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View Diary: Krugman sez Mint That Coin (298 comments)

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  •  I didn't miss it, (0+ / 0-)

    I don't think the statute actually gives the unbounded discretion that it might seem to upon a quick and formalistic reading.

    There is no free lunch.  I see two scenarios - (1) the fed prints more dollars to account for the hole the treasury just created in its balance sheet by making a few trillion in reserves go away, (2) the market never again trusts the fed to be independent.  Either way, interest rates skyrocket, as bad money chases out good.  Forget the canard about it not circulating.  The fed might consider refusing to accept the coin as payment for debts, citing equal protection grounds.  It's a creditor and it is receiving less value for its debts than holders of bonds of equal maturity, citing the above arguments.  The fed chair might be fired, but only for cause, and he could cite his statutory control over the money supply and any legal problems with minting such a coin and sue to keep his job.

    Difficult, difficult, lemon difficult.

    by Loge on Mon Jan 07, 2013 at 03:24:45 PM PST

    [ Parent ]

    •  But you do not actually address the statute. (0+ / 0-)

      How else are court suppose to read the law. If Congress wrote the law the way they wrote the law to not follow the letter of the law is judicial activism.  And although the 9th amendment gives the constitution some squirm room USC stautes are different. IF Congress screwed up writing a law they have to live with the consequences.

      Where are the dread bond zombies that will push up inflation? We have been hearing about them for 5 years or more. And while we worry about inflation (especially the FED) employment issues are being ignored. The FED is mandated to balance employment and inflation not deal with inflation alone. The FED can not reject as payment legal tender. How is this an equal protection matter? Does tha mean that a merchant can refuse paper money or coin as payment for goods. No they can't. The FED controls the paper money supply but not coinage. Read the staute again because you obviously do not get it.

      •  there's a long standing (0+ / 0-)

        legal canon against interpreting statutes to lead to absurd conclusions, even if the text can be interpreted to support it.  I don't think the view that the coin could be minted has no support, but the countervailing ones have textual support, too, and support from broader separations of powers principles.  It's not judicial activism to align with the intent of congress, but rather the opposite.  I think there's an implied limitation in the term "denomination," such that congress never conceived of this being applied to anything other than that which could be collected -- raising another statutory objection, that the coin has to be a circulating coin.  You're free not to agree with my reading of it, knowing as I do the background against which any law is written, but that's not the same thing as not addressing the statute.  Seeing it as less complex nevertheless requires argument, which you've made but not particularly well.  

        the other points -- there's a difference between arguments about bond vigilantes objecting to current deficit policy, and bond holders objecting to being paid with money explicitly created to pay them.  It takes away the fed's control over the money supply, and sets a horrible precedent as our politics get more dysfunctional.  

        The notion of monetizing debt has historically been used to stiff foreign creditors, and is also bad for people with fixed incomes.  I think it's a weak legal argument to suggest that this alone calls into question validity of payment or alters bond covenants, but not good practice to pay creditors of equal seniority differently.  This goes back to the question of whether legal interpretation is the same as pure comprehension.  Not really -- more at issue.  It's more like reading the Old Testament.  Again, there's a difference with an ordinary fluctuation in dollar value, the risks of which any holder assumes, and extraordinary measures to make payments.  

        When you bring in general complains about the fed, it sounds like the complaint is less with the debt ceiling negotiations but rather a policy view about what the money supply should look like, which should be argued explicitly and upfront.  Note that even most supporters of this idea think it's ridiculous; I've at least tried to show why.  

        It'll never happen, so i'm bored with this.  It's mostly a setup to gripe against whatever deal Obama and Congress get, after the fact.  Where would we be without absurd counterfactuals?

        Difficult, difficult, lemon difficult.

        by Loge on Wed Jan 09, 2013 at 06:07:33 AM PST

        [ Parent ]

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