism. But terrorism is something that you can picture quite concretely and you understand it as very real and scary — unlike the debt ceiling problem which is awfully abstract. (Even to say "ceiling" is to resort to metaphor.)
So, anyway:
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).In this hypothetical, you have to accept that the Secret Service has found "a way." It will work. The professor is telling you how to think, so you're going off track if you want an explanation for why that would work or if you — much more likely — would be thinking what the hell is going on in this country when the people in charge are figuring out solutions involving clown suits and believing that clown-suit solutions work? Krugman reveals that he knows his hypothetical is horribly flawed, and he tries to paper it over by confessing to second-rate "plotting skills." There has to be some way to work this it. The professor is teaching us how to think — use this analogy — but he can't piece together the hypothetical. How's that supposed to help us think?
He continues:
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?Wait. The normal people who go with the working theory that the government has gone mad are "nervous Nellies"? Yes, because Krugman's hypothetical locks it in that the solution works. So the people aren't supposed to be thinking that sounds crazy. It's posited that they know it will work, so all they can realistically be concerned with is that the secretary will look undignified dressed like a clown.
Krugman turns to the second objection, as if it's unconnected to the first one:
The other objection is the apparently primordial fear that mocking the monetary gods will bring terrible retribution.Why weren't the people who say it looks crazy credited with having some fear that it wouldn't work? Because in the clown-suit hypothetical it was posited that it would work? These "nervous Nellies" were mocked in Part I of Krugman's krushing of all adversaries. In Part II, we see troglodytes who imagine a "god" who will punish us for doing something wrong.
What the hysterics see is a terrible, outrageous attempt to pay the government’s bills out of thin air. This is utterly wrong, and in fact is wrong on two levels.So it's a trick, but it's not that different from other tricks. It's just weirder looking. Like a clown suit. Which gets back to the point I made when I criticized Krugman a couple days ago:
The first level is that in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised....
It's strange that it's come to this, but I don't believe the President of the United States would choose to do something that will strike the people as so bizarre, even if he feels capable of articulating the legal theory with a straight face. The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks.Krugman's response to these ordinary folks — the people upon whom the President's power depends — is: They're hysterical and ill-informed. Well, how did this President — how does any President — get elected in the first place? It was by generating confidence. He's a con man. Let's say the management of the national debt has been a lot of trickery for a long, long time. What then does it matter if we do something that is quite obviously a trick, that everyone will see as a trick?
Does the trick work if the magician points to the hand that's doing the sleight?
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241 comments:
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...and so they must be ignored, then concentrated into re-education centers, and then, if necessary, killed.
I think it would be the ultimate act of honesty to dress the Secretary of the Treasury in a clown costume. I have no objection to that at all.
And he, an economist.
Underpants are involved somehow.
I doubt the clown costume would be any less effective than the trillion dollar coin. Maybe we could get one for the President as well.
If the premise like here is that it will work, I now understand Krugman's insistance that the trillion dollar stimulus package was too small.
In the face of failure, rational people might examine their premise, others insist on doing the same thing bigger, harder.
Krugman's consistent, but no thinker. That's for sure.
Let's say the management of the national debt has been a lot of trickery for a long long time.
Good to say it...because it is true.
We tell ourselves that we can loan ourself $20 from our left pocket for the right pocket and thus have $40. And it's true...until you spend the first penny of the right pocket's borrowed money triggering a call by the left pocket for redemption of the IOU it has if their new money flow is interrupted. So long as the left pocket has new money to loan out the 2:1 charade can continue. Until it doesn't.
Apparently the objection that the trillion dollar shilling would be a wholesale usurpation of powers by the executive didn't reach Krugman's desk.
What if the Congress objects to the power grab and thereafter refuses to fund secret service clown suits?
There are two ways to keep spending.
1. Borrow the money. The debt limit prevents that.
2. Print the money. Nothing prevents this.
Krugman's coin amounts to number two.
The Fed could do it anyway, but I guess the Fed is not up for it. The coin gets around the negative vote fo the Fed, a vote probably based on inflation risks.
There's a difference that Krugman isn't thinking of, namely that borrowing is not inflationary (the money comes out of somebody's hands before the government helicopter-drops it on somebody else's hands), and printing money is inflationary (both somebodys wind up with the money at once).
It's time to have a national conversation about Krugman's mental illness.
I think people in general forget (or perhaps many never knew?) that the "con" in "con man" is short for "confidence" and that, likewise, "a con" as in "it's a con" is shorthand for "confidence scheme" or "confidence game." It's a pity and a dangerous thing.
When the debt limit is reached, Obama will maximize the damage as a PR move, say actually defaulting on US debt, rather than telling the energy department to go on unpaid leave.
There's plenty of money coming in to pay the actual US debt, but Obama will want a another crisis.
Krugman is showing off.
He knows that our money is our defense against the chaos of an inter-empire breakdown in authority as the old empire is destroyed and the new empire is put into place and we adjust to its rules.
So going for our money is going for our jugular 10 times worse than going for our guns.
Obama is using his creepy frog cooking talent of slowly removing the value in our US Dollar money as he slowly removes parts of our guns and parts of our ammo.
Can you imagine if they would have put this dummy in as Secretary of the Treasury? His recent articles make it clear he would rather masterbate in public for his fans than be responsible for any of his "ideas" in the real world. Wotta maroon.
Wrath of the "monetary gods"???
Has he not HEARD of inflation and hyper-inflation. Pre-Nazi Germany? Modern Zimbabwe?
I guess if the clown nose fits...
Does the trick work if the magician points to the hand that's doing the sleight?
While there are a subset of people who like to watch a magician in order to spot the sleight, I'd bet that many more willingly suspend the skepticism in order to relax and let the show go on. Ooh! Ah!
Alas, I think the metaphor/analogy carries on... .
Nobel Laureate Paul "Alien Invasion" Krugman!
I think I can help Krugman with his analogy, though to my way of thinking the clown suit, while appropriate, is incidental.
OK, we have a terrorist with a bomb in a building threatening to kill a bunch of people. Obviously, we can foil the terrorist by shooting a missile into the building, thereby killing everyone in there before the terrorist has a chance to act. So problem solved. We have kept the terrorist from killing anybody.
How apt is the analogy? Krugman believes the fiscal impasse in Congress will put the economy at risk. To solve that, he wants to destroy the economy first, before Congress can do its thing. A Hell of an idea.
If minting a trillion dollar coin is such a great idea, why not mint 100 of them to cover the next year or so of Obama's spending?
Now regarding the clown suit.
If the platinum coin loophole allowed the Treasury Department to print a bill of any denomination as opposed to a coin, they actually could print a clown suit.
Why not? It's just a fiction.
"The first level is that in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised...."
So those engaging in a fictional exercise while pretending that it has made a difference are coldly calculating rationalists. Whereas the people objecting to an unabashedly fictional solution and are ignorant savages cringing in superstitious fear.
Ah, I think I see why Krugman had trouble coming up with a decent analogy.
Get this man some entrail shorts, pronto!
What Krugman calls a trick, he would have surely called a 'lawless banana republic' tactic if something so underhanded was attempted un Bush or any other GOP president.
