Skip to main content

United States commemorative Coin
Philip Diel ran the U.S. Mint from 1994 until 2000, and wasn't just the author of the 50-state quarters, but was also the co-author of the law that authorizes the Mint to issue commemorative coins—the same law that would authorize the Trillion Dollar Coin being discussed as a way to bypass Republican opposition to raising the debt limit. He dropped us an email, spurred on by this diary, to further discuss the idea.
You've written the best article I've seen yet on the trillion dollar platinum coin idea. [Those kudos are for Letsgetitdone/Joe Firestone-- kos.]

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 in this case is that the law gives the Secretary discretion regarding all specifications of the coin, including denominations.

* 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

Wed Jan 09, 2013 at 9:51 AM PT (Chris Bowers): Sign our petition to President Obama asking him to mint the $1 trillion coin if Republicans refuse to raise the debt limit.

Originally posted to Daily Kos on Tue Jan 08, 2013 at 08:20 AM PST.

Also republished by Money and Public Purpose.

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

  •  Mint the damn coin and put Reagan's face on it (47+ / 0-)

    after all, it was under Reagan that this entire CA-RA-ZY teaparty conservative crap started...

    "You've got to be an optimist to be a Democrat, and a humorist to stay one" - Will Rogers

    by KnotIookin on Tue Jan 08, 2013 at 08:25:29 AM PST

  •  I don't understand the "no economic effects" part (24+ / 0-)

    The assumption is that the coin gets shipped back and, for all intents and purposes, not used.

    But -- if the debt limit continues to be a political football, it sounds like the mint will have created another trillion dollars, and I've never known Congress to be shy about spending money in the bank.

    I find those statements no more reassuring than all of the "Social Security lockbox" chants of a few years back.

    LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

    by dinotrac on Tue Jan 08, 2013 at 08:25:34 AM PST

    •  Dagnab it. There is always someone (11+ / 0-)

      who, from out of nowhere, insists on facts and reality to spoil a party.

      All kidding aside. You have made some very good points. Thanks.

      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 08:27:57 AM PST

      [ Parent ]

    •   Real Concern is if the Debt Limit is Never (11+ / 0-)

      raised after the Treasury gets the $1trillion credit. Wouldn't this become a new form of quantitative easing? Preventing the macroeconomic effects is based on the assumption that the Congress raises the debt ceiling and the gov't issues new debt to buy back the dollars it spent correct?

      "The problem with posting quotes off the Internet is you never know if they're genuine."--Gen. George Washington at the Battle of Gettysburg, February 30, 1908

      by Aspe4 on Tue Jan 08, 2013 at 08:33:19 AM PST

      [ Parent ]

      •  They will raise it (3+ / 0-)

        IMO, the only reason this is an issue is because we are in power.  If Romney had won, we wouldn't even be having this conversation.

        Once the president takes away their bargaining chip, they will bitch and moan, and then they'll shut up and raise it.

        "Mediocrity cannot know excellence." -- Sherlock Holmes

        by La Gitane on Tue Jan 08, 2013 at 11:06:38 AM PST

        [ Parent ]

      •  No (1+ / 0-)
        Recommended by:
        ivote2004

        There are virtually no macroeconomic effects even if deficit spending is funded by platinum coin seigniorage for any length of time, even permanently. The government will spend the same amount as it would if the money was borrowed, so the effect on aggregate demand is the same, as is the effect on inflation.

        The Federal Reserve would have to change the procedure for how it maintains its interest rate. Instead of buying or selling treasury bonds it would simply credit interest on reserves. Functionally, though, there would be virtually no difference.

    •  The term (22+ / 0-)

      was "no macroeconomic effects" - which I take to mean that it wouldn't actually increase the money supply since it wouldn't be in circulation per se. And I think this also relies on the idea that the debt ceiling would be raised and the coin melted down in a timely fashion. In any case, the macro part of the term is meaningful.

    •  I agree...it seems to me like an attempt (12+ / 0-)

      to circumvent the First Law of Thermodynamics:  There is no such thing as a free lunch.

      While I readily admit that I don't understand the macroeconomics associated with the platinum coin issue, it seems to me to be a grasp at perpetuation a giant ponzi scheme.  An attempt to prop up a house of cards just a little bit longer.

      It doesn't smell like a serious solution.

