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And yes, I do expect you to read that in a Dr. Evil voice.

Anyway, we're coming soon to another of those debt ceiling negotiations hostage taking incidents. There's a surprising and cunning option available to Obama to sidestep the entire morass and perform the exact same thing without needing to deal with a bunch of gerrymandered-districted blackmailers. That is, to have the Treasury mint a special non-circulating TRILLION DOLLAR platinum coin and deposit it at the Fed.

There are a number of arguments against this procedure, but I'll wait till they're actually raised before discussing them. Meanwhile, Adam Kotsko raises a point often overlooked in their entire debt ceiling controversy:

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In all the discussion of the debt ceiling, I think a really simple point is often lost — namely, that if the debt ceiling is not high enough to account for the debt required to spend all the money Congress has legally obligated the executive branch to spend, there is a contradiction in the law. What the president is doing when he requests an increase (or, in a different way, what the Treasury secretary is doing when he takes “extraordinary measures” to put off exceeding the debt ceiling) is politely asking Congress to resolve the contradiction in a face-saving way. If Congress doesn’t do that, then we are in a self-induced state of exception where the law does not provide guidance — and we all know who makes the decision about how to handle the state of exception!

Now our intrepid sovereign could choose to resolve the contradiction by claiming that the appropriations laws override the debt ceiling — i.e., that Congress implicitly already raised the debt ceiling by requiring the Treasury to spend a certain amount of money beyond what it is allowing the Treasury to take in as taxes. There is no need for an obscure constitutional provision to justify this decision. It’s elegant and straightforward in itself, and it has the benefit of privileging the laws that Congress most recently passed.

If Obama were really concerned to let Congress save face and treat both of these contradictory laws as equally important, there is the (stupid) platinum coin option that has gotten so much play in recent weeks. The solution here would be to say that Congress is requiring us to spend X amount of money but has only allowed us to borrow X-Y amount, and so we solve the problem by printing $Y. This is a solution that I assume a lot of people would have trouble accepting, but it does have a certain rabbinical quality to it that I find attractive.

The very worst decision to make here is to insist that the debt ceiling takes priority over the appropriations laws. As far as I can tell, in the past presidents have pretended they were constrained to favor this option in order to pressure Congress to resolve the contradiction themselves rather than subject everyone to the unedifying spectacle of the executive resolving it for them. This is a nice token gesture toward the separation of powers that I’m sure we all appreciate! But the only reason a president would allow it to be more than a token gesture — the only reason he would seriously cut off spending in order to comply with the earlier debt ceiling law instead of the more recent appropriations laws — would be if he wanted to be “forced” into cutting spending.

I’m not telling anyone anything they don’t already know — it’s pretty much conventional wisdom in the left blogosphere that Obama was just as eager as the Republicans to use the debt ceiling crisis for a misguided “grand bargain.”


So, let's get back to the matter of the $1,000,000,000,000 platinum coin. Specifically, I would like to hear what our economically-minded posters have to think about it, because, the unorthodoxy of the proposed solution is somewhat...distracting, so it's hard to be objective about it.
It's not actually a coin. It's coins. Basically, the president cannot order the treasury to print gold silver, copper or paper money without congressional approval. This is a sidestep and semantics move to just print more ******** money up.
Neither side wants to tackle the out of control spending. And the citizens allow them to continue pissing away money they don't have.
Old Blue Collar Joe
It's not actually a coin. It's coins. Basically, the president cannot order the treasury to print gold silver, copper or paper money without congressional approval. This is a sidestep and semantics move to just print more ******** money up.


Uh, yes.

You make it sound like that's bad or something.

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Neither side wants to tackle the out of control spending. spending on "defense".


Fixed.
azulmagia
Old Blue Collar Joe
It's not actually a coin. It's coins. Basically, the president cannot order the treasury to print gold silver, copper or paper money without congressional approval. This is a sidestep and semantics move to just print more ******** money up.


Uh, yes.

You make it sound like that's bad or something.

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Neither side wants to tackle the out of control spending. spending on "defense".


Fixed.


Because when you print money like you're working for Parker Brothers and boxing monopoly games, it devalues the currency. That tends to be bad. We've had more than one country collapse because of this act.
And, of course, the issue of completely violating the proper procedures to add money to the economy, thus, giving ONE person complete unilateral control.

Fixed? That's ******** retarded. To think we have ONE thing that is the problem? We have a shitload of programs that need to be cut, military is but one part of it.
Old Blue Collar Joe
azulmagia
Old Blue Collar Joe
It's not actually a coin. It's coins. Basically, the president cannot order the treasury to print gold silver, copper or paper money without congressional approval. This is a sidestep and semantics move to just print more ******** money up.


Uh, yes.

You make it sound like that's bad or something.

Quote:
Neither side wants to tackle the out of control spending. spending on "defense".


Fixed.


Because when you print money like you're working for Parker Brothers and boxing monopoly games, it devalues the currency. That tends to be bad. We've had more than one country collapse because of this act.
And, of course, the issue of completely violating the proper procedures to add money to the economy, thus, giving ONE person complete unilateral control.


This "printing of money" is only to be done in order to avoid a default. Surely that is better...
azulmagia
Old Blue Collar Joe
azulmagia
Old Blue Collar Joe
It's not actually a coin. It's coins. Basically, the president cannot order the treasury to print gold silver, copper or paper money without congressional approval. This is a sidestep and semantics move to just print more ******** money up.


Uh, yes.

You make it sound like that's bad or something.

Quote:
Neither side wants to tackle the out of control spending. spending on "defense".


Fixed.


Because when you print money like you're working for Parker Brothers and boxing monopoly games, it devalues the currency. That tends to be bad. We've had more than one country collapse because of this act.
And, of course, the issue of completely violating the proper procedures to add money to the economy, thus, giving ONE person complete unilateral control.


