January 7, 2013

"Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default?"

"Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious."

Says Paul Krugman.

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.

ADDED:

128 comments:

rhhardin said...

I don't see why he would be impeached. No hard feelings or anything but rules are rules.

EMD said...

"Sir, there's a Mr. Mugabe on line one ... "

edutcher said...

Krugman is taking Jerry Nadler's advice on anything?

In the immortal words of Kevin Cahstner, we're through the looking glass now.

The phrase, "There’s a legal loophole", speaks volumes about how this has less to do with what's a good idea than it sounds like a cute gimmick to drive the Rs crazy.

gutless said...

Mr. Krugman has gone so far off the tracks he is asking for someone to pursue a conservatorship. Anyone familiar with New York law in this area?

machine said...

and most didn't believe the GOP would hold the full faith and credit of the United States hostage either...


but they will...again...

Diogenes of Sinope said...

Obama supporters are sophomoric, they would absolutely love this.

Shouting Thomas said...

and most didn't believe the GOP would hold the full faith and credit of the United States hostage either...

God know what this bit of claptrap means.

Certain, machine doesn't.

Did you have something to say?

Kirk Parker said...

Althouse,

"The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks."

Ummmm...

"I won!"

Ben G. said...

Lose my "trust and confidence"? He never established it.

Shouting Thomas said...

Is there another crisis happening?

Lawyer Mom said...

So Mr. Krugman, where do we get the trillion dollars to buy this platinum?

bagoh20 said...

Is this Krugman's latest alternative to his economy-saving fight against the invasion from Mars? Now we're just gonna bribe them with a shiny coin?

It might work. After all we bribed the Indians with trinkets and the country boomed, so his Nobel Prize winning brain figures it will work again.

Keynesians are cute - kinda like gremlins, but don't feed them any responsibility after sunrise or you know what happens.

CWJ said...

Machine,

And most wouldn't think that the fed and executive wouldn't potentially make the "full faith and credit" a laughingstock.

Only in machineworld does the minority party bear full responsibility for such things.

bagoh20 said...

" the GOP would hold the full faith and credit of the United States hostage"

Thanks to our visiting and obedient lefties you don't even have to visit the left side of the internet to hear the talking points like the distant call of a pack of crows realizing they've eaten their cornfield barren and signalling the need to find the next. I can't tell one "caw" from the next. It's a caw-caw-phoney!

SGT Ted said...

These are Authoritarians. It's how they think and operate.

tim in vermont said...

" in 1945, President Harry Truman printed a one trillion-dollar bill (with his photo on it) to help reconstruct post-war Europe. He handed the bill over to Montgomery Burns to transport to the Europeans. However, the money never arrived and the FBI suspects Burns still has the money with him. As satellite photography can only confirm that the trillion-dollar bill is not on the roof of Burns's home, Homer is sent in to investigate..."

http://en.wikipedia.org/wiki/The_Trouble_with_Trillions

SGT Ted said...

Refusing to spend more is holding the full faith and credit of the US hostage.

Blowing trillions borrowed from the Chinese is Responsible Spending.

I want a bag of what you are smoking.

Crimso said...

"So Mr. Krugman, where do we get the trillion dollars to buy this platinum?"

Ah, but there's the beauty that is the mind of Nobel laureate Krugman. He knows you don't need the trillion dollars. He believes (correctly) that the U.S. can always avoid defaulting on debt by printing as much money as it needs to meet its obligations. He believes (incorrectly) that this is "benign." Or else he knows it is not benign, but is counting on his readers to be too stupid to know it.

Mark B said...

Why such a short Nixon clip? When a President does what? I guess I could spend some time researching it. But, I sense we have another Boomer iconic moment that doesn't need any explanation.

rhhardin said...

Actually there's no law against inflating the currency, which is probably will happen anyway.

It's just that it's a really bad public choice, and it spikes the interest rates on your new debt until it's obvious that you won't inflate any more.

codeweasel said...

So Mr. Krugman, where do we get the trillion dollars to buy this platinum?

Not needed.

The statute allows the secretary to denominate the coin in whatever value he wishes. Any amount of platinum will suffice.

The Drill SGT said...

why stop a one trillion dollar coin?

why not mint 16 and pay off our whole debt?

oh, you mean somebody would have to accept them and even idiots understand that the coins are worthless/

well darn.

How about one big 16 trillion dollar coin instead?

oh :(

Revenant said...

Krugman's just being typically childish. The day the government tried this stunt would be the day the Treasury stopped being able to get anyone to loan it money.