      Oregon: Sure...it's cold. But it's a damp cold.

      by Keith930 on Tue Jan 08, 2013 at 08:36:44 AM PST

      [ Parent ]

      •  Here's what it smells like to me (3+ / 0-)
        Recommended by:
        Sparhawk, Not A Bot, Sharon Wraight

        It smells a lot like the suggestion by those who got a college education by borrowing money, as opposed to those whose parents ponied up the tuition, or those who paid their own way, and who now contend that those loans should be simply forgiven and wiped away.

        A free lunch.  An attempt to avoid accountability.  A pretense that the bar is open, and it never closes.

        Oregon: Sure...it's cold. But it's a damp cold.

        by Keith930 on Tue Jan 08, 2013 at 08:44:55 AM PST

        [ Parent ]

        •  What I love about it (4+ / 0-)
          Recommended by:
          bmcphail, MKinTN, whaddaya, ivote2004

          is that if it does cause a little bit of inflation, you and I won't feel anything.

          It just pisses off the billionaires, 'cause they lost a few mil.

          Things are more the way they are today than they ever were before. -Jimmy Flynn

          by onionjim on Tue Jan 08, 2013 at 08:54:53 AM PST

          [ Parent ]

          •  Inflation seems very unlikely (9+ / 0-)

            Unless we issue dozens of them...

            Bond rates are at about 1.5%, inflation is about 3%, interest rates are pegged at approximately zero.

            We have room for a large increase in the money supply without inflationary consequences.

            (I am not an economist).

            Baz

            We are the principled ones, remember? We don't get to use the black hats' tricks even when it would benefit us. Political Compass: -6.88, -6.41

            by bmcphail on Tue Jan 08, 2013 at 09:02:47 AM PST

            [ Parent ]

            •  A trillion dollars is a lot of coin, and inflation (3+ / 0-)
              Recommended by:
              Keith930, Calgacus, Sharon Wraight

              is a funny beast that tends to spiral out of control.

              The real question is whether that injection would affect confidence in the dollar vis a vis other currencies and investments.  If we started to treat the dollar in a cavalier manner, people might lose confidence in it.

              LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

              by dinotrac on Tue Jan 08, 2013 at 09:16:05 AM PST

              [ Parent ]

              •  We don't need to teeter on the brink of deflation (8+ / 0-)

                in order to avoid inflation.

                There are better ways to run an economy.

                "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

                by JesseCW on Tue Jan 08, 2013 at 09:20:44 AM PST

                [ Parent ]

                •  Not convinced that we are teetering on the (0+ / 0-)

                  brink of deflation, not given our national debt.

                  More likely is that we are being cushioned from the state of our own economy because of global economic concerns.

                  If things start to turn around?
                  That could get interesting.

                  LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                  by dinotrac on Tue Jan 08, 2013 at 09:47:16 AM PST

                  [ Parent ]

                  •  Inflation doesn't occur because of a high national (2+ / 0-)
                    Recommended by:
                    Vote4Obamain2012, priceman

                    debt.

                    You can have a very high national debt without having excess currency in circulation.

                    "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

                    by JesseCW on Tue Jan 08, 2013 at 10:21:15 AM PST

                    [ Parent ]

                    •  It certainly can. (0+ / 0-)

                      We pay for debt by selling T-bills. More debt means more T-bills to be sold. So long as demand outstrips supply, all is hunky-dory.  When the appetite for T-bills at low return goes south, the cost of borrowing goes up, and prices with it.

                      LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                      by dinotrac on Tue Jan 08, 2013 at 10:40:16 AM PST

                      [ Parent ]

                      •  Greece has massive national debt. Do they have (4+ / 0-)

                        an inflation crisis?

                        Selling debt (under our current system) allows us to issue currency.  It does not force us to issue currency.

                        The Fed loans money out to major banks (or doesn't) at a rate controlled by the Fed board.  This is the biggest government tool for controlling inflation.  

                        It's really got very, very little to do with how much we borrow.

                        There are three classic forms of inflation with a fiat currency.

                        Demand inflation is when the desire for goods exceeds the ability of the economy to provide goods.  This is mostly self-limiting, since people will exhaust their own funds and their ability to borrow fairly quickly....unless the Government runs the printing presses 24 hours a day in a futile effort to stay ahead of rising costs.

                        That's what happened in Weimar Germany.  Not massive debt - demand inflation.  A crippled economy could not provide the needs of the German people while also funding reparations.  That created scarcity of goods which drove up prices.  Government then dumped gas on the flames.

