Skip to main content

Among the many posts on the Trillion Dollar Coin (TDC) and Platinum Coin Seigniorage (PCS) we're seeing this week, is a category of posts favoring using PCS in a limited way to avoid the debt ceiling crisis, rather than using it in a much more robust way, that would change the procedures underlying Federal spending, so that fiscal policies advocating austerity no longer have a political foundation in a visible and rising national debt that austerity advocates can constantly talk about fixing through “shared sacrifice.”

The Trillion Dollar Coin, as in #TDC and #mintthecoin is a meme representing more than a Trillion Dollar Coin. It represents, instead, the general capability of the Treasury Department under 31USC5112(k) to mint platinum coins of whatever face value the Secretary cares to specify.

The coins involved could have $1,000, or $1 million, or $1 Billion, or $1 Trillion, or $60 Trillion, or $100 Trillion, or even $1 Quadrillion face values. So, an issue immediately raised is what platinum coin denomination(s) should be minted by the Treasury Department if it decides it wants to use PCS to help fill the Treasury General Account (TGA) with enough electronic credits to fulfill its objectives?

Of course, the answer to this question is inherent in the way I posed it. It depends on the objectives involved, and these objectives will not and should not be merely narrowly financial or technical. They will and should be political.

And the two main political objectives associated with PCS and the TDC up to this time have been a) remove the risk of a politically induced default on the debts of the US Government caused by a refusal of the Radical Republicans to raise the debt ceiling to accommodate deficit spending appropriations Congress has already made; and b) to end the political context of austerity which has constrained and limited government activity in the service of public purpose, since the “fiscally responsible” (really stupidly fiscally irresponsible) Democrats gained control of the Executive Branch of government in 2009.

In the latest outburst of posts, tweets, articles, and videos about the TDC, we're beginning to see, a feeding frenzy in which the participants self-organize around the TDC meme AND the objective of avoiding the debt ceiling, but without providing any consideration at all to higher value PCS options that could both make the debt ceiling a dead letter and also remove the driving force for austerity politics. This focus on the bare TDC and its application to the debt ceiling is “small ball” policy analysis that ignores larger issues related to PCS. It needs to stop before it totally drives PCS into a defend the status quo solution, that may defuse the debt ceiling, but still leave us in the sorry state of austerity-driven politics

The focus  on “small ball” policy analysis of PCS is emblematic of the superficiality of media outlets and what passes for “journalism” in the early 21st century. Too many content professionals are no more than marketers and propagandists, and don't make even minimal attempts to get at the heart of the larger PCS news story.

If the small ballers get to control the PCS debate it will result in the waste of a remarkable opportunity to change the whole direction of American politics. Progressives need to wake up and try to grasp this opportunity, before the fiscal conservatives save their version of the financial system with its increasing tendency to impose austerity on the rest of us while the 1% get more and more wealthy.

Let's review the pattern of those recent “small ball” PCS posts (each one summarized in the Appendix), and the significance of the position they take on PCS, then in my next post, I'll deal with an exception to the “small-ball” pattern. And in the Post after that I'll compare the small ball position with the one taken in the relatively few PCS “game-changer” posts.

The “Small Ball” Pattern

The primary characteristics of the small ball posting pattern are:

-- They generally don't consider any other options but the “TDC” option. They take the TDC meme literally and address their description, analysis, and advocacy to the TDC option, and its ability to end the debt ceiling crisis, and not to any of the other Platinum Coin Seigniorage variations, and what they may be able to do.

-- They view the TDC option as somehow screwy, outrageous, ridiculous, looney, bizarre, or highly inappropriate, even though they acknowledge that it is legal, and probably would not be inflationary.

-- They also believe that debt issuance prior to deficit spending, the way things are now done, is preferable to issuing platinum coins and then spending without debt issuance. So, some are concerned about the impact the TDC will have on the Federal Reserve's control of monetary policy and its independence and most are advocating Josh Barro's idea of swapping PCS capability for repeal of the debt ceiling legislation.