This "printing of money" is only to be done in order to avoid a default. Surely that is better...


Not really. I'd rater see across the board cuts. We've been slapping band aids on arterial damage for years. Time to stop.
Disa Uniflora's avatar

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My understanding is that the coin is platinum, and that platinum can be arbitrarily set to any denomination as it's not in circulation. I could be remembering what I read wrong, it was a few days ago, but they definitely specified it was platinum and that that was what made it special in this case.
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Also, supposedly it won't affect inflation because it's not actually in circulation.
Disa Uniflora
Also, supposedly it won't affect inflation because it's not actually in circulation.


Both of what you said is true.
Disa Uniflora
My understanding is that the coin is platinum, and that platinum can be arbitrarily be set to any denomination as it's not in circulation. I could be remembering what I read wrong, it was a few days ago, but they definitely specified it was platinum and that that was what made it special in this case.


It's basically an IOU that he doesn't have authority to write, Disa. Put it this way, it's like writing down that he's going to place a 1 trillion dollar IOU in the vault. But...he can't do that, because it is the equivalent of paper currency, and THAT power falls on congress, to prevent just what he's doing from occurring.
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As I was discussing in chat, I think this article best articulates a lot of my reservations, though I'm not entirely convinced by his quick legal analysis. Yes, legislative intent only plays an informative role, but assuming justiciability requirements are met, courts tend to jealously guard institutional guards like separation of powers and I wouldn't be so quick to dismiss the bad taste this would presumably leave in their mouths. This is especially true when you consider, I think, that the courts tend to rely on the strength and validity of that separation to a greater degree than other branches. My increasingly cynical view of our court system is that, if a judge or bench of judges really wants an outcome, there are a number of interpretive weapons they can wield easily enough, and plain meaning is just one regardless of the canonical hierarchy the profession tries to insist upon.

A few other comments I think make sense and should give pause:

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The most compelling argument against it is that deployment of the solution would so obviously signal a breakdown in Washington policy-making that really bad things could result. It would represent a large and important change in the nature of monetary policy-making, since an adminstration that had once opted to take it upon itself to expand the money supply and enjoy the benefits (and eventual inflationary costs) of seignorage might do it again, for any number of reasons. Executive power, once seized, is rarely surrendered. There is a small chance that global markets would grow scared of America, and would dump exposure to the American economy in chaotic fashion.

Link.

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The fancy of a $1 trillion platinum coin is so tantalising in part because it puts a monetary option in play. The larger attraction, though, is that it does so in a way that honours democracy by sticking to the letter of democratic legislation, yet also flirts with the heady unilateral decisiveness of fascism. This is, I'm afraid, a combination powerfully intoxicating to the pundit id. We'd be better served, however, if the commentariat would rein in its id, stop its idle chatter about exotic, coin-based, presidential monetary policy, and begin seriously to consider the more probable but less glittering eventuality of a Greek-style default.

Link.
Heimdalr's avatar

Mega Noob

I'll assume the President is escorted by a proportionate number of federal agents? Or, scratch that, he's probably having a courier handle the actual transport. Wouldn't want to be set up for the ultimate, iconic heist.
Less Than Liz
My increasingly cynical view of our court system is that, if a judge or bench of judges really wants an outcome, there are a number of interpretive weapons they can wield easily enough, and plain meaning is just one regardless of the canonical hierarchy the profession tries to insist upon.


You're improving, Less Than Liz. Yes, your mind is beginning to work.

It's entirely due my influence, of course. You mustn't take any credit.

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The most compelling argument against it is that deployment of the solution would so obviously signal a breakdown in Washington policy-making that really bad things could result.


So, if we continue to pretend that Washington policy-making is fine and dandy, we don't have anything to worry about. Great. rolleyes

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It would represent a large and important change in the nature of monetary policy-making, since an adminstration that had once opted to take it upon itself to expand the money supply and enjoy the benefits (and eventual inflationary costs) of seignorage might do it again, for any number of reasons.


OK, anyone with any sense will start disregarding this person starting here.

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Quote:
The fancy of a $1 trillion platinum coin is so tantalising in part because it puts a monetary option in play. The larger attraction, though, is that it does so in a way that honours democracy by sticking to the letter of democratic legislation, yet also flirts with the heady unilateral decisiveness of fascism.


This is so bad it's worthy of Pseud's Corner in Private Eye.

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This is, I'm afraid, a combination powerfully intoxicating to the pundit id.


....And the writer just topped himself in that department. rolleyes
azulmagia
This "printing of money" is only to be done in order to avoid a default. Surely that is better...


That's what Germany did to avoid defaulting on it's war debts after WWI. Just kept on printing money to stop from defaulting. The money got so devalues, that people would be paid in literal hand carts of cash. And it devalued so fast, that by the time they could take their pay to the shop, it was worth all of a loaf of bread. Which meant workers needed to be paid more, which meant more money needed to be printed, which meant each dollar was now worth less which meant workers needed to be paid more...

So uh... yeah, printing money to pay off a few trillion dollars of debt? About the worst thing you can do. Not to mention, once your money becomes worthless, you've just paid back the money you owe to other countries with essentially monopoly money. Then who'll lend to you in the future?
It has been said that putting the treasury in a position where it has to request congress to spend the money it has already been asked to spend by congress, is a bad idea.

Onto the subject of devaluation there are both benefits and limitation. Equating it to Weimar Germany would be naive, but still demonstrate one possible problem, especially if you're not careful.

There's also the fact that "Printing Money" is kind of an obsolete term since Currency barely account for something like 10% of money.

The US dollar could probably do with some devaluation both to cut into debt and increase their competitive exports, but does have domestic and diplomatic risks.

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