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View Diary: New MSM Trillion Dollar Coin Wave: Here's The Big Story (20 comments)

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  •  While I don't necessarily agree with all of your (4+ / 0-)
    Recommended by:
    FG, wonkydonkey, Larsstephens, psyched

    points, you've certainly advanced a thought provoking, well written, and creative set of proposals here, Letsgetitdone, so I have to tip and rec your brilliant post, for sheer audacity, and talent, even though I have reservations about some parts of your arguments, and skepticism about the possibility President Obama would pursue the second part of your argument, after already announcing the administrations senior most lawyers consider it unconstitutional.

    After such praise I hope you will take well, my additional reactions  that you are probably confusing most readers by mixing the two levels of your argument.  

    I find the first part of your argument, using PCS to buy time, or even overcome destructive GOP threats to bring our government to its knees with the debt limit if we do not agree to devastating cuts to Social Security, Medicare, and Medicaid programs, to be interesting from a purely Machiavellian negotiating stance, regardless of its constitutionality, and think it is regrettable that our President has let qualms from his legal advisors box out a negotiating maneuver that could allow President Obama to make good on the "audacity" part of his "audacity of hope" campaign promises.

    My concern is that in your eagerness to jump over this first potentially plausible  and powerful first half of your argument  to advance the second more ambitious part -- that of transcending of "gold standard hangover' assumptions to finance a new golden age of expanded progressive spending confounds  the two dimension of your argument to the detriment of the perceived credibility of the first.

    This is the kind of delightfully creative and provocative proposal  that's great fun for PhD level economics seminars but likely to raise credibility issues for most politicians who will not wish to be seen so far out on the "thin ice."

    My hope is that now that you've planted a seed for us all to think about, and perhaps, "got this  second more ambitious part "out of your system," you will write several post concentrating on both advocating for, and  spelling out exactly how President Obama could use PCS in the debt limit face-off -- both as a threat for bargaining power, and perhaps, even as a real tactic to buy time in the budget standoff.

    The way that seems most likely to get peoples attention would be to acknowledge it would be radical, and perhaps even precipitate a constitutional crisis, but that if the GOP seriously continues to do tremendous damage to our national and global financial systems by blackmailing our nation with their extremist demands for massive cuts to entitlement programs the President may have not choice but to consider every legal response to keep our government payments going, and prevent a potentially destabilizing global financial collapse.

    In this context your proposal that we mint one, or several $1 trillion coins, to prevent the artificial imposition, and perhaps even unconstitutional shut down of the executive branch by the legislative branch deserves more attention, and discussion.

    If we could generate a healthy discussion and get some of our smartest and trusted Democratic economic voices convinced this could be a plausible, or realistic possibility,  then you could start stretching out the merits of the second part of you argument which I understand, but also feel would be such a radical departure from conventional assumptions as to require much, much greater public endorsement for from both courts, voters and legislatures.

    Also, I do either do not understand how such an an expansion of the money supply beyond our real productive capacity would not be inflationary.

    Given the legislative intransigence by Republicans on raising taxes on the wealthiest, I support a sustained moderate inflation of approximately 2% to 3% as a way of rebalancing the excess concentration of wealth, and believe this is inevitable to some extent.

    But, redistributing wealth with tax rates would be more progressive as inflation is going to transfer wealth from all saver to consumers, hurting those on fixed income and middle class savers on pensions or Social Security, unless we get more generous COLA, (we are debating going in the wrong direction.)

    But, notice that if we are unable to win over public support with this vastly simpler and more conventional argument about redistribution of wealth with taxation, what makes you believe we have any chance whatsoever of selling this much more radical second part of your argument, that even Democratic legal advisors to Obama suggest may be unconstitutional?

    As my former significant other's daughter like to say at this point in conversations, "whatever...."

    To be brief, (lol) the positive potential I see in the first part of your argument is if the GOP are going to be so destructive as the threaten such great harm to our nation, people, and global financial system, then the President ought to say, to heck with uncertainties about unconstitutionality, let the SCOTUS determine that, in the short-term he will keep out country's finances with PCS coinage if necessary and pound the stuffings out of the GOP daily from the bully pulpit until they relent.

    Let's concentrate on explaining why this would not only be perfectly  possible, and constitutional, but heroic, and smart.

    If we can achieve that much, then lets stretch it out as far as we can.  

    Thanks for this thought provoking post.  I hope you recognize that I wouldn't spend this much time challenging certain parts of your argument, if I didn't see merit in the rest of it.  

    Very well argued and written.  

     

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Fri Dec 14, 2012 at 05:59:20 PM PST

    •  There will be no platinum coins. It is interesting (0+ / 0-)

      and thought provoking but it won't happen. As you said, too many people believe it's illegal or even unconstitutional.

    •  Sorry (3+ / 0-)
      Recommended by:
      Larsstephens, psyched, HoundDog
      . . . after already announcing the administrations senior most lawyers consider it unconstitutional.
      I may have missed something; but I haven't heard that any senior lawyers from the Administration say that Minting a Platinum Coin with an arbitrary face value like $60 T would be unconstitutional. As far as I know, they've never mentioned it at all. What they have said is that their challenging the Constitutionality of the debt ceiling would not work. I agree with that, because I know of two alternatives including PCS which the Administration can use to avoid default.