But of course it's an accounting trick or fiction if you like. Krugman et al have clearly come to the conclusion that government money or debt isn't real, so lets stop pretending it is. Its as close to putting on paper what they honestly believe as we're likely to get. Now if they would simply follow the logic of that into realizing that, in such a world, tax revenue is also irrelevant and should therefore stop being raised, the rest of us cold get back to living in the real world where we'd much prefer to be if the government could mostly stay out of the way.
No time to explain! (Image)
I'm on board with Krugman's idea... as long as they don't guard any of our precious little coins... with guns.
MWAHAHAHAHAHA
MWAHAHAHAHAHA
MWAHAHAHAHAHA!!!
rhhardin said...
There are two ways to keep spending.
1. Borrow the money. The debt limit prevents that.
2. Print the money. Nothing prevents this.
What debt ceiling? It was breeched last week and were still borrowing and spending. We borrow from ourselves and print the money to enable it. 1 & 2 methods are thus joined in glorious collective harmony. See may left pocket - right pocket analogy.
When the debt limit is acknowledged, Obama will maximize the damage as a PR move,...
I agree...with the change I made to the statement...Obama will adhere to Cloward-Piven and create a crisis...actually an "additional" crisis. It is his style.
I think the real objection is less that "it will not work" than "it will have material consequences including inflation making it a bad choice. This seems to be what you're getting at, but the specificity makes it even clearer Krugman is avoiding the substance of the criticism just as he laways does.
so what he is saying is that income taxes are completely unnecessary.
All government officials should be required to wear clown costumes whenever they are on duty.
I find it quite sad that this post and discussion is so RAAACIST. Shame shame shame, feel guilty and repent.
Pettifogger said ...
How apt is the analogy? Krugman believes the fiscal impasse in Congress will put the economy at risk. To solve that, he wants to destroy the economy first, before Congress can do its thing
Perfectly apt. Krugman's theory is Cloward-Piven in action.
I think Tuco would find a way to steal that coin.
Has he not HEARD of inflation and hyper-inflation
The trillion dollar coin wouldn't be spent in the economy, so I'm not sure what makes it inflationary.
I'm flabbergasted that he's strawmanning to get past the real objection. I dont' think anyone cares about indignity as much as the fact that such a stunt doesn't solve the actual fiscal problem. That's the real issue here. But of course, talking about trillion dollar coins and clown suits is a nice distraction from that (*rolls eyes*).
Isn't this just the academic version of "the end justifies the means" argument?
I'm not sure I understand exactly how this is supposed to work. The Constitution is pretty clear on Congress controlling the finances, and they covered their bases pretty well:
All Bills for raising Revenue shall originate in the House of Representatives
. . .
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises;
To borrow Money on the credit of the United States;
. . .
To coin Money, regulate the Value thereof
Did Congress at some point in the past give the executive a blanket authorization to coin as much money as he wants, in whatever values he wants?
Wow. Krugman sure likes to prove he is brain damaged.
"Krugman Syndrome": an acquired neuropsychiatric disorder with onset in liberal conversion, characterized by multiple physical (motor) tics and vocal (phonic) tics. These tics characteristically wax and wane, can be suppressed temporarily, and are preceded by a premonitory leg tingle.
Echolalia (repeating the words of others), palilalia (repeating one's own words), and mythomania (pathological lying) occur in the majority of cases, while the most common initial motor tics are, respectively, eye blinking, throat clearing, and peeing down their leg.
The trillion dollar coin wouldn't be spent in the economy, so I'm not sure what makes it inflationary.
It produces a book balance that the government then spends in the economy without withdrawing funds from circulation elsewhere.
therefore raising the debt limit is a trick too...
Re: garage:
The trillion dollar coin wouldn't be spent in the economy, so I'm not sure what makes it inflationary.
The whole point is that you'd use the trillion dollar coin to pay the mounting debts of the United States. What do you mean it wouldn't be spent in the economy? It still gets added to the money supply, unlike ordinary public debt which, as I understand it, just uses money currently in the money supply (exchanged by investors for treasuries).
I'm sorry to have to say this Ann,
But your failure to fully comprehend a very clear explanation of a simple idea by a top economist shows a "Shocking lack of sophistication"
Krugman is trying to sound smart and talking down to people at the same time.
He gives a scenario that is, well, stupid. No real logic to it.
So how in the hell did he ever get a Nobel prize?
About all a trillion dollar coin will do is destroy anyone's fixed annuity value by inflation. We would be in the Weimar Republics position in 1920 (and yes, they printed money like crazy to pay the debts to other nations imposed on them by the WW1 treaty.
And you know how THAT went.
So what is Krugman doing? Pushing for another Hitler? After all, being a socialist, he does lean that way. Hitler's party was the NATIONAL SOCIALIST PARTY.. i.e. NAZI.
Remind me again why we're supposed to take this guy seriously.
The Blonde's youngest nephew at about age 5 understood economics better than he does.
garage mahal said: "The trillion dollar coin wouldn't be spent in the economy, so I'm not sure what makes it inflationary."
Of course it's spent in the economy. It's intended to fund government expenditures. Otherwise, it would be a frivolous exercise.
Plus it's an idea that I would expect to catch on all across the globe.
Pretty soon all the popular nations will be printing trillion *_____* platinum coins. I'm guessing even North Korea has enough platinum to mint a few. What a great way to end starvation.
The whole point is that you'd use the trillion dollar coin to pay the mounting debts of the United States
The coin would only address the debt limit ceiling, so we don't miss obligation payments in the event that Congress doesn't raise the legal limit.
"What then does it matter if we do something that is quite obviously a trick, that everyone will see as a trick?"
A troll will seriously defend it as a serious policy response to a critical need.
Garage, although the coin itself would not be in circulation (can you imagine?!), it represents additional funds available to the US Treasury, which would be in circulation as the US pays its bills.
Imagine the security for that particular bank vault.
If we could harness the brainpower generated by the great Krugman it would perhaps be enough to light up a firefly's butt.
Levi wrote:
Pretty soon all the popular nations will be printing trillion *_____* platinum coins. I'm guessing even North Korea has enough platinum to mint a few. What a great way to end starvation.
exactly! why do we have to mint just 1? And why 1 trillion and not 1 Infinity. Mint a Coin that is the size of our debt and then pay off the debt. What's the problem?
And why can't other nations similarly mint their own coins of infinite value?
China wants to loan us cash? fine. Just mint a trillion dollar coin and then loan us a trillion dollars.
Re: Levi Starks:
Plus it's an idea that I would expect to catch on all across the globe.
Only if it works. Historically, funding government through dramatic debasement of the currency hasn't typically worked particularly well. On the other hand, I don't know the scale of past efforts vis-a-vis the total money supply. Maybe they were much larger, much quicker.
According to the Fed, M2 is about 10 trillion dollars, so minting a trillion dollar coin would bump the money supply up about 10% in one go -- that's about equivalent to the growth between mid/late-2011 and the end of 2012. My impression from this graph is that growth in the money supply has accelerated a bit since the recession, as in past periods (from ~1995 or so), it looks like money supply increases about 10% every 2 years rather than 1.5 years.