It doesn't even matter if $1 trillion in funny money isn't inflationary (as Krugman weirdly claims). What matters is that there's no upper limit; under Krugman's theory the SecTreas could print a $1 septillion coin if he wanted to. Nobody is going to invest a substantial sum in debt when the value of that debt is literally dependent on the whim of a single political appointee.

Maguro said...

Sounds like a great idea. Then, just send Hillary to Beijing with a purse full of these $1T coins to pay off our national debt.

After she gets better, of course.

jr565 said...

THere should be a movie called Obamas Trillions. And the premise is Obama gets a trillion dollar fortune, but first he has to spend his billions on things that give him no assets whatsoever.
So he could run for Office and tell voters to vote for None Of the Above. He can buy the most expensive stamp and then use on a letter he will send.
And of course he can have govt create a coin made out of platinum which he says will be worth a trillion dollars. But then he'll buy a cup of coffee with it.

The coin would be as worthless as the coin in my proposed movie.

Why not get the Franklin Mint to come up with commerative platinum coins that are models of the real platinum coin and everyday people can buy them for 19.95 from an infomercial.
I'm thinking on the face of the coin they should put a big pile of shit. And on the back could be Obama on the toilet.

AprilApple said...

Obama was against raising the debt ceiling before he was for it. Now that he's wasted so much money, he not only wants to raise the debt ceiling, he wants to kick into the stratosphere forever.

jr565 said...

I have a lot of monopoly money at home. But no trillion dollar bills. Something tells me it wouldn't work in a monopoly game either.
But Obama bucks, I like the soudn of that. We could have a trillion dollar coin. ANd a bazillion dollar coin. And a gazillion trillion billion million dollar coin.
I Wonder if China has change of a gazillion trillion billion dollars?

Then again, maybe they'll loan us cash in fake currency as well.

lge said...

Who's the economic defective who dreamed up that idea? That all we need to do about our crushing national debt is give China a subway token?

These people aren't ready for prime-time government.

Sofa King said...
This comment has been removed by the author.
Sofa King said...

What this is really about is another Executive power grab at the expense of Congress.

I know it may seem melodramatic, but this kind of thing really is how republics slide into dictatorships. The Road to Serfdom, indeed.

Rusty said...

The funny part is that they're serious.

I mean some government wonks with political science degrees and degrees in womens studies stayed up late and had a deep meaningful discussion on this and concluded it was a brilliant idea.

dreams said...

Krugman is another liberal slut.

dreams said...

Our founding fathers were very aware of corrupt governments which is why they gave such care to the constitution. The liberals don't like the constitution.

jr565 said...

Definitely sofa king. And I'm sure that Obama wiil
Enact gun control through executive order rather than by
Trying to
Legislate it or amending the constitution.
You kno what though? I'm
Ok with it, do long as repubs get to live by the same rules
When they're elected. Overturning the right to an avortion through fiat and executive order. So sime so effective.

Making Keynesian economic Ideas hate speech with those found guilty getting fired From any job they might hold ever unless its on gay porn.. Or a firing squad. Still not sure yet. Maybe we can simply shit in their
Face and force them to eat it, like Ron Burgundy was forced to eat cat poo after insulting San Diego.

Jerome said...

It would be worth it just see the look on the ChiComs' faces. "OK, here's your 16 Trillion, thanks, it came in real handy, but we've decided to pay it back now. Ta-ta, be sure to write!"

edutcher said...

machine said...

and most didn't believe the GOP would hold the full faith and credit of the United States hostage either...


but they will...again...


Yeah, it's that silly principle about living within our means.

Seeing Red said...

Oh, good gravy, the coins are equal to rubles.

BWAAAAAAAAAAAAAAAAAAAAA

AprilApple said...

We are all going begging for Obama's trillion dollar rubles when he is finished with us.

Seeing Red said...

And our IRAs will also be backed by the "full faith of the US Treasury."

They'll be worth - oh, wait, we're already being monetized, NOTHING!

Hagar said...

It does not have to be a platinum coin. They can also print it on a piece of paper and have the Secretary of the Treasury and the Treasurer of the United States sign it, and it would be just as good.
The question is if anyone would accept it and also what folks that matter around the world would begin to think about our 1 through100 dollar bills.

The legal profession seems to have some people in it that thinks any practice there is not a specific written statute against is "legal" and therefore must be accepted by us all, but this is not so.

Rusty said...

Jerome said...
It would be worth it just see the look on the ChiComs' faces. "OK, here's your 16 Trillion, thanks, it came in real handy, but we've decided to pay it back now. Ta-ta, be sure to write!"