      AS the rest of your reply, I think you need to read my post more carefully. I'm not proposing any more injection of net financial assets into the privates sector than Congress approves in the normal course of its budgeting. The debt patoff can't be inflationary because the debt instruments themselves are more inflationary than the reserves the Government would replace them with. The other $44T would be deficit spent into the economy over 5- 25 years as Congress decides. There's no empirical evidence that spending that money into the economy without floating debt is any more inflationary than doing it along with debt. In fact, that the evidence that exists points in the other direction.

      •  About a month ago, I read an article about the PCS (0+ / 0-)

        and  buried deep within the article was a paragraph explaining why President Obama was unlikely to pursue such an approach which mentioned his legal advisors told him it was unlikely to survive a constitutional test.

        It was not really an announcement, as much as a report of off the record inside comment, sorry I miscommunicated that part.  I'll see if I can find the article later this afternoon.

        I remember though thinking it seemed like a weak argument, that wasn't convincing, and I was annoyed if Obama rejected the idea on such a flimsy basis.

        I caught the aspect of your proposal that the administration would not be injecting any funds into the economy that were not approved of by congress, which is an excellent point politically, which may in fact, be a tipping point factor that might convince our cautious president he is not really doing anything other than keeping the government solvent to spending funds already authorized by the legislative branch.  

        In one of your next posts I think you should emphasize this point to refute the concern that this would be overreaching by the executive branch, infringing on the legislative's branch control over the budget.  It seems to me that one might be able to argue the opposite.  That once the legislative branch has authorized spending programs, then it is the executive branch's duty to implement and execute those plans, so the whole debt-ceiling constraint becomes a constraint on the executive branch's ability to fulfill this obligation.  

        If the legislative branch issue two contradictory sets of bills, they seem to me to be the party responsible for creating the extraordinary situation that requires an extraordinary response by the executive branch -- which set of laws does the executive branch implement?  

        The strongest argument seems to me to be using another capacity already authorized by the legislative branch - that of PCS coinage to maintain continuity of spending and payments, until the legislative branch gets its act together, is actually the most conservative, and most consistent with the separation of powers.

        With regard to your last point on inflation, I'm still puzzled.  My memory of my macro-economics classes was that expanding government debt is thee the traditional way of expanding money supply, and if done so beyond the expansion of the "real production" in the economy the result is inflation.

        So, I understand that you are suggesting that expanding the reserves is not doing this but only enabling government spending authorized by congress.  

        But, this still seems potentially inflationary to me.  While I support the idea of Keynesian  stimulus during times of great recession, and acknowledge that government spending is a direct component of GDP, it still seems suspicious to me that this be counted fully as equivalent of an expansion of "real production."  

        If we were to inject $60 trillion of deficit spending into the economy over some period of decades, would we not expect inflation of "hard assets" such as real estate and commodities as greater numbers of dollars are chasing a finite number of "real goods?"

        I accept your argument that "spending that money into the economy, without floating debt" might be less inflationary that "doing it along with debt," but it would seem to me that both would have some potential for inflation.

        I'm reminding of the text book examples of Keynesian economics where critics suggested that we hire people to dig holes then then hire them again to fill them up.  But at least they have wages that create consumer demand which then stimulates real production.

        But, how much better it would be to have them to real productive work such building productive infrastructure such as roads, bridges etc.  

        I've used this argument to suggest that the President infrastructure bank or even just domestic spending on Medicare, Medicaid, and Social Security have higher economic multipliers than military spending just on the basis that the spending is done domestically, and health care expenditures have "real economic" value as opposed to leaving military hardware, or exploded bombs overseas. (Whatever "utility" one attributes to "feelings of greater security" does not seem to me to count as much as a "real productive" assets or good, - but I'll admit I'm struggling to understand this distinction more clearly.)

        So, perhaps, one could argue that anything people are willing to spend money on is a "real" good or asset, but this doesn't seem right to me.

        Here I'll admit I'm beyond the edge of my understanding of economics.  

        But, as I think about it more, would it not be fair to say the second part of your proposal would be a subset of Keynesian stimulus plans? Perhaps, a more clever one, but likely to be opposed by everyone who already oppose Keynesian stimulus?  

        BTW, I started the Keynesian Kossacks group thinking we need such stimulus now to counter the "austerity bomb" impacts of excess cuts backs to government spending - so I'm certainly not opposed to it. But, I've always thought we do incur a trade-off of  some degree of inflation risk that we should be willing to make up for by cutting back on such spending during times of stronger "natural" economic expansion. ?

        Now, I'm wondering if I should be republishing your PCS proposals and analysis which I have learned a great deal from in the Keynesian Kossacks group?

           

        The means is the ends in the process of becoming. - Mahatma Gandhi

        by HoundDog on Sat Dec 15, 2012 at 08:37:07 AM PST

        [ Parent ]

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