Also, re: Levi Starks:
Pretty soon all the popular nations will be printing trillion *_____* platinum coins. I'm guessing even North Korea has enough platinum to mint a few. What a great way to end starvation.
North Korea already has a good sideline in counterfeiting US currency.
Re: garage:
The coin would only address the debt limit ceiling, so we don't miss obligation payments in the event that Congress doesn't raise the legal limit.
I'm not sure I follow what you're saying. It sounds like you're agreeing that yes, the trillion dollar coin will be used in the economy (e.g. by depositing it with the Fed and then using the funds to pay federal obligations). Is that fair?
Garage mahal wrote:
The coin would only address the debt limit ceiling, so we don't miss obligation payments in the event that Congress doesn't raise the legal limit.
but why only address the debt ceiling and not our entire debt? Why limit it to a trillion and ONLY address the debt ceiling issue? If it works for hat short term crisis why not for the crisis after that, like say the next debt crisis?
Or the one after that?
Just mint enough coins to cover our debt. Problem solved. Right?
Gimmicks is a really great word isn't it?
However, it is not a good idea to replace our gimmicked up deficit with an even bigger gimmick. Libruls and Repubs have been using gimmicks for 30 years to avoid our spending problems.
Of course it's spent in the economy. It's intended to fund government expenditures
The coin wouldn't pay for new spending. It would pay for old spending -- spending already approved by Congress that we can't pay for because of a self-imposed debt limit.
I don't mind the idea of minting the platinum coin, with three conditions:
1. It should weigh at least one kilogram.
2. It should have a little hole in it so that Obama could wear it around his neck with a decorative chain.
3. The president would be required to wear it 24/7 and each additional coin minted would be added to the chain.
Win/win: The ultimate bling and a constant gravitational reminder of the debt.
Krugman is obama's court jester.
Patrick wrote:
Garage, although the coin itself would not be in circulation (can you imagine?!), it represents additional funds available to the US Treasury, which would be in circulation as the US pays its bills.
why doesn't Garage get this?
recommal@9:11/
Not just "confidence" but this all strikes at the heart--the very rock-bottom concept--of what constitutes a LEGITIMATE GOVERNMENT that should be allowed the power to demand obeisance from its citizens. The Trillion-dollar coin ploy--imho-- calls EVERYTHING about the legitimacy of the Obama "regime" into question..
The coin wouldn't pay for new spending. It would pay for old spending -- spending already approved by Congress that we can't pay for because of a self-imposed debt limit.
Having the effect of freeing additional funds, which would also be spent.
Garbage said:
"The coin wouldn't pay for new spending. It would pay for old spending -- spending already approved by Congress that we can't pay for because of a self-imposed debt limit."
Garbage is aspiring to be Krugman's apprentice jester.
He got the clown costume right.
Since Obama was elected I've learned not to discount ideas based on absurdity.
When the Idea was first proposed that Free People would now be born into servitude to the US government via the Affordable Healthcare Act, I thought it was the most crazy absurd thing I'd ever heard.
Obviously the majority of the Supreme court felt otherwise, and now here we are.
Does Krugman ever admit that he wants unlimited spending, now and forever? The giveaway is that the debt limit is to be "solved" by eliminating it.
Garage mahal wrote:
The coin wouldn't pay for new spending. It would pay for old spending -- spending already approved by Congress that we can't pay for because of a self-imposed debt limit.
so in other words, congress spent more money than it had available?
I can see why a party that refuses to pass a budget would have an issue with a debt limit.
Why not just make the budget infinity and beyond, and then mint enough coins to cover infinity and beyond?
Balfegor
I think the idea is have the Treasury mint the coin, then the Fed would sell bonds in an equal amount as the minted coin.
"Krugman's response to these ordinary folks — the people upon whom the President's power depends — is: They're hysterical and ill-informed."
And probably clutching their guns and toting their bilbes, too. (Or vice versa, as the case may be.)
ricpic said...
Does Krugman ever admit that he wants unlimited spending, now and forever? The giveaway is that the debt limit is to be "solved" by eliminating it.
Looking at it from this perspective reveals it as a rare case of honesty, in which his words accurately represent the true condition of his heart.
"Bibles, I meant Bibles."
re: garage:
The coin wouldn't pay for new spending. It would pay for old spending -- spending already approved by Congress that we can't pay for because of a self-imposed debt limit.
I'm not sure I see why that point is relevant. Congress has the Constitutional power to control the debt, as well as to control spending. It's not like the spending power trumps the borrowing power. They're both fully legitimate powers of Congress.
The ultimate resolution of the debt ceiling debate is obviously going to be that we raise the debt ceiling -- even the Ryan budget required massive borrowing in 2014. The only question is whether irresponsible spending levels approved by previous Congresses (in years when we were flush with cash) are going to be adjusted to face reality.
If there was a debt limit in place shouldn't congress have kept spending to the debt limit? isn't that why you'd have a debt limit?
Did congress not realize there was a debt limit when deciding to spend that money? Considering the dems, its very possible that they don't. They certainly don't pass budgets.
"I think the idea is have the Treasury mint the coin, then the Fed would sell bonds in an equal amount as the minted coin."
Hey, I think you're on to something here. A currency backed by precious metals. I wonder why no one's ever thought of this Idea before?s
It's strange that it's come to this, but I don't believe the President of the United States would choose to do something that will strike the people as so bizarre, even if he feels capable of articulating the legal theory with a straight face. The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks.
I agree. A trillion dollar coin sounds bizarre to ordinary Americans. Obama needs to be more subtle. He should mint a million million-dollar coins. Then ordinary Americans, educated as they are, will give up on the math and go back to watching Jersey Shore. Problem solved.
Shades of Hjalmar Schacht!
Re: garage:
Balfegor
I think the idea is have the Treasury mint the coin, then the Fed would sell bonds in an equal amount as the minted coin.
Thanks. Sorry, but could you spell that out further? Is that the bonds they're currently holding? And what would they do with the cash they generate from selling $1 trillion of bonds?
All I've heard was this.
Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
Not lifting the debt ceiling doesn't prevent borrowing for new spending. It prevents borrowing for spending Congress has already appropriated.
This is a theft of wealth. Anyone with money in the bank will, after this coin trick, have the same number of dollars, but less purchasing power.
But it won't spur inflation, because the Consumer Price Index published by the BLS is itself a fiction. The price of milk, bacon, gas, and damned near everything else you have to purchase has gone up 10% in the last year, and yet, there is no inflation: Because a $300 laptop is, today, as powerful as a $400 laptop was a year ago, and they use this advance of technology to cancel out actual increases in the price of essential goods. Or they decree that the prices of such things as gas are just too volatile, and should have no impact on inflation at all.
And so we won't notice. Fools will continue to vote various President Camachos into office because MSNBC told them the economy is doing great. And one day we'll be pushing wheel-barrels full of hundreds to the Piggly Wiggly to get a loaf of bread, and we'll say "Why did this happen?", and MSNBC will tell us it's the Republicans' fault, between commercials for Brawndo, the Thirst Annihilator.