-- They favor the TDC, however, despite its negative characteristics, for one very good reason: using it is preferable to defaulting, in violation of the Constitution, when the debt ceiling is reached, and, again, according to Josh Barro's proposal, the capability to make TDCs can be traded for debt ceiling repeal, once it's shown that it can be used to avoid the debt ceiling and prevent default.

Let's evaluate this pattern. First, the idea that we have only one problem to deal with and that's the debt ceiling problem is short-sighted and narrow, and reflects the bias of small-ball writers towards the economic and political status quo. What they all want is for the debt ceiling crises  to be over, for it to go away, and for the political system to return to normal.

Well, that may be what these writers want; but “normal” in the current political system is austerity politics, a politics in which “the fiscally responsible” people in both parties are about to agree on severe cuts to discretionary spending and the social safety net, and also, perhaps to increasing tax revenue, which will extract further money from the economy. The cuts in deficit spending being planned, with or without any debt ceiling crisis, will severely reduce aggregate demand, and will do that for years to come; condemning American to a depressed and stagnant economy for several more years and perhaps beyond. That situation's not much good for most of us, but it would be the result of the failure to end austerity resulting from viewing PCS as just an expedient for solving the debt ceiling crisis.

Second, I know it's fashionable for the Very Serious People (VSP) who comprise the New York/Washington policy/financial axis to view PCS as silly, ludicrous, and all the other various epithets they've seen fit to bestow on it. But. In doing so, they reveal their ignorance of the history of fiat money issuance and coin seigiorage unaccompanied by debt issuance in the United States and elsewhere.

Lincoln's Greenbacks funded the Civil War without ruinous inflation, and many nations funded their spending in World War I without debt issuance, and Nazi Germany, even if we hate the example, used it without issuing debt and without inflation in the pre-World War II period. Platinum Coin Seigniorage is not a priori silly. It is just not the way things have been done before, and if used in high denominations, it would require adjustments by the Federal Reserve. That does not make it silly, or looney, or ludicrous, or any such thing. It just makes it new and untried. That may be a problem for conservatives, and members of the MSM village, who, above all, want to be viewed as among the VSP; but it should not be one for progressives.

Third, the belief that deficit spending preceded by debt issuance is preferable to using PCS to close the gap between tax revenues and government spending is a belief I don't share. The basis of it, apart from some of its advocates benefiting from current arrangements in some way, is the belief, that Treasury issued reserves in the process of spending without debt issuance are more inflationary; than reserves added only after debt issuance. This, in turn, requires assuming that debt instruments added to the economy as net financial assets are less inflationary than reserves added when unaccompanied by debt instrument sales. This assumption is false.

Debt financing is accompanied by interest payments into the economy of some $245 Billion at present. In addition, debt instruments can be sold anytime reserves are needed, and also, debt instruments can be leveraged multiple times when used as collateral in credit transactions. Reserves do receive Interest-On-Reserves (IOR) from the Fed these days. But the rate paid is lower than on Treasuries and also the payments are made by the Fed and are not a cost to the Treasury. Finally, since reserves injected into the economy through deficit spending cannot be leveraged as effectively as debt instruments, they are not as potentially inflationary in a financial system where private banks and the Fed, based on credit, routinely create money out of thin air, whether the Treasury deficit spends or not.

Believing that it's preferable to have debt issuance precede deficit spending, rather than to use PCS prior to it, also is accompanied by concern about the impact of use of massive PCS would have on Federal Reserve control of monetary policy. PCS, in fact, is likely to result in the Federal Reserve's having to adjust whatever it wants to do in response to deficit spending. Is this a problem, or a bad thing? Does that compromise the Fed's independence? Doesn't the Fed now formulate its monetary policy based on the assumption that the Treasury will issue debt?

Of course, it does. So, what the Fed does now is already impacted by what the Treasury does. It is already reacting to what the Treasury and Congress do, and we also know very well that it reacts to what Wall Street does. And the change that would be introduced by using PCS as the basis of all deficit spending would do no more than cause the Federal Reserve to make some different assumptions before it reacted to these various forces.