                        It's not government borrowing that generally causes inflation (unless that borrowed money is used to purchase tons of goods and makes those goods scarce) but rather huge injections of cash into actual circulation.

                         

                        "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

                        by JesseCW on Tue Jan 08, 2013 at 12:04:36 PM PST

                        [ Parent ]

                        •  Do you really want to be Greece right now? (0+ / 0-)

                          But, more to the point, what do you think happens when the government borrows?

                          The government borrows money to spend.  That tends to be an injection of cash into the economy, as effective a way of creating money as firing up the printing press.

                          LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                          by dinotrac on Tue Jan 08, 2013 at 01:12:19 PM PST

                          [ Parent ]

                          •  The Fed controls the money supply. The Fed can (1+ / 0-)
                            Recommended by:
                            Phoenix Woman

                            tighten up the money supply even while we increase our total debt.

                            Right now, the Fed is desperately trying to inject cash.  

                            That's what quantitative easing is.

                            It can't be said that there is never a connection between inflation and the debt - at a certain point, debts can get so steep that more and more people start believing that a government will collapse entirely and the currency will become junk.

                            That's not where we are.  We're 20 lbs underweight, and you're saying "Don't risk eating a sandwich, we don't want to get obese!!".

                            Do you really want to be Greece right now?
                            Maybe it's me.  My instinct here is to throw my hands up and walk away with a few cutting remarks about your intelligence, or to accuse you of not acting in good faith, but maybe I'm just not able to explain things clearly.

                            "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

                            by JesseCW on Tue Jan 08, 2013 at 01:31:51 PM PST

                            [ Parent ]

                          •  "tighten up the money supply even while" (0+ / 0-)

                            we increase out total debt

                            Talk about wanting to throw one's hands up.

                            Borrowing more money is the opposite of tightening the money supply. The piper does come due, but, until that time, the supply of money is increased.

                            And yes -- the Fed is trying to inject money into the economy, but that doesn't mean that debt is harmless, just that the economy is moribund.

                            Do you think the Fed policy is working?

                            Or are you too busy throwing your hands up to see?

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 02:46:37 PM PST

                            [ Parent ]

                          •  The Fed can cut down its lending to banks (1+ / 0-)
                            Recommended by:
                            Phoenix Woman

                            even if the US is increasing borrowing.

                            Do you understand?

                            It's not borrowing by the Treasury than actually controls the money supply.

                            It's Fed policy, and to a debatable extent, the lending policies of other banks.

                            "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

                            by JesseCW on Tue Jan 08, 2013 at 03:30:31 PM PST

                            [ Parent ]

                          •  That's like saying the gun doesn't kill you, (1+ / 0-)
                            Recommended by:
                            Sharon Wraight

                            but the bullet does.

                            Technically true, but so what?

                            The Treasury generally borrows for a purpose, and that purpose involves spending money, which increases the money supply.

                            Now -- the mere presence of a trillion dollar coin won't do anything in and of itself.

                            If, however, there were no imperative to spend money, there would be no point to the coin.  There is a "magic argument" that it's presence can sidestep the debt ceiling, but it can only do so by creating a big old pile of money.  You are more confident that I, I imagine, that our grown-up Congress will avoid doing bad things with that big new pile.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 04:19:28 PM PST

                            [ Parent ]

                          •  Nothing could be better (3+ / 0-)
                            Recommended by:
                            JesseCW, Calgacus, ivote2004

                            than for Congress to realize the US government is not revenue constrained. If they finally realized that we can't run out of money and started to spend more, not only would it help the economy, which is badly in need of additional spending and has been for most of the last thirty years, but we could have a real discussion about the role of government, instead of buying the neo-liberal lie "we'd like to implement those progressive policies, but we can't because we're broke." Joe Firestone/letsgetitdone has recently been making this point forcefully, often, and far more eloquently than me.

                          •  You don't get how the Fed works. They can (0+ / 0-)

                            take whatever they want at the discount window and give dollars in return, at whatever value they want to set.

                            They can suck up or pump out trillions with no action by the Treasury.

                            Deficit spending is not the major driver of increased money supply in the US economy.

                            Then we have private banks.

                            You understand that when banks loaned huge amounts of money out on second mortgages during the housing bubble, that money wasn't created by the Treasury printing dollars, right?

                            A couple trillion bucks was just sluiced out into the economy.  No Treasury action involved.

                            Then the Fed took bundles of those mortgages at face value.