I still don't understand why we should stop at a 1 trillion dollar coin. I mean, the national reserve bank of Zimbabwe printed a one hundred trillion dollar bill and everything turned out great after that, no more problems.
We'll call it the "double standard platinum standard"
Our platinum is worth whatever the market says it worth, and the government's platinum is worth whatever the government says it's worth"
Here's Obama from back in 2006:
"The problem is that the way Bush has done it in the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion from the first 42 presidents. No. 43 added $4 trillion by his lonesome. So we now have over $9 trillion of debt that we are going to have to pay back. $30,000 for every man woman and child. That's irresponsible, that's unpatriotic,"
I guess if we mint a coin its somehow different than taking out a credit card, but is it really? Not at all. We'll still be driving up our debt from China, and every man women and child will still have to pay it back. Only the cost will be a lot more than 30,000. That was tthe cost, prior to Obama borrowing even more than Bush.
That stat he pegged Bush with, he beat. If What Bush did was irresponsible and unpatriotic, then Obama would have to be even more irresponsible and unpatriotic.
Yet again, every statement made by Obama has an expiration date. For me not for the. The usual hypocrite charges apply.
And I'd bet a fictitious coin of my creation,, at the time Garage,when Obama made his point about Bush you and all your friends were jumping up and down in joy because Obama really pegged Bush.
And because you take your marching orders from lying hacks, then raising the debt ceiling really was irresponsible and unpatriotic!
Now, all you have to do is mint coins of infinite value. That's responsible and patriotic.
God, you libs are nauseating.
re: garage:
Not lifting the debt ceiling doesn't prevent borrowing for new spending. It prevents borrowing for spending Congress has already appropriated.
Um. So? Spending is spending. I'm still not seeing how this point leads anywhere.
In fact, I think this coin trick was considered when Idiocracy's screen play was written, but it was considered "too over-the-top". Sure, they might try irrigating fields with GatorAde; but who would be stupid enough to strike an elevety-kabillion dollar coin so that we can deposit it in our general account?
The way I understand it, the only way the government could legally mint a trillion dollar platinum coin, would be to use a trillion dollars worth of platinum to do it. The government cannot mint a million or billion dollar gold or silver coin without using that much gold or silver in it's making.
Get it? The government can't take an unstamped penny and then stamp it as a million dollar gold coin.
"in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised...."
There was a time when the market's willingness to lend government money was a check on excessive debt. But the Federal Reserve has already shot that to hell with QE-infinity so, in a sense, Krugman is right. This coin subterfuge is little different than what we're currently doing.
Intellectually dressing up like an clown seems to have worked for Krugman. But maybe it only works on other clowns.
Arguments here only prove how utterly wrong and absurd the idea is.
I've got a great Idea for a theme song for Garage:
"if lovin a trillion dollar coin is wrong, I don't wanna be right"
Um. So? Spending is spending. I'm still not seeing how this point leads anywhere.
I'm not saying there is a point. The coin is an absurd solution to an absurd problem.
The way I understand it, the only way the government could legally mint a trillion dollar platinum coin, would be to use a trillion dollars worth of platinum to do it.
Is a $100 bill made out of $100 worth of cotton?
Good read on seigniorage history here. (near bottom)
"Martha Washington is said to have donated some of the family silverware for the minting of the nation's first coins."
Fascinating!
No, AllenS, I don't think we've operated on a precious-metal-value standard since the Civil War. They could blank this coin from copper-washed zinc if they felt like it. I'm not sure why they're going to waste a couple thousand dollars worth of platinum on it.
Original Mike, you're right, there's no difference between minting this coin, borrowing money that doesn't actually exist, and having the government purchase its own notes. It's all the same thing: Theft of wealth by degradation of the value of the currency.
It is similar to telling Congress to take their Constitution and stick it where the sun never shines, which is about what Charles I Stuart told Parliament they could do with their Magna Charta.
garage mahal said: "The coin wouldn't pay for new spending. It would pay for old spending -- spending already approved by Congress that we can't pay for because of a self-imposed debt limit."
We sold securities to fund that old spending. Thus we took money out of the economy that otherwise would have been available for other purposes. If we rely on a coin such as is proposed, we will free up the money we previously took out of the economy, thus adding that money back into the economy. This increases the monetary base without increasing the amount of good and services available for purchase. That is the very definition of inflation.
There are only three ways to fund government spending. No matter how much you wish for a fourth way, it is not there. The three ways are:
1. Increased government revenue.
2. Increased government debt.
3. Inflating the monetary base.
Krugman is proposing the third, and he knows it. He's a schmuck.
Pasta, Google: precious-metal-value standard. I scrap metal and the price fluxuates daily. If you're a beer drinker, save your aluminum cans and you'll see that when you bring them to the recycling center the price is never stable.
A $100 bill is worth whatever it will buy. For instance, the amount of groceries it would buy last year is a lot more than what it will buy today.
Wow, only 9 days into 2013 and it's already Bizarro Year, b/c garage mahal is right on a point of economics. Amazing.
Treasury funds on deposit at the Federal Reserve are not part of the monetary base, b/c the banking system does not back its activities w/ them. These magic coins would, however, be monetized as the Treasury wrote checks directly to private-sector entities from them. But it wouldn't add trillions to the money supply all at once.
But even this degree of monetization can be fully offset by the Federal Reserve, through bond sales to the general public.
So, subject to the Fed offsetting the Treasury in order to hold to its own monetary targets, this is just an accounting trick to get around the debt limit.
That may be objectionable on its own, but not b/c it's inflationary.
Come to think of it, since the value of the coin is pretty arbitrary anyway, why bother making it out of platinum? Why not make it out of aluminum? Or better yet, why not just cut it out from the top of a soup can and carve "$1,000,000,000,000" on it with a nail?
Or would that just be silly?
Not any sillier than anything that Krugman says.
If the Secretary of the Treasury has to wear the Clown suit does that mean the Joe Biden has to go around naked?
Re: Old RPM Daddy:
Come to think of it, since the value of the coin is pretty arbitrary anyway, why bother making it out of platinum?
In general, Congress controls minting of currency and the value of the currency minted. 'S in the Constitution. Reading further on this absurd scheme, I see that Congress let the Secretary of the Treasury mint as many platinum coins in whatever denomination as he likes.
If money doesn't make sense, precious little else in life will make sense. He's dressing up the currency in a clown costume.
I get that in some sense, this is technically legal, if not within the spirit of the authorizing law. And I get that it's novel and novel things are fun to consider – even for liberal Nobel Prize Laureate Economist. I further understand that in negotiations, it’s good to have a BATNA (Best Alternative to a Negotiated Agreement). What I don't understand is how minting a One Trillion Dollar Platinum Coin is a superior solution (or even reasonable BATNA) to making substantial spending cuts that signal to the world that the United States takes seriously the issue of sound fiscal governance. For many years, governments, including the United States Government and many of our various states, have reduced spending to get budgetary issues under control. And markets, employment, and other economic markers have responded favorably to these actions – in fact, fortune seems to favor the fiscally sound! What are the un-intended consequences and moral hazards associated with minting a One Trillion Dollar Platinum Coin and depositing it in the Treasury in avoidance of fiscal responsibility? Further, if there are no negative consequences or moral hazards to this action, why not continue to mint and deposit these Miracle Coins so we don't have to pay any taxes! And instead of platinum, can we use Reardon Metal -- seems more suited to the task...