The idea that this is destroying the Fed's vaunted independence, and that this makes it impossible to consider very high value PCS, is no more than a bias that prefers the status quo, and the way things are done now, where the predominant influence at the Fed is from the big banks and Wall Street. It is just conservatism talking again. Just a willingness to avoid changing how we do things to take austerity off the table, and make a better life for everyone out of fear of the new, the strange, and the unknown.

Fourth, even though the “small ball” writers are for using the TDC as a last resort, most of them endorsed Josh Barro's idea of making a deal to swap the PCS capability in return for repeal of the debt ceiling law. This idea is a terrible one, and if progressives support it or even accept such a trade, then that would a perfect example of “loser liberalism.”

It's essential to understand that if the Treasury uses PCS and continues to have the PCS capability, then the debt ceiling legislation is already a dead letter. It doesn't matter if it exists, since the outstanding debt can be paid using PCS, and all future deficit spending can be covered by credits generated by the Fed in the course of using PCS.

Since that's the case, a trade of the PCS capability for repeal of the debt ceiling legislation is a trade of something potentially very, very valuable as an enabler of progressive politics in return for nothing at all. It would be a bizarre trade. A silly trade. It would be a moronic trade. A trade made for no purpose at all.

Conclusion

Only a person who wants to keep the system of government deficit spending exactly as it is today can possibly advocate such a trade. But why would people want to keep it the same as it is now, since the political impact of such a system is so disastrous for progressive politics and for government efforts to achieve the public purpose? Why would people want to preserve a system that constantly sets the political table for austerity by constantly increasing something called “the national debt?”

What do austerity advocates now use to justify the policies they prefer? The answer is that they use the existence of the debt. And then they talk about fiscal responsibility, and the grandchildren, and the markets driving interest rates up, and the possibility of running out of money, and about cutting Social Security, Medicare, Medicaid, discretionary programs that people need, and then they go on to talk about this thing we need that we can't pay for, and that thing we need that we can't pay for, and all the financial limitations we have in doing things that we desperately need to do to make our country viable again.

We need to put an end to all that. And we can do that if the PCS capability is maintained; and if we can find a President who will use its power to its full extent. That's why progressives need to wake up, and not only defend PCS against a Republican attack that has already begun; but also come forward with their own PCS proposals that will go beyond the TDC and offer PCS options that will put an end to the political basis of austerity!

Appendix: ”Small Ball” Views on the Trillion Dollar Coin

This survey summarizes what each of the pieces on the Trillion Dollar Coin appearing in the last few days I had the opportunity to review had to say. They served as the foundation for the above analysis. The dominant pattern is established by the Wiesenthal and Barro posts, and then is replicated by pretty much what looks like an MSM-based echo chamber. Not every post appearing in this time frame is replicated here. And some posts on the TDC were opposed to the idea and so, are not part of the 'small-ball” category. Nevertheless, I think the posts and the video segment reviewed here are representative and that they served as a good basis for the pattern I identify in the Post.

Joe Wiesenthal: Minting the Trillion Dollar Coin won't cause massive hyperinflation because: the money from a TDC wouldn't go into the economy since it wouldn't be used to pay back the debt; and even if some of it did go into the economy, the Fed could “sterilize” that by selling enough of the Treasuries it's holding to get money out of the system.

The TDC won't destroy the dollar because: the money won't be just poured into the economy like “a helicopter drop” of money to people would be. It's just a stop-gap to get by the debt ceiling and keep services going.

People who say we should mint a $16 Trillion coin or a $100 Trillion coin are missing the point. The point isn't to pay off our debt. It's to get by the debt ceiling. If we did try to pay off the debt with a minted coin we'd get inflation or hyperinflation because of the massive expansion of money.

Joe Wiesenthal2: Wiesenthal points out that Paul Krugman, Jerry Nadler (D-NY), and Josh Barro of Bloomberg News have endorsed it. Barro proposes an agreement in which the Republicans give up the debt ceiling and Obama gives up the PCS capability. Wiesenthal then says that it's silly to think of funding the Treasury with a coin, but even sillier to think that defaulting is a good idea. So, let's do the lesser silly (my paraphrase).