                            Government borrowing just isn't much of a driver of money supply increase.  This is Econ 101 stuff.

                            Let me ask you this question -

                            Do you understand why we did not have much  inflation (even had periods of deflation) during the Great Depression, even after Government spending skyrocketed and we started creating what was then considered a huge amount of debt?

                            "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

                            by JesseCW on Wed Jan 09, 2013 at 01:12:49 AM PST

                            [ Parent ]

                          •  "The Piper does come true" -- how so (2+ / 0-)
                            Recommended by:
                            Phoenix Woman, priceman

                            for a fiat currency?

                            Who pays who?

                            We pay we, right?

                            And with money created out of thin air.

                            So, what Piper?

                          •  Boy am I confused. (0+ / 0-)

                            Fiat currency?
                            The dollar?

                            I don't think so.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 06:30:46 PM PST

                            [ Parent ]

                          •  Fiat Money (4+ / 0-)
                            Recommended by:
                            katiec, Phoenix Woman, priceman, Calgacus

                            From the Wiki - Fiat Money

                            The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the U.S. dollar and the Euro
                            .
                            .
                            .
                            The term fiat money has been defined variously as:

                                * any money declared by a government to be legal tender.[7]
                                * state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.[8]
                                *money without intrinsic value

                          •  OK. I misunderstood the definition. (1+ / 0-)
                            Recommended by:
                            Calgacus

                            I thought it had to do with fixed exchange rates, which most certainly is not the case with the dollar.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 06:42:46 PM PST

                            [ Parent ]

                          •  And with fiat, the Fed Gov is merely a score (2+ / 0-)
                            Recommended by:
                            Phoenix Woman, priceman

                            keeper of how many dollars are in the private sector.

                            Fiat is a unit of account.  Like inches.  And there's no Piper demanding anyone to pay back loans of inches.

                          •  There certainly is. (0+ / 0-)

                            If you had been around in the 1970s, you would know that.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 08:32:03 PM PST

                            [ Parent ]

                          •  The inflation of the 70's (2+ / 0-)
                            Recommended by:
                            priceman, Calgacus

                            Was not caused by an increasing money supply. It was caused in the main by an oil price shock. Demonstrably, there has been no correlation between an increase money supply and inflation.

                            See Cost-Push Inflation

                            the oil crisis of the 1970s, which some economists see as a major cause of the inflation experienced in the Western world in that decade. It is argued that this inflation resulted from increases in the cost of petroleum imposed by the member states of OPEC. Since petroleum is so important to industrialised economies, a large increase in its price can lead to the increase in the price of most products, raising the inflation rate. This can raise the normal or built-in inflation rate, reflecting adaptive expectations and the price/wage spiral, so that a supply shock can have persistent effects.
                            The Monetarists are wrong on this one
                          •  The inflation of the 70s begain before the oil (1+ / 0-)
                            Recommended by:
                            Calgacus

                            price shock and continued after prices abated.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 08:53:16 PM PST

                            [ Parent ]

                          •  Well Here is a chart for you (2+ / 0-)
                            Recommended by:
                            Calgacus, priceman

                            Oil Prices vs the CPI - Historical Chart

                            This definitely argues against you!

                          •  No, because I haven't claimed that the increase in (1+ / 0-)
                            Recommended by:
                            Calgacus

                            oil prices had no impact on inflation.

                            Of course it did.
                            Nevertheless, your chart shows inflation climbing before two major oil shocks and lingering afterward.

                            Some interesting data in that chart for the 21st century, something I find a bit surprising: an apparent decoupling of inflation and oil prices.  I know we've come a long way in our energy efficiency, but I didn't think we had come that far.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 09:07:11 PM PST

                            [ Parent ]

                          •  Actually (1+ / 0-)
                            Recommended by:
                            Calgacus

                            if you regress changes in money supply against changes in nominal CPI since 1948, you get a slightly negative correlation which goes against the monetarist's framework.

                            I have done this exercise. Friedman in his book, makes a classic mistake of regressing a CPI adjusted money supply against CPI, and finds a 90% correlation - not surprising don't you think!

                          •  I'll have to think that one over. (1+ / 0-)
                            Recommended by:
                            Calgacus

                            I definitely don't like the idea of correlating an adjusted number to the value used in making the adjustement, but..

                            I would expect the use of constant dollars to reduce the correlation by smoothing out variations that were due to the CPI, not increase it.