Oh, and we need still need to talk about Benghazi...
Re: Chip S:
Ah, now that makes sense. Thanks.
Commercial for current Georgia state lotto "Monopoly money" campaign:
http://preview.tinyurl.com/a8wadrf
Yeah, we're a red state, but are enough of us bright enough to connect the dots?
Re: Tom:
What I don't understand is how minting a One Trillion Dollar Platinum Coin is a superior solution (or even reasonable BATNA) to making substantial spending cuts that signal to the world that the United States takes seriously the issue of sound fiscal governance.
Without buy-in from a broad swath of the political class as a whole, I don't think spending cuts are going to signal that the US has rediscovered fiscal responsibility. Instead, all it will signal is that House Republicans successfully used their leverage to win this round. Future Congresses aren't bound by the present Congress, after all.
This coin subterfuge is little different than what we're currently doing.
It's just such a bald-faced admission that yeah, we print money when we need it. I know that's always been true, but still. It's a horrendous trust issue...sometimes I like us all to think the emperor really does have clothes on.
The platinum coin gambit seems like it could be the fatal step toward Weimar inflation.
These magic coins would, however, be monetized as the Treasury wrote checks directly to private-sector entities from them. But it wouldn't add trillions to the money supply all at once.
But since it isn't representing goods or services or government bonds it IS inflationary.
Even if it isn't circulating it is diluting the money supply because it is arbitrarily representing the "full faith and credit"
This is all a very juvenile smoke and mirrors so that congress can get around the real problem which is spending.
The platinum coin dodge is simply the two drunks and a nickle joke writ national.
Without the power of the purse, Congress becomes a mere debating society that can safely be ignored by the Executive.
Nor are the courts going to help, if they cannot rely on Congress to support them.
("Mr. Marshall has made his decision; now let him enforce it!")
Obama is as confused as the Republicans about believing that national debt is bad in these times. I would be surprised if he mints a coin. Still, if he does, I would have no problem with it.
To people who say that producing money and spending or distributing it would produce so much economic stimulus as to induce inflationary forces, I say that would be a good thing. If the FED raised interest rates by selling some of its three trillion dollar debt holdings, then that would tend to be deflationary. And interest rates ideally should be at least a few percent to encourage savings and reduce rampant financial speculation in stuff like commodities. In particular, the FED owns (I believe mostly from QE1 and the ongoing QE3) about 1 trillion dollars in mortgage backed securities--securities backed by private debt (and insured by the American people via government sponsored enterprises--Fannie Mae, etc.). It has no business owning those. If the coins issued were near three trillion, that might I suppose hamper the ability of the FED to raise interest rates if the rest of our government remains stupid, but otherwise it seems pretty safe.
The whole government debt limit is crazy. It shows a certain contempt for arithmetic to pass a law dictating that government in total should not spend what they decided each individual part of government should spend. The only way such a law could ever make sense is if they expected the executive administration to not spend a large part of the money it appropriates. If that's what they are doing, it seems to me they are abrogating their responsibilities, giving to the president most of what they have the responsibility to do. But I'm no legal expert. I mean, obviously some expenses can't be predicted. For instance, heating costs for Federal buildings will obviously be less if winter is warm, and I don't know exactly how such situations are handled--would the money not be spent? I suppose it would be great (at least in ordinary economic times) if the executive branch can spot inefficiencies, reducing costs to such an extent that money can be given back to the treasury, but there is a reason why Congress ultimately should decide what gets spent: presumably it's easier to bribe or otherwise corruptly influence one president than 535 congresspeople.
No, Chip S, the $1 trillion wouldn't instantly enter the money supply. I don't think anyone has suggested that. It would take a few months for the government to cut $1 trillion worth of checks.
But they would, eventually, and by then this $1 trillion will be pushed into the money supply, and the value of each dollar will be reduced.
Now, there's no real difference between this minting trick, and the government monetizing their own debt, and endless borrowing with no hope of ever paying the debt back: It's all really the same thing.
It's just that this coin trick is so transparent: Before, claims that the government was just "printing more and more money" were methaphorical. Now they're literally correct.
I personally hope that this whole ridiculous process is followed to its ludicrous conclusion: the coin is minted and deposited with a Presidential declaration that the country is now debt free. Why? Because that might materially hasten the actual, inevitable default.
Weimar, baby.
change the wording a bit, and this could be an analysis of every Krugman column ever written
Questions for Krugman:
1. If this is such a wonderful idea, why doesn't every nation always do this?
1(a). --and then stop collecting taxes. Think of the rise in production when all those IRS agents, tax lawyers, etc. have to do something useful!
2. Why is counterfeiting illegal? If it's okay for the government to use imaginary money, wouldn't it be good if everybody did? If not, why not?
Yeah, he's a Nobel laureate and I took Econ 101 and made a C. But I had more sense about money when I was twelve.
Re: Meigs:
If that's what they are doing, it seems to me they are abrogating their responsibilities, giving to the president most of what they have the responsibility to do.
On the contrary, letting the President raise the debt limit arbitrarily is an abdication of responsibilities/powers that are assigned to Congress in the Constitution. Same with minting of coin (though apparently they already abdicated that responsibility as far as platinum coins are concerned).
Pasta, you and others are talking about this as if the Treasury determined the money supply.
There is no path of the monetary base with the magic coins that is not in the Fed's choice set without the magic coins.
In essence, these coins allow the Treasury to force the Fed to issue debt on its behalf or else give up total control over the money supply. The Fed does this, of course, by selling off the requisite amount of its own holdings of Treasurys.
"...would produce so much economic stimulus as to induce inflationary forces..."
Me thinks you didn't live through the '70s.
Stephen, devaluing the currency would certainly have one benefit: It would reduce the value of our national debt.
But it also reduces the value of any cash private citizens might be holding.
Maybe it's time to take another look at gold, even at $1650 per ounce. Or, hell, maybe platinum. Apparently the government will be using quite a bit of it when they start blanking these trillion-dollar-coins out like they're bulk flat washers.
Dear Mr. Krugman,
When you find yourself in a hole, stop digging.
Sincerely,
People with Common Sense
Re: Meigs
That said, Congress has clearly abdicated their responsibility to pass a budget every year. They haven't passed one since 2009. The House has passed budgets, but I'm not sure the Senate has even agreed to hear a budget since 2009.
Well, I actually hope Obama does this. I think that it's pretty certain that the people who elected him don't regard the debt limit with any seriousness, so this should be a fitting gesture to them. You know, because, they won.
Chip S. said...
But even this degree of monetization can be fully offset by the Federal Reserve, through bond sales to the general public.
But isn't the Fed selling bonds exactly what the debt ceiling prevents? Just because they have the cash in their account from the coin would not change the fact that they are issuing debt beyond the ceiling.
At least we'd have a coin to toss in the well and WISH our debt away. Magic.