He also thinks that minting a TDC would not result in massive inflation because that results only from a massive injection of new money into the system, and a TDC could result only in spending conforming to Congressional appropriations. Also, we should not mint a $100 Trillion coin because: the current economic constraint is not about money, it's about law and getting around the debt ceiling, and a $1 T coin gets around that just as well as a $100 T coin.

Josh Barro: The Treasury has the authority to mint large denomination platinum coins and deposit them at the Fed to finance payments of the Government's bills in lieu of issuing debt. If the Republicans offer a list of demands to be met before they vote to increase the debt ceiling then the President should should simply say that he will mint platinum coins to pay the Government's bills until the debt ceiling is raised. And he should also promise that as soon as the debt ceiling is raised he will have Treasury issue bonds to drain the economy of currency equal to the value of the platinum coins in order to dampen down inflationary expectations. Josh Barro then says:

And then he should offer to sign a bill revoking his authority to issue platinum coins -- so long as that bill also abolishes the debt ceiling. The executive branch will give up its unwarranted power to print if the legislative branch will give up its unwarranted restriction on borrowing to cover already appropriated obligations.
He goes on to say that debt ceiling coercion is no way to run a country and neither is “. . . . monetizing deficits through direct presidential of the currency, in lieu of borrowing.” So, the ideal “concession” for Obama to offer is to trade this power for repeal of the debt ceiling legislation.

Matthew Yglesias: Platinum Coin finance would create new spending capacity, but no new spending authority. But because “it's mighty silly” he supports Josh Barro's call for legislation that would trade platinum coin financing authority for repealing the debt ceiling.

Joshua Holland, a progressive writer, likes the idea of using the TDC. He cites Josh Barro's post and also Jerry Nadler's support of the TDC idea, and then brings in Kevin Drum's legal qualms about the platinum coin legislation which I've reviewed earlier. But then he concludes that he'd just use the coin and let the chips fall where they may. He grants that there may be law suits, but says he still thinks it's a good idea because there's “. . . nothing more ridiculous than a Congressional minority threatening the economy by trying to extract unpopular concessions in exchange for paying the bills that Congress itself already ran up. Let's not pretend this is normal behavior we're dealing with.”

And then he points out we should not pretend that the behavior of hostage taking using the debt ceiling is constitutional behavior and then cites the 14th Amendment Section 4, and the oath of office to strengthen his case.

William Wei at Business Insider produced a youtube explaining the mechanics of the TDC, inaccurately, in the interests of brevity I suppose, lets people know about the #mintthecoin movement, and then asks people to choose which is more silly, minting the TDC and paying your bills; or not minting it and going to default.

The #mintthecoinpetition asks the White House to direct the Mint to make a single platinum trillion dollar coin! It asks for this simple solution to avoid playing political football with the US and global economies.

Charles Riley of CNN also writes about the TDC. He says it's not going to happen because it could lead to even people worrying about inflation and to critics of Federal reserve QE being apoplectic if the Treasury Department did a further “helicopter drop” of $1 Trillion. But later after outlining the solution, he refers to it as “elegant,” and points out that Jerry Nadler supports it as do many on twitter.

Alex Hern put together piece which combines the Wiesenthal and Barro posts and follows Barro down the road of advocating the swap I outlined earlier. He also repeats Wiesenthal's statement that the TDC idea was first suggested by Cullen Roche on July 7, 2011. So clearly Hern did no research of his own on the coin and its origin.

Connor Simpson at the Atlantic Wire is another participant in the echo chamber generated by Joe Wiesenthal. Connor mentions the platinum coin, links to all the names I've mentioned above, repeats Wiesenthal's viral error about the origins of the TDC movement, mentions the #mintthecoin petition, and then follows Barro down the line about what ought to be done, but also emphasizes using the coin as a negotiating tool to get the debt ceiling leverage off the back of the President in the negotiations over the budget. Then he asks why Obama didn't think of this before? And answers: “Because no one's first resort to a debt ceiling fight is to create what is essentially a loonie on horse steroids, duh.” He then concludes by presenting various humorous tweets on the subject by way of agreeing with the position that the move would not damage the economy much.