And since we have decided the value they can just as easily turn around use it to buy anything we have that they want with it.

chickelit said...

Coins aren't printed, they're minted.

Diogenes of Sinope said...

Lenin "The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation." This is what Obama is doing.

Maguro said...
This comment has been removed by the author.
Maguro said...

It does not have to be a platinum coin. They can also print it on a piece of paper and have the Secretary of the Treasury and the Treasurer of the United States sign it, and it would be just as good.

Functionally, it's like printing trillion dollar bills, but they can't print trillion dollar bills because Congress won't authorize it. Or maybe it's the Fed who won't authorize it. Anyway, the reason it has to be a platinum coin is that there's some kind of loophole that lets the Executive branch mint platinum coins in any denomination they want without cooperating with anyone else.

elkh1 said...

"The President must maintain the people's trust and confidence."

Really? He got re-elected with Big Bird, free condoms, diasters in Benghazi, lies (you can stay with your doctors, lower medical costs) and more lies (nobody is going to take your guns away). Do people trust him, have confidence in him?

AprilApple said...

A lot of talk about Obama searching for all the loopholes he can find to clobber us with his dictatorship.

bagoh20 said...

I'm not sure who's head goes on the front, but the back of that coin has to be a goatse.

Hagar said...

I think Maguro is right that it taes Congressional authorization to print "greenbacks," but I still think the platinum is just for show. Probably a hangover from the original Constitution when the value of coins really depended on the weight of precious metal in them.

n.n said...

Devalue capital and labor through perpetual trillion dollar account deficits, or devalue capital and labor through a selective redistribution scheme of a new currency. Will he mint a new trillion dollar platinum coin every year to devalue capital and labor until citizens serve at his pleasure?

Michael K said...

"machine said...
and most didn't believe the GOP would hold the full faith and credit of the United States hostage either...


but they will...again..."

machine, you are redefining the "useful idiot."

We are now entering an era of lawlessness and you are cheering. Have you ever seen "A Man for all Seasons?"

Bob Ellison said...

The coin should have an animated image on each side. Chip Ahoy should get the design contract.

Paul said...

Fist, Krugman got his Nobel the same way Obama did.. in a cracker jack box. And if President Farce Obama want's to make his Administration a bigger failure he can just go ahead. Hell why not? Sixteen trillion, seventeen trillion, a trillion here a trillion there and soon you will have some real money.

And when inflation gets as high as it is in Argentina and the riots begin I sure hope Obama has taken up the guns as he says he will cause if not it's 1776 all over again (as has been said this night by another gent.)

Pogo said...

You understand this means we live in a dictatorship, for real.

mishu said...

Krugernuts is Dr. Evil. link

bpm4532 said...

75% chance this happens. Obama won't recognize spending limits if he's got cash in the bank. An executive order or signing statement will be deployed. Using the Autopen.

jr565 said...

I think economists are pretty clear about how printing money only devalues currency.
If you do a google search for "why don't we just print money to pay off our debt?" You get plenty of pages explaining how this doesn't actually work and why its a bad idea.

And yet Krugman is supposedly a Nobel prize winning economist suggesting absurd gimmicks rather than simply addressing real solutions like dealing with spending.

No wonder he is all for Keynesian economics. If that fails he wans to print or coin trillion dollar coins. Anything but address spending.
His next idea is a game of craps.

mark said...

I find it funny that machine and other libs support Obama at all. And ignore that minting or printing money, like Idiot Krugman advises, is a massive tax on the poor. But, who cares besides Republicans. We just live in the real world.

The Obama fairy world ... where Krugman imagines his idiot fantasies ... Obama imagines he could have passed College Algebra if the GTA would just understand how much smarter Obama was then her ... machine imagines that being sane is like hostage taking ... that is the world we all should live in.

Now drink your koolaid, cut your pay check in half, and praise The One.

Robin said...

The idea that its the GOP "holding the full faith and credit of the US hostage" when the Democrats have intentionally refused to pass a budget for more than four years is the kind of utterly insane nonsense that ought to make one swear off meth.

Lawyer Mom said...
This comment has been removed by the author.
John said...

It is incredible to me that Krugman, an economist and all that, would talk of "printing" a coin.

In fact, I am so certain that he knows the difference between "printing" and "coining" that I am sure he is doing it on purpose for some slippery reason I do not understand.

The founders were very leery of giving government to the power to "print" money and they did not do it. Memories of the disaster of paper money during the Revolution were fresh in their mind. "Not worth a Continental Dollar" is a phrase we still hear occasionally today.