How many idiots does it take to make change for an IOU?
Just one, if his name is Krugman.
One more thing.
The Federal Reserve's total holdings of Treasury securities are a bit over $1.6 trillion, so this magic coin trick can only be done once w/o turning into direct funding of government spending via money creation.
Upon reflection, this strikes me as the worst thing about it. It's just one last kick of the can.
It may be worth saying once more that all of this nonsense--fiscal cliff, debt-ceiling crisis--has its fundamental source in the Senate's unwillingness to confer w/ the House to pass an actual budget.
Ok,
I'm going to assume everybody here already knows that we're not actually "printing" most of the money we acknowledge to be the national debt.
So we are being presented with 2 choices-
1) congress gives someone at the treasury permission to create debt, the federal reserve then creates the money to cover the debt. Of course it does this virtually. all it takes is a few keystrokes. it's not in any sense tangible. Unless of course you count the value and quantity of ink contained in the signature on the piece of paper authorizing the keystrokes.
2) The treasury as directed by the president uses the stroke of a minting press to create a coin it deems to be worth 1 trillion. This totally eliminates the Federal Reserve, and by extension Goldman Sachs who customarily receives a cut of the money for delivering from the fed to the treasury.
You know I hate to say it, but all of a sudden the trillion dollar coin is starting to look good to me.
But isn't the Fed selling bonds exactly what the debt ceiling prevents?
No. The debt limit (I'm pretty sure) applies to all outstanding Treasury debt, including that held by the Federal Reserve. (This pretty much has to be the case, I think, b/c the amount the Treasury sells has nothing directly to do w/ the amount the Federal Reserve buys.
I say do it. Please do it! Then mint 16 more of them.
I promise it will not change my opinion of the dignity of the people involved. That is rock solid.
Clarification to the above--
Since the limit already applied to Fed holdings, the Fed's sale of bonds to the public has no effect on the total outstanding debt subject to the limit.
Damnit, bagho20, you stole my thunder!
It's like arguing about minimum wage. If $8.75 is a good idea, why not $20 an hour minimum wage, or if that's a good idea, why not $50 an hour.
Oh, I forgot there is one other option.
We could choose to live on what we take in, and create no more debt.
Of course that's just the crazy "financially unsophisticated me" saying it.
Krugman's partisanship has overridden his intelligence and his professionalism. Why not his ability to think logically as well? This is par for the course.
Nice job, Professor A.
Krugman's partisanship has overridden his intelligence and his professionalism. Why not his ability to think logically as well? This is par for the course.
Nice job, Professor A.
Levi.
It's inflationary simply because it is arbitrary. It would like saying that all of a sudden all the one dollar bills in your wallet are now worth ten dollars. While you would be richer by a factor of ten. Prices would rise by the same factor. In this case it doesn't even have to circulate.It simply has to exist. It is the equivalent of diluting our currency by one trillion dollars.
What would the value of a rare one of its kind penny postage stamp be if there were suddenly two of them?
Aridog said...
Let's say the management of the national debt has been a lot of trickery for a long long time.
Good to say it...because it is true.
We tell ourselves that we can loan ourself $20 from our left pocket for the right pocket and thus have $40.
Two drunks manage to pool nearly all their money and buy a bottle of whiskey. They're smart drunks though and they agree that every time one of them takes a drink they have to pay the other one a nickle. That way when the bottle is empty they'll have enough for another bottle. So as they walk along taking turns drinking they pay each other a nickle. Pretty soon the bottle is empty and all they have is a nickle.
The only difference is that this nickle is purported to be worth a trillion dollars.
AllenS wrote:
The way I understand it, the only way the government could legally mint a trillion dollar platinum coin, would be to use a trillion dollars worth of platinum to do it. The government cannot mint a million or billion dollar gold or silver coin without using that much gold or silver in it's making.
Actually I don't think they have to. To get through a loophole they have to make the coin platinum. But the value assigned to it would simply be a trillion dollars. The actual worth could be .025cents.
Just wait 'til someone hands one to a cashier at Walmart.
http://www.theblaze.com/stories/cops-say-man-tried-to-use-1million-bill-at-walmart/
X wrote:
so what he is saying is that income taxes are completely unnecessary.
True. If we can just print money to pay for our spending, then why do we need to pay a tax with our money. Simply print enough to pay for all debt and don't require people to actually fund the govt.
And why borrow money? If you can just add value to the treasury you shouldn't have to take out a loan to meet expenditures should you?
The situation is a little complicated by the Fed paying interest on bank reserves, which allows it to increase the money supply while holding the supplied money out of circulation.
That interest-paying is a huge overhang on the money supply, which will increase very suddenly when they stop paying interest, or when other interest rates go up enough to compete with it.
It's hard to imagine enough political will to soak that money avalanche back up quickly.
jr, metal has a value. Any metal. They cannot stamp a gold coin that weighs a pound and say it's worth $1 billion dollars. Nobody would buy it. The last time I scrapped metal, it was steel, but gauge steel which the recycle place only paid me tin prices, which was $.18181818 cents per pound.
It's well to note that as a result of QE3 the Federal Reserve is each month creating $40 billion dollars out of thin air and using it to purchase mortgage back securities. I'm thinking this doesn't count toward the debt limit, since it is not a liability of the treasury. Spending doesn't have to be at all reasonable to be better than spending to prop up and buy the sketchy investments of the entities whose incompetence and greed were the main causes of the recession. It would be much better if the treasury rather than the FED created and spent money out of thin air, so long as the money was spent for something better than welfare for mortgage bond holders. Even if the money was just given away to U.S. citizens as a whole it would be better (and would have a much better effect at stimulating the economy).
" I don't think they have to. To get through a loophole they have to make the coin platinum. But the value assigned to it would simply be a trillion dollars. The actual worth could be .025cents."
Now you're getting somewhere,
Lets make it a challenge event, and get the science/engineering community involved. Instead of a coin, we'll isolate a single platinum atom and encase it in a cube of lucite. We won't actually be able to see the platinum, but we'll know it's there.
The actual worth could be .025cents.
Plating would suffice? Platinum usually tracks gold in step and is usually more expensive. It's slight cheaper now ($1593 vs. $1657) which should give the alchemists here some ideas, since you can turn platinum into gold. Who knows? Maybe you can sneak into CERN when they are not looking to keep your sunk costs down.
Congress can change that law tomorrow to specify a different matal for the coin. I suggest unobtainium.
Just an aside, and I'm not sure if it's accurate but apparently the amount of zinc in a penny minted between 1909 and 1982 is worth 2.4 cents.
Oh, and to get paid at the metal recycling place, I have to show them my drivers license.
How is this worse than QE to Infinity?
Some clerk at the Fed types "twenty billion" into his keyboard.
Bingo.
Now we have $20B to buy treasuries.
The last time I discussed this with my financial guy, at the end of about 20 minutes I said, "Ya mean the money is just there, just like ... poof ... magic." He said, basically, yes, that's it.
Could they just make me a $2M coin? I'll pick it up personally.
Ah, too slow. Meigs beat me to it.
Kudos sir.
Great minds ... and all that.