                            In other words:

                            All things being equal, Unadjusted money supply will rise faster when CPI is higher.  Expressing the money supply in constant dollars should reduce the correlation between CPI and money supply.  An inverse relation would yield a higher correlation, but I don't know of anybody making a credible case that increasing the money supply lowers inflation.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 09:34:06 PM PST

                            [ Parent ]

                          •  That is not (1+ / 0-)
                            Recommended by:
                            Calgacus

                            how correlation works

                            if the LHS has the RHS as a multiplier or divisor, then both sides will be highly correlated even when each series by itself is uncorrelated to the other. Standard statistics. A very simple mistake made by people who do not understand how randomness works (which is what statistics ultimately is)

                          •  Sorry, but that is how correlation works. (1+ / 0-)
                            Recommended by:
                            clonal antibody

                            It is not a matter of randomness.
                            It is is a matter of minimizing the sum of the squares of the error terms.

                            You account for randomness in computing confidence intervals (and, one hopes, in designing your study).

                            Your confusion is understandable in this day and age of doing all your statistical work with software that dumps out the answers for you.

                            To get a clear understanding of what I said, let's try a very simple example.

                            Let us imagine a few (made-up) CPIs and a completely flat unadjusted money supply:

                            Unadjusted money supply = 100

                            CPI = 5.0, 5.5, 6.0, 6.5

                            Adjusted money supply = 20, 18.2, 16.7, 15.4

                            Now you've got the strong correlation you were talking about -- a perfect -1 correlation, in fact, except for rounding errors.

                            Now we can start out with a perfect correlation of 1.0 simply by letting the adjusted money supply from the first calculations serve as our unadjusted supply -- with the order reversed, of course, to get a positive correlation instead of a negative one:

                            Unadjusted money supply = 15.4, 16.7, 18.2, 20
                            CPI = 5.0, 5.5, 6.0, 6.5

                            Adjusted money supply = 3.08, 3.04, 3.03, 3.07

                            (I added another digit of precision because applying the CPI  flattens out the adjusted money supply, and 1 decimal place was insufficient to keep  rounding error from dominating the calculation)

                            The net effect: only rounding error keeps the correlation from dropping from a strong unadjusted correlation of .997 (1.0 if not for rounding) to .024 (0 if not for rounding).

                            That little exercise doesn't make you fundamentally wrong -- only your contention that using the right hand side to adjust the left hand side must increase correlation.

                            The effect on correlation is still completely predictable, you just can't assume that it will increase instead of decrease.

                            This seems like a Catch-22 situation:
                            If you believe that CPI accurately measures changes in the value of money, then your correlation will be overstated if you don't correct for changes in its value.
                            But --- then we're adjusting LHS by RHS, and we know in our hearts that it's troubling.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Wed Jan 09, 2013 at 02:22:41 AM PST

                            [ Parent ]

                          •  You are absoutely right (0+ / 0-)

                            However, if you take two uncorrelated series, divide one by the other, and then regress the result against the divisor, you will get a high correlation - this appears to be the case with money supply and CPI over the last 60 years. So if you do what Friedman did, you will end up coming to an incorrect conclusion.

                          •  I think you stated the problem right of the bat: (0+ / 0-)

                            with

                            if you take two uncorrelated series
                            you will artificially increase the correlation.  Whether you get a high correlation will depend on how much noise is in the data to begin with.

                            The problem is that CPI and money supply are not uncorrelated if the CPI actually measures the value of money.
                            Like I said -- it's a catch 22.  You can't really deal with money supply questions unless you keep the dollars constant.  You can't keep the dollars constant without using the very thing you are trying to correlate against.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Wed Jan 09, 2013 at 07:28:24 AM PST

                            [ Parent ]

                          •  On closer inspection... (1+ / 0-)
                            Recommended by:
                            Calgacus

                            I was looking at something based on constant dollars, which, I think, would have hidden some of the correlation with inflation.  Nevertheless -- while the oil shock was the major player, it was not the only player.  Inflation was rising steadily throughout the 60s and early 70s as we tried to have both guns and butter without a corresponding tax increase.

                            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                            by dinotrac on Tue Jan 08, 2013 at 09:02:09 PM PST

                            [ Parent ]

                          •  Post WWII price controls ending+2 oil shocks+... (2+ / 0-)
                            Recommended by:
                            Calgacus, katiec

                            the fall of Bretton Woods and the adjustment to it was he cause of inflation and stagflation but it's all on the supply side and the reaction to the supply shocks ruining the Monetarists and goldbugs propaganda.

