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View Diary: Good Luck Stopping Austerity With Incremental Platinum Coin Seigniorage! (46 comments)

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  •  Who cares about social norms? (0+ / 0-)

    Since the social norms involved have zero economic impact, let's just ignore the debate about social norms.  Changing them would have no value one way or the other.  

    What we should be concerned about is what is politically and legally possible.  

    On that account, minting a $60T coin and using it to pay off the existing debt is not legally possible.  Minting the coin is allowed.  Using it to pay off the debt isn't.  You would have to have congress do that.  In which case, you might as well just get them to raise the debt ceiling (which it appears they are already now prepared to do, anyway).

    The debate about the size of the coin was always silly, since it makes no difference.   The only point of the coin was to avoid the debt ceiling.  You could even issue a separate coin every day just enough to stay above that ceiling.  Any number higher than that is just a number, with no real world meaning or consequences.  Nothing different happens if you put a $60T number on that spreadsheet rather than a $1T number there.

    •  According to whom is it not legal? And why? (3+ / 0-)
      Recommended by:
      psyched, Nada Lemming, cynndara

      I've read a lot of opinions by lawyers and economic experts who've said that it is legal, but I'd like to know who of high credibility says that it isn't.

      As for whether Obama would ever use the option, I don't believe there's any chance of that, so the questions is academic.

      •  because Obama! (0+ / 0-)

        and that's all the people need to know.  

        "I'm a Republican from the 80s". - The most "liberal" president in my lifetime.

        by Nada Lemming on Mon Jan 21, 2013 at 06:48:13 PM PST

        [ Parent ]

      •  The coin is legal (0+ / 0-)

        You can't do anything with it that isn't authorized by congress.  

        Constitutionally, it's congress which has the right to spend, to collect tax revenues, to issue debt, to repay debt, or to issue coins.  The president can only do what has been delegated by congress.  

        In this case, congress has said he must spend the money, and has said he can issue the coins.  So if they say he can't issue new debt, then he can probably still issue coins as needed to fund the spending they are requiring.  

        But I'm not convinced he can repay existing debt on his own, in effect single handedly expanding the supply of dollars in circulation.  Control of monetary policy has been delegated to the Fed, so they do have the power to buy up existing debt.  And by law they are supposed to have some independence from the President.

        So I would think there would be a difference between using a commemorative coin loophole to fund existing spending, something congress has required the president to do, and using it to pay off existing debt, something the congress has not required the president to do.  

        •  Can't Treasury override the Fed? nt (0+ / 0-)

          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 Mon Jan 21, 2013 at 07:46:35 PM PST

          [ Parent ]

        •  it can be used to retire Tsy Bonds as they come (1+ / 0-)
          Recommended by:
          cynndara

          due, thus retiring the debt.

          When new spending is authorized, Tsy can spend.

          Just as it does now -- when it issues coins out of thin air.

          •  Agree (0+ / 0-)

            Yeah, I agree there.  The Fed right now has $1.7T in bonds it can sell anyway if it wants.  And its buying more.  So you would probably have no issue there for the first $2T in spending, or bonds due, as the Fed can sell it's own if it likes to counteract that.  Get beyond that though to where you might be interfering with monetary policy, and maybe it would raise some legal issues.  

            •  Again, (2+ / 0-)
              Recommended by:
              katiec, cynndara

              there are no legal issues. the Treasury has an absolute right to pay off the debt it has issued when that debt falls due. If it affects monetary policy then the Fed will have just have to adopt to what Treasury is doing. However, it won't affect monetary policy; since the Fed can always issue Interest On Reserves (IOR) to target and achieve the federal Funds Rate it wants. Remember the Fed can always control that interest rate, the bond markets really have no say. That's why interest rates on Treasuries went down, after the credit agency downgrades of Treasury debt instruments.

        •  See the link (2+ / 0-)
          Recommended by:
          katiec, cynndara

          I provided just above. It is legal to pay down the debt, using seigniorage, since Congress has already given Treasury the authority to pay back the debt instruments it issues. Think about it, if Treasury didn't have that authority then even if the debt ceiling were raised it wouldn't have the authority to roll its own debt.

          •  Does retirement of debt require an appropriation? (0+ / 0-)

            The retirement of debt as it matures (comes due) is perhaps automatically appropriated.  But what about premature retirement of debt?  Does that require specific appropriation by Congress?

            •  Sorry, didn't see this earlier (0+ / 0-)

              No appropriation's required if you use either tax revenues, debt financing, or seigniorage to do it. Think it through, the Treasury's obligated to pay the principal plus interest anyway, so why would it be an issue if were paid off before it was due, provided the Treasury had the money.

              Another way to approach it. Congress already gave Treasury permission to incur the debt; so clearly the authority is implicit to pay it back whenever one can.

              Yet another consideration, you wouldn't want to pay off any debt to the public before it falls due anyway. Debt you pay back to other Government agencies using seigniorage doesn't actually get sent out to the economy except as scheduled, so that dosn't involve any special Congressional appropriations. So, what the question comes down to is whether the Fed debt can be retired early using seigniorage. That depends on whether the Fed will sell it early to Treasury. But why wouldn't it? The Fed can always get more by buying it from the private sector.

      •  Bmaz, the legal guru at emptywheel.com (0+ / 0-)

        He claims that it's patently unconstitutional, besides being "absurd."  And, he claims that Edwin Chemerinsky, Dean of the Law School at UC, Irvine, agrees.  Also, Michael Dorf and Neal Buchannan, e.g., http://www.dorfonlaw.org/...

        •  I know (1+ / 0-)
          Recommended by:
          katiec

          But look at the logic of his argument. There isn't any. I'm serious about that. I read the bmaz he's not offering an argument based on reading of the law and related parts of the US code. he says he's making the constitutional argument. But where is there anything in his post that's anything but his own opinion and Chemerinsky's, which as far as I can tell involved no serious argument. I thought selise and masaccio pretty much demolished bmaz in the comments, and that all he could offer in reply to them was authoritarian statements.

          Thanks for the Dorf reference, which is the best counter to the legality/constitutionality of the coin I've seen. But this latest discussion initiated by beowulf's latest post contains an exchange that I think contains the elements needed to easily refute Dorf's argument. Perhaps I'll do a critique of that myself later on in a more quiet time. But for now, I need to push the $60 T alternative again the "loser liberal" small ball folks who really don't want to do anything about austerity.

          There are many very good legal people who think the coin is constitutional including Lawrence Tribe of Harvard Law, Jack Balkin of Yale Law, and beowulf himself, who's a pretty mean lawyer. I haven't seen a post on the coin from Jonathan Turley who is a great Con Law professor at The George Washington University; but back in the summer of 2011 he published a legal analysis by a colleague that also concluded that PCS was legal.

          Also, Philip Diehl, former Director of the Mint, who co-wrote the 1996 with Mike Castle, and who knows a lot about coinage-related law has no reservations about legality, as you can see from the exchanges on beo's post.

        •  It's too late to rec, but thank you. (0+ / 0-)

          This is exactly what I was asking.  I'd find a debate among lawyers and economists on this issue to be helpful.

    •  No, it's legal alright (2+ / 0-)
      Recommended by:
      katiec, cynndara

      to pay off the debt using seigniorage. We've explored this question since the beginning at the start of 2011. The seigiorage gets accounted for as miscellaneous receipts, and these can be used to pay down debt. Check out the debate here.

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