We had to go through the Charade of the Federal Reserve System where, technically, privately owned banks (Federal Reserve Banks) issue the paper money under the supervision of the govt Federal Reserve Board.

From Article 1, Section 8 of the Constitution:

5: [The Congress shall have Power] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

6: To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

While the Sec Treasury may have the legal authority to issue commemorative coins, I wonder if they have the power to make them "legal tender"?

Something smelly is going on here. I wish I knew what it was.

John Henry

Crimso said...

I think the result (and the mechanism for its occurrence) of printing more money is well-known and very easily understood, even by people who know almost nothing about economics. Krugman tells us that we can't default, we can just print the money we need. He is pointing out that the U.S. never has to default. This is correct. It is also correct that leaping from the Empire State Building (with no lifesaving device) will not kill you; the sudden stop will. The "sudden stop" in Krugman's scenario is an experiment that has already been done more than once. It is reproducible, and there is every reason to think that we will get the same result.

And does anyone doubt that credit rating agencies take into account the possibility of expanding the money supply when they grade the credit worthiness of a sovereign?

Bob Ellison said...

Remember that Krugman's Nobel is for a microeconomic theory, not a macro- one. He writes about macro but doesn't seem to understand it.

John said...

Congress has the power to "coin" money. Coining is a specific metal working process, not a printing process.

Congress can also fix the value thereof. Sounds like Congress would be the ones to set the value on the Platinum coins, not the Sec Treasury.

Of course, the Repos in COngress are so toothless that they would not do anything. And if they did challenge the president, what could they do? Obie seems intent on doing whatever he wants without regard to law or COnstitution.

To paraphrase Stalin, "How many divisions does Congress have?"

John Henry

John said...

Ann, a question for you as a lawyer and Constitutional scholar:

Is there a Constitutional requirement for the President to "sign" bills into law? By that, I mean physically sign them, not allow an aide to use an autopen to apply a facsimile of his signature.

Is a law signed by an autopen legal?

John Henry

Lawyer Mom said...

@ Crimso said, "Ah, but there's the beauty that is the mind of Nobel laureate Krugman. He knows you don't need the trillion dollars. He believes (correctly) that the U.S. can always avoid defaulting on debt by printing as much money as it needs to meet its obligations. He believes (incorrectly) that this is "benign." Or else he knows it is not benign, but is counting on his readers to be too stupid to know it."

Yes, Mr. Crimso, just so. Thank you for noticing that a "trillion-dollar platinum coin" is not worth a trillion dollars. It's funny money, all around. Sadly for America, Bernanke thinks so, too. Why, the U.S. will never default because it can borrow money from itself -- at "no cost!" said he.

We can mint any new coin we like and denominate it a trillion. Why mint it in costly platinum when it can just as easily be stamped on play-doh? Or wood? (Although platinum does sound more dignified and Cambridge-like; it suggests the coin might actually hold intrinsic value).

So let us raise this platinum-coin money-creation concept far and wide, with everyone who will listen. It is not at all new. But having racked my brain, I can think of no other way to educate the populous that the Federal Reserve is already printing funny money and devaluing our savings (and pensions) by the minute. It is so in-your-face, blatantly inflationary, that by George, they might just get it.

The only difference between this coin and the Fed's current lending practices is . . . the Treasury needs permission from Congress to borrow printed money from the Fed, whereas -- so goes the argument -- the Treasury has unlimited access to "money" free from Congressional constraint if it is "minted" rather than printed. The difference is quite stark, of course, and clear for all to see. GLURP.

Perhaps this con talk -- sorry, coin talk, I meant to say -- played so straight by our friend Krugman -- will finally give logic a foothold.

Dare I hope the bond market will set us straight, dreadful and painful though it will be, before we debase ourselves into oblivion? Or should I just give up now and make a cup of tea?

I hear my tea kettle whistling.

(P.S. apologies to all where I've conflated the Fed with the Treas. or the Prez.; here's a link that should clear it all up quite nicely.) http://www.pbs.org/newshour/businessdesk/2012/08/does-the-fed-feed-the-treasury.html

mtrobertsattorney said...

Forget the platinum coin. Just build a wooden box,seal it, and have Obama issue an Executive Order claiming that it is filled with magic air worth $1 trillion dollars but cautioning that if the box is opened, the air will immediatly lose its magical powers.

EMD said...

Only if they use a 3D printer.

FORWARD!

cubanbob said...

I'll take another six years of Nixon and double your Watergate's before having another six months of Zero if given the choice.