Bonnie Kavoussi of The Huffington Post provides a piece on the #mintthecoin petition. She calls attention to the debt ceiling and the possible dangerous consequences of default and then refers to the concerns of some that using the TDC may “could be a slippery slope to hyperinflation.” The piece also contains a video explaining the TDC, and reproduces a number tweets about the #mintthecoin petition drive. Everything is focused around the TDC and the debt ceiling problem.

Rachelle Younglai of Reuters This article just reports on the coin proposal, the #mintthecoin petition drive, and the context in the debt ceiling crisis. It doesn't question the legality of platinum coin seigniorage, and doesn't suggest that the proposal is “wacky” or “silly” or “ludicrous.” It mentions the likelihood of Congressional opposition from members trying to reduce deficits, and also mentions that using the coin would compromise the independence of the Fed.

Cullen Roche joined the small-ball party with a brief post at Pragmatic Capitalism. The debt ceiling is silly. The platinum coin solution is silly. The US government has no solvency constraint, and “Willingly defaulting on US debt by using the debt ceiling as a threat is pure madness. I can’t think of many things that would be more reckless than this.” The platinum coin is a legal workaround for the debt ceiling problem first discussed in a web comment by Carlos Mucha (beowulf). Mint the TDC. Deposit it at the Fed. Use the proceeds to pay down debt and it functions like raising the debt ceiling by $1T. It's not inflationary because it's not new spending. It's an accounting gimmick and shouldn't be used. But if the choice is between the coin and default, then “. . . then the decision is a no-brainer. It would be unpatriotic to default. Even more unpatriotic for leaders to allow default when they could mint the coin.” And then he endorses the Josh Barro solution of swapping the PCS capability for repeal of the debt ceiling.

Steve Randy Waldman also weighs in on the controversy. SRW thinks “The benefit of the plan (depending on your politics) is that it circumvents an institutional quirk, the debt ceiling. The cost of the plan is that it would inflame US politics, and there is a slim chance that it would make Paul Krugman’s “confidence fairies” suddenly become real. But note that both of these costs are matters of perception.” He thinks Treasury will reluctantly issue coins in the Million Dollar, rather than the Trillion Dollar range, to continue spending, and that the Fed will “sterilize” this spending selling assets to absorb an equal amount of money in the private sector. He thinks that's all that would happen and that it would be a “big nothingburger.”

Chris Hayes segment with Jerrold Nadler (D-NY) and others on video.

Visit NBCNews.com for breaking news, world news, and news about the economy

This segment reflects the dominant pattern discussed in the text perfectly. The segment poses the issue as a trade-off between using the TDC and default due to the debt ceiling. Notice how Veronique De Rugy defends Republican debt ceiling tactics. Notice, also, that Chris Hayes appears not to have thought beyond the TDC idea as a solution to the debt ceiling.

Today, Paul Krugman weighed in with a very specific statement advising the Administration to be ready to mint the TDC immediately to take the debt ceiling issue off the table. He says: “Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.”

(Cross-posted from New Economic Perspectives.)

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  I never thought about this: (4+ / 0-)

    But it's probably a stupid idea until the 1% figure out they can make money off it, then it becomes sound fiscal policy.

  •  TDC:Numismatic Neverland. You neglect legalistic (1+ / 0-)
    Recommended by:
    FG

    argument in opposition which has the support of EVERYONE but MMT theorists. Our economy is not a thought experiment to be explored outside of academia. Central Bank Independence cannot be overrun by such foolishness as PCS.
    Question, what asset back this coin? As others have pointed out, at least QE is not creating money, rather it is backed by an asset known as federal reserve notes and the power of the federal taxing authority.

    "If the past sits in judgment on the present, the future will be lost." Winston Churchill

    by Kvetchnrelease on Tue Jan 08, 2013 at 07:18:48 AM PST

    •  I meant support legalistic argument which everyone (0+ / 0-)

      Rejects except MMT proponents. Sorry, only one cup of coffee this am.

