Obama and the BeanStalk – $1 Trillion Magic coin?
What if the threat of a voluntary default by the United States could be erased by simply turning one tiny scrap of platinum into a coin?
Of course, this is not going to happen. Creating money out of thin air is hardly a solution. It could lead to even more concerns from those worried about inflation. Critics of the Federal Reserve’s monetary easing programs would likely be apoplectic if the Treasury Department trumped Ben Bernanke’s “helicopter drop” by minting a trillion more new dollars.
The influential New York Times columnist Paul Krugman has already dubbed the talk a “gimmick.” But here is why some people think this bizarre strategy could work.
Last week, Treasury Secretary Tim Geithner made it official: Federal borrowing has reached the $16.394 trillion debt ceiling.
Mother Jones says – No, a $1 Trillion Platinum Coin is Not Legal
No particular restrictions were placed on the design or issuance of platinum coins, but this paragraph was plainly intended to apply to bullion and commemorative issues for coin collectors. That’s all.
There is, apparently, a widespread belief that courts will uphold a literal, hypertechnical reading of legislative language regardless of its obvious intent, but I’m quite certain this isn’t true. Courts are expected to rule based on the most sensible interpretation of a law, not its most tortured possible construction. I don’t think there’s even a remote chance that any court in the country would uphold a Treasury reading of this law that used it as a pretense for minting a $1 trillion coin.
This is not New, The Economist thought about it 6 months ago –
AS THE date on which Treasury runs flat out of money grows nearer, various harebrained ideas to workaround the statutory limit on borrowing and keep paying the bills have been getting more attention. This one, one of my favourites, seems like it just might work:
Sovereign governments such as the United States can print new money. However, there’s a statutory limit to the amount of paper currency that can be in circulation at any one time. Ironically, there’s no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.
To prevent the money from contributing to too rapid inflation, the Fed could simply conduct reverse QE—sell some of its enormous stock of government debt to absord some of the new money in the system. Though it’s unlikely that inflation would be too serious an issue; indeed, it could be helpful.
via The Economist.
TownHall Calls this whole idea Insane – But that is from those extreme Right-Wingers
I’m at a loss for words. I mean, you’d think that there’s no way on earth the White House would even float anything like this, if only because of the massive political risk and insane optics. But I guess you never know; Obama did just ask Congress to relinquish all of its debt limit-related powers to him, after all. It’s difficult to identify the most mind-blowing element of this article, but economist Joseph Gagnon’s quote might take the cake. There’s “nothing that’s obviously economically problematic” about this absurd scheme? Printing, or rather minting, $2 trillion in magic money, overnight, to artificially “pay for” existing federal obligations isn’t “economically problematic”? In that case, we should print $87 Trillion in special coins and retire all of our accrued debts and obligations in one fell swoop. I’m sure the massive devaluation of the dollar, inflationary spikes, and total loss of confidence among our creditors would work themselves out somehow. Thank goodness for experts.
Obama and the bean stalk – Magic Beans for the Debt Ceiling?
Latest example of the developed world’s monetary insanity: cancelling the US’s debt by creating a magic coin read.bi/RvlYJ5
— Juliet Samuel (@CitySamuel) January 3, 2013
— Bonnie Fuller (@BonnieFuller) January 4, 2013
I know — instead of pretend money, let’s just create a pretend Constitution and do it that way? #platinumcoin
— David Freddoso (@freddoso) January 3, 2013
Problem is, as with all Liberal solutions –
@rbpundit Seems like a waste of time when we’ be needing a $10 Trillion coin in 4 years…
— D.M. Hawkins (@HawkinsUSA) January 3, 2013