Machine is of on a rant about full faith and credit. Legalize the use of other currencies in this country to satisfy debts and he will see how much full faith and credit the Swiss Frank has. Friends for the comming inflation put your money in hard asset backed investments.

wyo sis said...

And now little Huey will be able to go to college using the IOU's mommie and daddy put in the piggy bank.

DEEBEE said...

It is disheartening to see grown-ups talk about balancing budgets with magical gimmicks. If our discourse is at this level -- God help US

Bruce Hayden said...

I don't think that an executive order or the like is going to work here for Obama, though I wouldn't put it past him for trying. Yes, the Republicans would be totally unglued, but I don't see this getting through the courts either, for the reasons given by others above. It just so contravenes the express intent of the Constitution, and esp. since it bypasses the Federal Reserve, which was the way that Congress was bypassed in the first place. And, the problem with the Republicans is that they control the House (which is why Obama would be doing this in the first place), and that is where budget bills start. This would, I think, cede them the high ground, allowing them to essentially shut down the government in order to impose their spending cuts.

Rusty said...

I've noticed the usual shills haven't popped up to defend this one.
Perhaps deep in their progressive lizard brains they know this is an incredibly foolish idea.
Or they're waiting for talking points.
You know. They want all the facts before they make up their minds.
And yes, POGO. This is what dictators do.

AllenS said...

John said...
Ann, a question for you as a lawyer and Constitutional scholar:

Is there a Constitutional requirement for the President to "sign" bills into law? By that, I mean physically sign them, not allow an aide to use an autopen to apply a facsimile of his signature.

Is a law signed by an autopen legal?

John Henry


She doesn't answer law questions. She might teach law, but she doesn't seem to know anything about it.

machine said...

So it's agreed: the US should not pay the checks it has already written.

Nice....

davidinvirginia said...

LOL! Ms. Althouse, which alternate universe have you been living in for the past 4 years? "...must be comprehensible as normal, sound and sane to ordinary folks"? LOL! That's precious.

Ern said...

The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks.

I must not be part of the population of "ordinary folks".

Ern said...

The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks.

I must not be part of the population of "ordinary folks".

Jacquejet said...

What would we call it? Perhaps the Uber Reichsmark?

Scott Anderson said...

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.


Can't tell if trolling, or serious. Where have you been for the last four years?

Clyde said...

Trillion dollar coin, my ass. What we really need is a big statue of a golden calf. A trillion dollar coin is just too small to venerate properly.

Rusty said...

machine said...
So it's agreed: the US should not pay the checks it has already written.

Nice..



When these thoughts enter your head and you feel compelled to share them with the rest of the world..........stop and think about it for a full minute and then don't do anything.
Trust me when I say this. It will prevent you from outing yourself as a complete and utter idiot.

Crimso said...

"So it's agreed: the US should not pay the checks it has already written."

I don't "pay" checks I've written, the bank does. When I write the check AND THEN SEND IT TO THE RECIPIENT, assuming the bank does its job and assuming I have the money in my account, the check is "paid."

But that's not what we're talking about. We're talking about never writing the check in the first place. For example, if I have to make a mortgage payment, but don't, I have not failed to "pay the check" I've "already written."

Of course, an even better idea would be to not have the debt requiring the writing of the checks in the first place. That is the root of the problem being discussed here, and addressing it is the only actual solution.

Crimso said...

"Just build a wooden box,seal it, and have Obama issue an Executive Order claiming that it is filled with magic air worth $1 trillion dollars but cautioning that if the box is opened, the air will immediatly lose its magical powers."

You may have just hit upon the perfect solution, allowing us to have our cake and eat it too. We'll actually create the currency, and then set up a mechanism in the box that will cause destruction of the currency at a random time. Until the box is opened, the currency is both intact (so we can use it) and destroyed (so no inflation). Call it “Schrödinger’s trillion.”

rhhardin said...

Iowahawk says that trillion dollar coins only work if you toss them into the mall fountain.

Jay said...

machine said...
So it's agreed: the US should not pay the checks it has already written.



That is so stupid it is actually tragic.

I mean, I chuckled for a second, then I realized you probably actually believe this.

So it isn't really that funny anymore.

TomB said...

Unless this Trillion dollar coin weighs around 20,250 tons, it is just more fiat currency.

Better idea, why not just build 4 more Nimitz class carriers out of platinum! At roughly 100,000 tons each, they would each be worth about 5T. Then Obama can have the "extra" 3.5T to play with these last 4 years.

Fernandinande said...

"Yes, absolutely.
Says Paul Krugman.


Then the correct answer is "no".

Henry said...

Why platinum? Why not dross?

Cap'n Rusty said...