      "If the past sits in judgment on the present, the future will be lost." Winston Churchill

      by Kvetchnrelease on Tue Jan 08, 2013 at 07:22:06 AM PST

      [ Parent ]

    •  There is no difference between a (2+ / 0-)
      Recommended by:
      Dustin Mineau, Calgacus

      federal reserve note and a coin on deposit at the fed.

      They are fungible.

      Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

      by hestal on Tue Jan 08, 2013 at 07:41:23 AM PST

      [ Parent ]

    •  Asset backed?! (4+ / 0-)
      Recommended by:
      Satya1, bunnygirl60, Calgacus, katiec

      QE is backed by Federal Reserve Notes?  And what exactly do you think federal reserve notes are backed by?  QE is the exact same thing as a TDC.  They are all backed by the power of the state to impose and collect a tax.

      Our Dime: Understanding the Federal Budget

      by Dustin Mineau on Tue Jan 08, 2013 at 07:41:56 AM PST

      [ Parent ]

    •  See Philip Diehl's comments (2+ / 0-)
      Recommended by:
      Satya1, offgrid

      On Blog's related to the PCS

      Diehl was also the Chief of Staff to Senator Lloyd Bentson of TX

      From The Razor’s Edge, John Carney and The Trillion Dollar Coin

      From Philip Diehl, Mint director who wrote the platinum coin law:

      The claim that minting a trillion dollar platinum coin is unconstitutional was no basis whatsoever. Congress has given Treasury broad discretion in minting coins since the founding of the republic, and its power to do so is rooted in the Constitution (Article 1, Section 8). Moreover, the accounting treatment of the coin would be identical to other coins produced by the Mint–no different from a quarter.

      Here’s a brief on the subject:

      I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.

      * In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

      * What is unusual about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations.

      * Moreover, the accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

      * Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

      * There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

      * This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

      * This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

      * Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

      * Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.

      Philip N. Diehl

      35th Director

      United States Mint

      en.wikipedia.org/wiki/Philip_N._Diehl

      A similar comment was posted at PragCap
    •  And why should we have central bank (0+ / 0-)

      independence?

      I don't think it's gone so well lately.

      And as Dustin said....   fed reserve notes are backed by the same stuff as a coin would be:  The real economy.

  •  One Step at a Time (3+ / 0-)
    Recommended by:
    chuck utzman, offgrid, katiec

    Maybe we can't bring everyone into paradigm at once.  But, if we can mint the TDC and show that the world doesn't end, maybe we can get our foot in the door of people's minds.

    Our Dime: Understanding the Federal Budget

    by Dustin Mineau on Tue Jan 08, 2013 at 07:28:36 AM PST

    •  You know, as progressives we often say things (0+ / 0-)

      like this...and maybe you are right but what if this one time we just keep pressuring for a solution that truly has the capacity to change the entire economic basis of our society for the better. Momentum is a rare and precious thing. I don't think we should waste it. The GOP ginned up this debt ceiling problem and PPCS is too important a tool to waste or limit on their stupidity.

      "When in doubt, do the brave thing." - Jan Smuts

      by bunnygirl60 on Tue Jan 08, 2013 at 01:09:39 PM PST

      [ Parent ]

      •  I agree with you (1+ / 0-)
        Recommended by:
        katiec

        Look at the debate! If we do what the MSM wants, then they'll save the economy from the debt ceiling with PCS, and then trade it away for zip since the debt ceiling would then be a dead letter. Understand the MSM don't like the coin. They'd use it now to get around the Rs. But then they'd just restore the status quo and start poor mouthing us about how we have no money and have to cut the safety net!

  •  Wow, and wow again! nt (2+ / 0-)
    Recommended by:
    jellyyork, offgrid

    Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

    by hestal on Tue Jan 08, 2013 at 07:39:54 AM PST

  •  Sheesh, I bet the bad guys wouldn't be (1+ / 0-)
    Recommended by:
    Nautical Knots

    trying so hard to steal it if it were made out of plutonium!  Or maybe ebola-laced plutonium.  That ought to keep would-be thieves at bay.