And speaking of loopholes, ever notice how some loopholes are good and others are bad?
When a person finds a legal way to avoid giving their own money away to the government, thats a bad loophole.
But when a government runs short of money and finds a way to create it out of thin air, that's a good loophole.
Two drunks manage to pool nearly all their money and buy a bottle of whiskey. They're smart drunks though and they agree that every time one of them takes a drink they have to pay the other one a nickle. That way when the bottle is empty they'll have enough for another bottle. So as they walk along taking turns drinking they pay each other a nickle. Pretty soon the bottle is empty and all they have is a nickle.
The only difference is that this nickle is purported to be worth a trillion dollars.
THere was a great episode of it's always Sunny in Philedalphia where the gang tries to take on the Great Recession. And the idea they come up with is Paddy's bucks. They spend real money to print up some fake Paddy's bucks and give it out to people so they will use the Paddy Dollars at the bar to buy drinks. Then when the Paddy Dollars runs out the customers will buy more Paddy's dollars with real money and then use the Paddy dollars to buy more booze thus creating a "self sustaining economy". But it doesn't quite work out that way.
Here's some dialog:
Dennis: I think we made every single one of our Paddy’s Dollars back, buddy.
Mac: You’re damn right. Thus creating the self-sustaining economy we’ve been looking for.
Dennis: That’s right.
Mac: How much fresh cash did we make?
Dennis: Fresh cash! Uh, well, zero. Zero if you’re talking about U.S. currency. People didn’t really seem interested in spending any of that.
Mac: That’s okay. So, uh, when they run out of the booze, they’ll come back in and they’ll have to buy more Paddy’s Dollars. Keepin’ it moving.
Dennis: Right. That is assuming, of course, that they will come back here and drink.
Mac: They will! They will because we’ll re-distribute these to the Shanties. Thus ensuring them coming back in, keeping the money moving.
Dennis: Well, no, but if we just re-distribute these, people will continue to drink for free.
Mac: Okay…
Dennis: How does this work, Mac?
Mac: The money keeps moving in a circle.
Dennis: But we don’t have any money. All we have is this. … How does this work, dude!?
Mac: I don’t know. I thought you knew.
Dennis: I thought you— WHAT? I thought you were on top of this!
Mac: You’re the one who came up with the plan!
Dennis: I— did I come up with this plan?
Mac: Last night, dude! With the D&B Power Club card and the—
Dennis: I blacked out. I blacked out that night.
Mac: Shit dude, I’ve been following your lead!
Dennis: Aw, Jesus… aw, shit. Okay, we—
Mac: We have no money and no inventory. There’s still something we can do. That’s still a business somehow.
Dennis: How does D&B’s do it? They’ve got a complicated system worked out and I cannot begin to understand it.
Mac: How does a self-sustaining economy work?
Dennis: I don’t understand how the U.S. economy works much less some sort of a self-sustaining one. I don’t understand how finances work.
Perhaps there's a job for Mac and Dennis in tha administration.
Good God, that may be the worst analogy I've ever read (seen or heard).
jr, metal has a value. Any metal. They cannot stamp a gold coin that weighs a pound and say it's worth $1 billion dollars. Nobody would buy it. The last time I scrapped metal, it was steel, but gauge steel which the recycle place only paid me tin prices, which was $.18181818 cents per pound.
They're relying on a loophole that allows the govt to print or mint coins of any face value so long as they're platinum.Usually this is done for commemorative coins. But they arne't suggesting that we actually use a trillion dollars worth of platinum. It would be money created out of thin air.
They actually do this and the market tanks. They will create the recession they think they're avoiding.
It reminds me of a joke from my economics class. A chemist, an engineer and an economist are on an island. a can of beans washes up and they debate how to open it. the chemist proposing mixing various naturally occuring chemicals to create an acid that eats a whole in the can. the engineer suggests designing a rock sharpening device. the economist offers his solution: first, assume we have a can opener.
"A $1T coin, eh?"
That's about what it cost (in Reichsmarks) to buy a basket of potatoes in Weimar Germany, ca. 1923.
President by-passing Congress' powers of the purse. Treasury co-opting the Fed'l Reserve. I can see where this is heading.
What loophole is this? So, this would be a commemorative trillion dollar platinum coin?
Congress can change that law tomorrow to specify a different matal for the coin. I suggest unobtainium.
...or Mithril. I hear one mithril mailshirt is worth more than the whole Shire.
Here's some coinage sanity:
US Mint
by CoinNews.net on December 2, 2008
The Professional Numismatists Guild (PNG) on Monday released an articulate statement cautioning that President-elect Barack Obama "Coins" are not rare investments.
In part, PNG President Gary Adkins said the following regarding the items,
"All of the items we’ve seen offered so far on television and online are merely political mementos that certainly may be enjoyable as a keepsake, but typically will have little or no re-sale value later in the mainstream numismatic market. Privately-produced items are not legal tender U.S. coins. In cases where a marketer has altered an actual U.S. coin after it left the Mint, such as putting a sticker with Obama’s picture on it, knowledgeable collectors usually consider that to be merely defacing the coin."
I'm not saying I'm agreeing with this I'm just repeating what they say would allow for the creation of this coin. But note, it's not actually worth a trillion because it has a trillion dollars worth of platinum. It could be literally worth a penny in platinum but they could have it have a face value of 1 trillion and presto, it's worth a trillion dollars.
Though, if we are going to do this, why limit it to a trillion dollars? Why not just mint a coin that pays the entire debt?
Lets pretend that with inflation running at about 10% everyone is rushing to buy treasuries paying less than 2% at whatever quantities the treasury puts up for sale. Lets pretend that it isn't actually the fed buying most of the treasuries so as to control interest rates. Only by pretending that we aren't already directly monetizing much of the deficit does it make sense to pay any attention at all to the magic platinum coin buffoonery. Brawndo, it's got electrolytes. Seems more like a documentary every day.
jr, please use quotes when quoting someone. Otherwise, it's hard to read if those are your words or someone else's.
Sorry Allen, here it is again with quotes:
"Generally speaking, no, the Treasury can't just print money to pay off its debt. But there's a legal loophole, intended to deal with commemorative coins, that gives the Treasury secretary the ability to strike platinum coins to whatever specifications he (or hypothetically she) wants.
So he could make any coin he wanted, as long as it's platinum?
Yeah — both the denomination and the design are up to Tim Geithner, basically. He could mint a coin for $69 trillion or $420 trillion. He could make it a triangle and put John Boehner's face on it. He could make it the size of a horse and engrave "MEGADETH RULES" on the side."
http://gawker.com/5973717/your-guide-to-the-trillion+dollar-platinum-coin-that-obama-can-mint-to-save-the-world
Waitaminnit. The relevant statute says that “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.” Isn't the "and issue" part of the statute relevant? I don't see how "deposit in a government vault" is the same as issuing.
Phil said...
Waitaminnit. The relevant statute says that “The Secretary may mint and issue platinum bullion coins...
Bingo! That's why this bullshit won't fly. Metal is worth something, and if it isn't in circulation, then it will have no meaning or value.