I so badly want Obama to do this. Though there is little evidence, I retain the belief that among a scant few of the idiots that support him, there is a slight familiarity with reality. Were he to coin a $1,000,000,000,000 platinum piece, undoubtedly with his image upon it, even they might see what a joke he is.

retired.military said...

" 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"

TOO LATE

retired.military said...

" 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"

TOO LATE

Ann Althouse said...

"Why platinum? Why not dross?"

Because there is a specific statute authorizing the Treasury to make platinum coins (that was supposed to be about commemorative coins but doesn't have that limitation in the text of the statute).

Henry said...

I suppose a dross commemorative coin wouldn't attract as many collectors.

Hagar said...

"Schroedinger's trillion" wins the thread.

McGehee said...

"The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks."

This president? You're kidding, right?

Bryan C said...

Seems like a waste of good platinum to me. But I'll bet there are thousands of those lovely Obama "Historic Victory" commemorative plates, just gathering dust in a warehouse somewhere. They were priceless family heirlooms in 2008, and now that Obama has had TWO historic victories they've gotta be worth at least a couple billion dollars each! Our deeply divided country needs the inspiration of his confident smile and kind eyes, now more than ever.

Not only is the debt gone forever, just imagine all those loyal Obama supporters sitting at home, unemployed, suddenly discovering they're billionaires! It's the right thing to do.

Seeing Red said...

Since we don't have a spending problem, does it really matter?

kcom said...

"and most didn't believe the GOP would hold the full faith and credit of the United States hostage either..."

They are not holding it hostage. They are acting as a Kevlar vest, trying to protect its vital organs from the fusillade of bullets the Democrats are firing at it with their (high capacity magazine) economic assault rifles. When the full faith and credit of the United States is bleeding red all over the floor it doesn't exactly inspire confidence.

Bryan C said...

"So it's agreed: the US should not pay the checks it has already written."

No. It's agreed that the US should start paying those checks it has already written, rather than leaving that responsibility for our unborn children.

Payments which the US could meet under the current debt limit, if people like you actually believed it was important to repay debts.

McTriumph said...

I read somewhere that Krugman was ask to be the new Sec. of Treasury, but wisely turned it down. I suspect he is afraid to be officially part of this administration, especially when this economy built on Federal Reserve sand collapses and the hanging begins. Isn't that how banana republics usually end?

Mark said...

He will order the coin made because he has no risk from any fallout. Ordinary people already know that he is not "normal, sound, and sane", while his supporters treat his every action as delivered from God.

Mark said...

He will order the coin made because he has no risk from any fallout. Ordinary people already know that he is not "normal, sound, and sane", while his supporters treat his every action as delivered from God.

ed said...

"Because there is a specific statute authorizing the Treasury to make platinum coins (that was supposed to be about commemorative coins but doesn't have that limitation in the text of the statute)."

I advocate the thinnest possible platinum coin and minted only on one side, as a tribute to Zimbabwe. As an aside I mentioned this to my niece and she laughed and thought I was joking.

So. Should I buy more gold? Or cans of soup?

Seeing Red said...

Machine is so cute, it's just that Uncle Sam is now like most of us, the commoner, deciding which bill to pay when.

Maybe Congress shouldn't get paid for the duration, we're all in this together, after all.

Most people have to cut back, why shouldn't Uncle Sam? What makes him special?

ken in sc said...

I don't think the debt problem is as bad as it looks because the federal balance sheet does not include the real estate and mineral wealth the federal government owns. I don't know how bad the debt problem is because I have never seen a reasonable estimate of that value.

The balance sheet of a private person or company would include these things.

The platinum coin idea is stupid.

The Monster said...

"So it's agreed: the US should not pay the checks it has already written."

This nonsense comes up every time we discuss fiscal matters. The Left conflates "paying the checks we've already written" with "writing more checks". They do something similar with every attempt to reform Social Security: If you propose raising the retirement age for people who are now under 50, they pretend that you advocate changing the deal for someone who files for his SS benefits tomorrow.

Aaron said...

As Sowell says "and then what?"

Even if they make that coin just to threaten the GOP, every bondholder in the world might get spooked.

Though the Fed is already printing 40 billion a month anyways, the whole coin idea is just to neat.

I had to explain to my lefty friends that inflation hurts the poor the most...they thought it hurt rich people.

Conserve Liberty said...

We should strike the profile of Archduke Ferdinand on the obverse and the City of Weimar on the reverse of the coin.

mr burns said...