    What's with all the fixation on platinum?  Just saying, I just read the constitution and it doesn't say "platinum" even once.

    •  Well, the law about commemorative coins didn't (2+ / 0-)
      Recommended by:
      Dustin Mineau, Roadbed Guy

      mention plutonium. Would have been a lot more fun if it did.

    •  At best a collectors item... (1+ / 0-)
      Recommended by:
      Roadbed Guy

      Sort of like stealing the Mona Lisa.  

      You could not do anything but sell it on the black market as a collector's item.  Every bank would know it was stolen.  No seller would accept it as payment at face value knowing it was stolen.  So, as long as none are legally put into circulation a trillion dollar platinum coin stolen from the Fed vault would be a black market collector's item and nothing more.

      Not sure what it would be worth to a collector on the black market.  But, I doubt it would be more than a couple million assuming only very few were made.

      •  I'm sure somebody would steal the Mona Lisa (0+ / 0-)

        in a heartbeat if given the opportunity.

        But more to the point of the coin, if it is NOT put into circulation, that surely seems to go against the spirit of the law that enables the entire scheme in the first place:

        The proposal stems from a line in federal law that allows the Treasury Department to “mint and issue platinum bullion coins and proof platinum coins” in any size or denomination it chooses.

        That loophole, intended to allow for collectors’ coins, theoretically opens the door to the trillion dollar coin

        .

        Read more: http://www.nydailynews.com/...

        •  Laws evolve. Everything evolves. It may (1+ / 0-)
          Recommended by:
          Roadbed Guy

          have been conceived one way but it is not illegal to use it in another way and we should.

          "When in doubt, do the brave thing." - Jan Smuts

          by bunnygirl60 on Tue Jan 08, 2013 at 01:11:47 PM PST

          [ Parent ]

        •  The law says nothing about collector coins... (1+ / 0-)
          Recommended by:
          Roadbed Guy

          The law does not say anything about the coins being only collectable and even all coins minted, even if they are intended for collectors are legal tender.  

          Courts only get involved in intent of the law discussions when the letter of the law is unclear.

          Yes, some one might steal it, but only as a collectors item to be sold on the black market.  Just like some one who stole the Mona Lisa.  It would not be worth a trillion dollars because no one would accept as a trillion dollar payment or deposit since it would obviously be stolen and anyone accepting it would be subject to felony prosecution for knowingly trafficking in stolen property.

          So, it would depend entirely on what the black market collector value is for s (several?) trillion dollar coin.

          Among other reasons, this is why I prefer that a single $60 trillion coin be minted.  In addition, to the fact that it might get a wedge against the idea that a sovereign nation that is the sole issuer of the currency has to acquire currency via taxation or borrowing.  Not sure how those being taxed or lending get the currency that only the government can issue.

          For some reason, in war time this is never an issue, but when it comes to actually doing something for the citizens of this country suffering under crippling unemployment it is ridiculous.

  •  Thanks again Joe. (0+ / 0-)

    It's very interesting that so many can cross the line and support TDC as a maneuver to get around Republican obstructionism and not understand the reality of what they are supporting.  Oh well, one step at a time for the toddlers.

  •  Small ball impacts structures; spending too? (3+ / 0-)
    Recommended by:
    offgrid, Nautical Knots, Calgacus

    Any use of PCS (and probably even the discussion that has already occurred) undermines the impression that there are no alternatives to present monetary and fiscal structures, regardless of whether it is focused on “small ball”.

    If “small ball” thinking increases the likelihood of PCS being used or credibly threatened, this will also increase the likelihood of PCS eventually being used for purposes of broader educational and structural changes.

    But a move away from federal borrowing might not fundamentally change the public debate about federal spending.  The fact that federal borrowing is presently central to austerity propaganda does not necessarily mean that a move away from debt-financing of federal spending would eliminate austerity propaganda.  The fact that this propaganda has not declined during a period when market demand for federal debt exceeds the supply is a strong hint that borrowing difficulties are not the real constraint on federal government spending.