Can't Obama just get someone to appraise the handwritten version of one of his book for $1 Trillion, then just donate that to the Treasury? If Elizabeth Warren could get a "respected" genealogist to beclown himself, it should be a snap for Obama. Antiques Roadshow is NPR as well.
If you will all get back to earth, the issue is:
1. Congress needs to control the purse strings.
2. Congress needs to control the purse strings.
Otherwise we may well be on the way to loose Mr. Franklin's republic.
But when a government runs short of money and finds a way to create it out of thin air, that's a good loophole.
That is because creating money is what the government does. The value of the currency of the U.S. is not based on any commodity (the gold standard is dead).
For all the whining about Weimar level inflation--the Fed has been printing money for years and interest rates are still at record lows (effectively zero) and inflation is low.
Here's the loophole that supposedly allows for the creation of said coin:
http://www.law.cornell.edu/uscode/text/31/5136
Right now (and since WWII) the US is the best game in town. When foreigners no longer have trust in the US economy, that all goes away. And then the bad scenarios play out.
Keep up the shit and see.
That is because creating money is what the government does. The value of the currency of the U.S. is not based on any commodity (the gold standard is dead).
The US government prints money, sure. But did you ever pause to wonder why we even have taxes -- or why we even borrow money, for that matter -- if the government can simply printing all it needs?
"Right now (and since WWII) the US is the best game in town.
This is the reason current interest rates are so low. U.S. Treasuries are the least worst place to put money in these unstable times.
"When foreigners no longer have trust in the US economy, that all goes away."
Yes, it does.
Carney was finally asked about the platinum coin at the briefing today. Haha. He should have had one in his pocket to show everybody.
"But did you ever pause to wonder why we even have taxes..."
For "fairness", apparently.
Freder Frederson said...
But when a government runs short of money and finds a way to create it out of thin air, that's a good loophole.
That is because creating money is what the government does. The value of the currency of the U.S. is not based on any commodity (the gold standard is dead).
For all the whining about Weimar level inflation--the Fed has been printing money for years and interest rates are still at record lows (effectively zero) and inflation is low.
Nearly there. Low interest rates simply means that we don't value our own currency.
Another way to look at it. An ounce of gold doesn't cost $1560.00. The VALUE if $1560.00 is an ounce of gold. An ounce of gold will still buy what it could in 1970. Which may have cost in dollars $100.00 in 1970 cost $1560.00.
So yes we have been inflating our currency.
Anyone who says we are not experiencing inflation does not buy groceries.
THere's also another crazy option. Instead of printing one coin,there is another obscure law that allows the Treasury to print Palladian bullion coins valued at 25 dollars. So theoretically the Tresury could mint the equivalent of a trillion dollars worth of these coins. However, in this case, it would require 2.75 metric tons of palladium to do this.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/04/michael-castle-unsuspecting-godfather-of-the-1-trillion-coin-solution/
--For all the whining about Weimar level inflation--the Fed has been printing money for years and interest rates are still at record lows (effectively zero) and inflation is low.--
Is that why a case of Coke is now 20 cans instead of 24?
Is that why places like Starbucks is substituting cheaper coffee beans?
Isn't part of the "full faith of the US Government" me?
With the gun grab, there might be fewer people with faith.
More Go Galt, more bartering.
More US buying US bonds, oh, wait.
Welcome Jack Lew, TurboTimmy is gone.
If any significant fraction of the public cannot immediately see the ludicrousness of the $1-trillion-coin idea, there's no hope for the country. Start laying in seed.
If any significant fraction of the public cannot immediately see the ludicrousness of the $1-trillion-coin idea, there's no hope for the country
Crazier than defaulting on debt promises?
Crazier than defaulting on debt promises?
The government has made exactly two "debt promises". One is to not borrow more than the debt limit; the other is to repay the debt we already have (which, of course, can be done without further raising the debt limit).
So there's no danger of us "defaulting on our debt promises". Well, unless the President decides to try borrowing above the cap. :)
France never paid us back in full for The Marshall Loan, people default all the time, OPM's pick up the slack.
Then there's that pesky SS "promise" which our betters left the USG an out in the wording.....
And then there were the promises to the Indians and that dept is still eff'd up, of course, Bubba's people shredding all those documents didn't help......
Think about how this would have played out, if Bush had thought of this idea.
The coin outrage is killing me. If Congress raises the Treasury's borrowing limits (i.e., the debt ceiling) we'll get the very same trick: money from thin air. The only difference is the general public doesn't see it because it's behind the curtain of the Federal Reserve -- which curtain is parted only on finance blogs. Ask people at a shopping mall about quantitative easing. One in a hundred might actually know what it is.
So Ann's question is exactly right: why not do the coin trick out in the open?
Today Bernanke bought a bunch of 30-years (which won't even be auctioned until tomorrrow!) from Treasury and gave Treasury a $300M credit. No money changed hands -- $300M came from . . . the tooth fairy. http://www.zerohedge.com/news/2013-01-09/fed-now-pre-monetizing-bernanke-buys-300-million-treasury-be-auctioned-tomorrow
The Fed has been doing this for 4+ years: Create $$ with a journal entry, buy massive amounts of Treasuries, suppress the interest rate on US debt, credit Treasury's account, rinse, repeat. (And buying crap mortgages from banks with computer $$ and propping up their stocks, too -- let's not forget).
Yet except for those "Republican lunatics" and Ron Paul's crew, there is no outrage. None. So, yeah, let's do the crazy coin trick out in the open for all to see. It's time for the education of Kim Kardashian.
And GM's solution is there's nothing we can do about it, go make more money.
We can't cut the budget because it would put all these people out of work, but let's stop selling guns and ammo cos it won't.
BWAAAAAAAAAAAAAAAAAAAA
It's time for the education of Kim Kardashian
Great idea! Obama can unveil the coin by pulling it out of Kim's ass crack. It might take some time though. But certainly less than if he pulled it out of the Grand Canyon.
Assuming we can do this, why limit ourselves to 1 trillion dollars?
the other is to repay the debt we already have (which, of course, can be done without further raising the debt limit).
Haven't heard an explanation on how you do that.
Bake sales work wonders. If Micelle will allow it, though.
How about this, garage, we quit spending more money than we take in. That's a start, no?
LOLOL GM doesn't have a clue how to pay debt?
Did U ever have debt?
What did you do?
If you didn't what did you do not to have debt?
If I trade 10 $10 bills for one $100, then I'm $100 richer, according to Paulli "The Beard" Krugman. Especially if I print my own $10 bills.
Haven't heard an explanation on how you do that.
With tax revenue, of course. We bring in over $2 trillion dollars a year, and debt maintenance is only in the hundreds of billions.
It means a lot of the other things the government wants to spend money on don't get funded, of course. But such is life; just because the government wants 2+2 to equal 17 doesn't mean it will. :)
And GM's solution is there's nothing we can do about it, go make more money.
Raising the debt limit is the best solution. The coin is an escape hatch against hostage takers.
Hostage-takers? Tsk, tsk, have you no shame? I do believe that requires a civility bullshit tag.
Oh, poor teenage GM, I've had this same argument with my teenager.
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