The platinum coin nonsense is no crazier than having the fed buy 80%+ of all treasuries so as to keep the interest rate far below it's natural/market rate, which is exactly what is going on now. It is like watching little sub-normal children play with matches, automatic weapons, prostitutes and narcotics all at once.

Jeff Dorsai said...

actually the law in question is pretty clear ... The Sec Treas can have a 1 trillion dollar coin minted but he would have to buy 1 trillion dollars of platinum first and have the coin struck with that metal ... the law directs that the coins have a value of the bullion contained with some minor markups for minting amd handling ...
so first he would have to find a spare trillion in the couch cushions, buy the bullion and then strike the coin which would weigh about 638 million ounces ... all legal ...

mr burns said...

Actually inflation hurts the stupid most of all. It is a form of liberalicide.

Doug said...

I've seen a warning poster about this fraudlent coin here:

https://www.facebook.com/#!/photo.php?fbid=4838904264930&set=a.1062959468670.10941.1666474751&type=1&theater

Larry said...
This comment has been removed by the author.
denmotherblog said...

machine said...
and most didn't believe the GOP would hold the full faith and credit of the United States hostage either...
but they will...again...


I know you heard or read this somewhere and thought it sounded good. But "full faith and credit" doesn't mean what you think it means.

Rusty said...

Crimso @ 7;15

Made my day. Thanks!!

Bill Dalasio said...

And when this harebrained scheme is launched, how exactly does Mr. Krugman think the bond market will react. At that point, the legal legitimacy of the USD will be dubious, at best and the Fed's credibility will be shot. But, hey, at least they manage to increase debt without having to negotiate with Republicans.

gregq said...

President Obama can try this. Then House Republicans can refuse to pass a continuing resolution, and the government can shut down.

Then they can refuse to pass a budget until Congress passes a law, and Obama signs it, that blocks the coin trick, and repudiates any existing coins.

One of the major mental deficiencies of the Left is they simply can't wrap their heads around the idea that the other guy gets to play just as rough as they play. They want to refuse to bargain in good faith, and play hardball? Fine. So do we.

As the party of government dependency, they have a lot more to lose than we do.

gregq said...

"So it's agreed: the US should not pay the checks it has already written."

Nope. It's agreed that the US shouldn't write more checks that it has no chance of ever paying.

"No increase in debt limit" = "budget immediately balanced, because the US can not engage in any more deficit spending."

Yes, this means a lot of people who are dependent upon the gov't will get screwed. Tough.

gregq said...

ken in SC:

The land and minerals the gov't "owns" are only valuable if the gov't is willing to sell the land / allow the minerals to be mined / drilled for.

The environmental left would rather entitlements get cut, than land get sold and put to productive uses. So there will have to be a major civil war on the Left before something like that could happen.

Revenant said...

the US should not pay the checks it has already written

You confuse the act of writing a check with an empty promise to write a check later on.

Spending in excess of the debt limit is in the latter category. :)

VekTor said...

"The President must maintain the people's trust and confidence. He must be comprehensible as normal, sound, and sane to ordinary folks."

There are unstated assumptions in your choice of construction, Professor.

I would challenge you to check your premises. Simply because you believe that the only prudent path for the President to take is the one you outline, that does not in any way imply that he MUST do so.

There is certainly no requirement that he do so. Presidents have done imprudent things before, and it would hardly be the first time that a President took an action that some subsection of the population considered far beyond the pale.

The current economic wunderkind contingent is enamored of something that they call Modern Monetary Theory. They assert that the old Quantity Theory of Money is flawed, and insist that their new model accurately describes how money "really works" in modern economies.

They are stone-cold serious when they assert their belief that taking this action, or even ones far larger, would not have an inflationary effect. In their view, it is only spending (appropriations) when at full employment that can have an inflationary effect.

This maneuver, or the jaw-dropping version where someone is seriously advocating making a single coin one time denominated at 60 trillion dollars, simply changes the balance available at the Treasury, and since the US is a sovereign issuer of currency, they have the ability to manufacture whatever amount of currency they like out of thin air. That's the nature of fiat currency.

They assert that no matter how high the balance is at the Treasury, the only potential for economic effects would come from the incremental spending as Congress appropriates additional funds and spends them... but that spending in excess of revenues is not inflationary now because we are at less that full employment.

I would sleep better if I were simply making this up as a lark... but I'm not. These folks are real, and are serious. I fear for the future of our nation if they are believed in Washington long enough to let a djinn like this out of the bottle.

Stephen A. Meigs said...

The problem with the economy is really that there is not enough money that doesn't have associated with it private debt. If there were more currency or coinage, then the government could wisely discourage lending, which excess lending is what caused the collapse of the economy to begin with.