    •  I think it has to do with factors beyond the (1+ / 0-)
      Recommended by:
      Calgacus

      monetary system. Austerity propaganda, as you accurately call it, has been a tool utilized by conservatives to make specific gains. Momentum has changed and they are no longer riding the wave. This might be just the time to kill that propaganda meme dead.

      "When in doubt, do the brave thing." - Jan Smuts

      by bunnygirl60 on Tue Jan 08, 2013 at 01:15:10 PM PST

      [ Parent ]

    •  Won't increase (0+ / 0-)

      the likelihood of using PCS if they trade the capability for repeal of the debt ceiling law will it?

      On austerity propaganda. It is based ONLY on the idea that US is running out of money for this and that. Once that's gone because there's $60 T in the bank, then they have to find other rationales for austerity; and that's when they get laughed off the block!

      •  Longterm shift from debt; austerity laughable? (1+ / 0-)
        Recommended by:
        Calgacus

        LGID,

        Unfortunately austerity fetishists has proven invulnerable to being laughed off the block (when it should have been) for recent ridiculous and transparent positions such as:

        (i) pivoting absurdly from supporting W's pro-cyclical deficit spending to objecting to Obama's counter-cyclical deficit spending,

        (ii) ignoring the fact that interest rates set by auctions of federal debt, and other market reactions, have demonstrated for several years that most markets are requesting more rather than less issuance of federal debt, and

        (iii) simultaneously decrying the Austerity Bomb (AKA Fiscal Cliff) and ruling out military spending cuts while still demanding the 'right' kind of austerity (safety net cuts).

        I agree that a quick trade-away of the PCS opportunity, by stifling discussion, could reverse the recent questioning of current monetary structures.  (I still think that it would probably be useful for Obama to offer the trade, because of the certainty that this would strengthen his political position, in comparison with the unlikelihood of reaching agreement with the Republican majority House on the details of the trade).

        More discussion has the benefit of enabling a long-term shift away from debt-financing (rather than merely using it to counteract the threat of debt ceiling abuse), which shift (I tend to think) will eventually need to be based on a new majority view coalescing (at least briefly) among the three branches, rather than merely a unilateral Executive decision to use the present loophole in the commemorative coin law.

        But more discussion also has risks.  If more people pay attention to the present complex, counter-intuitive and banker-coddling monetary structure, they may gravitate towards simple but destructive solutions like Ron/Rand Paul's gold standard obsession.

  •  interesting take (0+ / 0-)

    There are two other questions/choices that top my list first though:

    1) how would world wide markets and ratings agencies react to the TDC?  Our fiat currency and financial systems are  all based on trust.  The debt ceiling vote is a ridiculous bit of theater but is the world ready to see the ridiculousness called out even more?

    2) What images would appear on the coin?  I was thinking Bo's head for "heads" and Boehner's butt getting spanked for "tails".

    I'm not liberal. I'm actually just anti-evil, OK? - Elon James White

    by Satya1 on Tue Jan 08, 2013 at 10:33:34 AM PST

    •  If you are any other country, the US dollar (0+ / 0-)

      effects you no matter what and even though we are well past Bretton Woods. A stable US economy is essential for international economic health. If PPCS is how we get there, I don't think they care. I think they just want to know that we aren't going to default and we are going to stabilize and grow.

      As for the face on the coin, people are already saying Ronald Reagan and I'm sure I don't have to explain the irony there. LOL! I know I would love to see Martin Luther King on a coin...or a rabbit, but that's just me.

      "When in doubt, do the brave thing." - Jan Smuts

      by bunnygirl60 on Tue Jan 08, 2013 at 01:19:31 PM PST

      [ Parent ]

  •  We need to keep this option (1+ / 0-)
    Recommended by:
    katiec

    To stop ourselves from self destructing politically.

    Thank you, letsgetitdone.

    I don't negotiate grand bargains with deficit terrorists!

    by priceman on Tue Jan 08, 2013 at 04:13:15 PM PST

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site