The conversation about government debt in the media is remarkably stupid. For instance, Why is it rarely pointed out that money in the strict sense is backed almost exclusively by government debt? Were there no government debt, there would be practically no money (except to the extent it is backed by coins, etc.) Government issued debt and money does not have associated with it private debt. Money that banks create out of thin air in checking accounts, etc., does have associated with it private debt. As long as government created debt and money is small compared with money that the banking system as a whole creates, the total amount of money people have in the broad sense will always be near the amount of debt people have and our citizens on average will be bad off. This is just simple accounting identity.

Vastly increasing the money that the government creates (relative to what the commercial banking system creates) would be a fine thing as long as the money is given or spent so as to end up in the economy. Obviously if the money is spent, it would be preferable if it were spent on something useful, but that is not the main issue.

The wrongly sophisticated tend to think that our economic problems are complicated and that there could be no quick remarkably easy fix like the government printing and distributing more money (backed by trillion dollar coins, say), while not allowing banks to create more money and restricting lending. But they are wrong (assuming the method would be legal, which I have no knowledge about)--that's in fact exactly what we need to do. Stephen Colbert said yesterday that the coin should have the Charmin toilet-paper bear embossed on it because obviously the idea came from the government's ass. But that's wrong, too, though a relevant topic. About half of sexual morals is equally simple as fuck--distinguishing between sodomy fuck and sex fuck. Ordinary people who haven't made this observation will be made quite crazy by their own natural defenses, excesively accepting simple answers regarding anything relating to sex or sodomy from a natural sense that the answer is likely simple (as though the answers came from their asses, I suppose Colbert would say). Elitists to keep from going crazy will tend accordingly to view themselves as having broad crazy tendencies to oversimplify things. But actually what elitists have are crazy tendencies to oversimply things that remind them of the sex/sodomy distinction but aren't. And bankers (whom ellitists tend to view as eminently respectable) and platinum proof coins probably don't remind elitists of sodomy or sex, so in fact, they would have little crazy tendency there to prefer simple solutions, whereas their stupidly indiscriminate sophistication might cause elitists to excessively reject solutions there that are simple. Elitists need to see that they only have crazy tendencies to view things as too simple as regards matters that vaguely are like the sex/sodomy distinction, and to stop allowing a false sophistication on their part to discourage themselves from seeing simple truths.

On the other hand, there are some common people, not having possessed or used leisure to analyze the economic situation and lacking understanding, who view things too simply by conflating what is called government debt with private debt, when in fact they are more opposites of each other. And there are other people (Peterson foundation?) who are against government debt because they think if interest rates weren't low, banks and financial institutions insuring or holding debts and mortgages might suffer, and they overestimate the importance of finance, an essentially non-productive sector of the economy, or have selfish stakes.

Frenchy said...

Because making a $20 Trillion dollar coin would be ridiculous?

Frenchy said...

Because making a $20 Trillion dollar coin would be ridiculous?

MikeAdamson said...

Seems like a clever move financially speaking and it probably survives judicial scrutiny assuming that the law is applied as written. Still, it's a dumb move politically because it lets the GOP escape accountability and opens the President up to ridicule and invective from regular Americans and not just the 27%.

Thucydides said...

Well if a platinum subway token is all it takes to pay off the deficit or debt, then everyone now has a way to pay their new tax bills as well.

If the IRS questions you tell them Paul Krugman said it was OK...

Steve Koch said...

machine,

The feds income per year is around $2.5 trillion. IIRC, the cost to service that debt is less $.5 trillion, so if the fed gov stopped borrowing money tomorrow, it could easily afford to service the debt.

The GOP will use the debt ceiling debate to try to force the dems to do a budget, as required by law. The dems have not done a budget in 4 years, truly execrable and a complete abdication of their duty to the USA. BTW, the constitution says that congress controls the spending, so what the GOP controlled House is doing is entirely appropriate from a constitutional perspective.

From a financial perspective, back in 2011, for the first time in history, S&P downgraded US Treasury debt to below AAA.

The Chinese and other countries are now in the process of gradually of replacing the dollar as the reserve currency for the world. This will have a huge continuing negative impact on our economy.

Keynes wrote:
"Lenin is said to have declared that the best way to destroy the capitalist system was to
debauch the currency. By a continuing process of inflation, governments can confiscate,
secretly and unobserved, an important part of the wealth of their citizens...
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis
of society than to debauch the currency. The process engages all the hidden forces of
economic law on the side of destruction, and does it in a manner which not one man in a
million is able to diagnose."