                            I don't negotiate grand bargains with deficit terrorists!

                            by priceman on Tue Jan 08, 2013 at 10:24:01 PM PST

                            [ Parent ]

                          •  Yes, dollar = fiat. Since 1972 (4+ / 0-)
                          •  We're not going to be Greece (0+ / 0-)

                            Greece cannot issue its own currency, it has to spend euros issued by the ECB.

                            The economy of an entity that issues its own currency is different from the economies of Greece, California, or average household.

                            When there's no inflation, high unemployment, and factories working at under capacity, a government that does issue its own currency should spend more money than it is taking in.  Right now, we have too few dollars chasing goods that will therefore not be produced, nor require that anyone be employed to produce them.

                            More here (listen) and here (read).  There's a fair amt of Joe Firestone at NEP as well.

                      •  We set our own interest rates. Also, there's (2+ / 0-)
                        Recommended by:
                        priceman, mbguenth

                        really no need to issue debt instruments to begin with.  It's a hold over from the gold standard.

                        We have fiat now.  It's weird that the US creates out of thin air liquidity points, only to borrow them back from private banks.

                        Why are we still doing this?

                      •  The Fed controls interest rates, not the market (0+ / 0-)

                        If investors don't like the completely risk-free return they're getting on T-bills and decide not to buy more, their alternative is to hold cash and earn nothing, or invest in the private sector, which entails risk. Of course, if they want a risk-free subsidy they'll buy more T-bills. Market participants have no leverage over interest rates, the Fed sets them.

                  •  Debt vs. deficit...... (1+ / 0-)
                    Recommended by:
                    priceman

                    The deficit doesn't signal a debt for a monetary sovereign of a fiat currency with a floating exchange rate.

                    For instance, you wouldn't want to pay the deficit down to $0, cuz then there would be $0 dollars in the private sector.

                    I'm not sure how people's attention being elsewhere affects inflation.

                    Either there's more money in the economy than there are things to buy, or there isn't.  Even if I watch a lot of American Idle.

              •  The coin wouldn't circulate all at once. The (4+ / 0-)

                money supply issue would be the same as if the Congress raised the debt ceiling.

              •  The implication of my post (0+ / 0-)

                which lit off that long thread about the effect of borrowing on inflation....is that at first glance, a trillion is a lot of moolah, but perhaps not enough to trigger more than mild inflation compared to the overall size of the economy.  

                In a liquidity crisis, more liquid is indicated.

                We are the principled ones, remember? We don't get to use the black hats' tricks even when it would benefit us. Political Compass: -6.88, -6.41

                by bmcphail on Wed Jan 09, 2013 at 11:35:58 AM PST

                [ Parent ]

        •  Those freeloading grifters who took school (24+ / 0-)

          loans and are now living in poverty unable to pay them sure don't get beat on enough.

          Thank you for having the courage to open that can of whup'ass and show them who's boss.

          "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

          by JesseCW on Tue Jan 08, 2013 at 08:59:10 AM PST

          [ Parent ]

        •  There are all kinds of analogies you could (11+ / 0-)

          have used rather than to attribute some moral failing to those who had to borrow money for college. As opposed to, you know, the virtue of being independently wealthy.

          This is, as I read it, no different than any effort on the part of the Fed to loosen or tighten the money supply. You can go after them for "avoiding accountability," but after all, that's a pretty basic tool of the state in economic policy.

          Nothing requires a greater effort of thought than arguments to justify the rule of non-thought. -- Milan Kundera

          by Dale on Tue Jan 08, 2013 at 09:26:43 AM PST

          [ Parent ]

        •  What the funk? (11+ / 0-)

          All those freeloaders, going after a free education, selfish bastards?

          ????

          -5.38, -2.97
          The NRA doesn't represent the interests of gun owners. So why are you still a member?

          by ChuckInReno on Tue Jan 08, 2013 at 09:28:57 AM PST

          [ Parent ]

        •  Not really digging (7+ / 0-)

          your slam on student loan borrowers, and your analogy isn't even right.

          This does not in any way allow us to avoid paying our debt; it simply reduces the amount of the debt on the books to bring it under the debt ceiling limit so that the government won't shut down.  Once the limit is raised, the extra trillion goes back off the books and we're back where we started.  This isn't $1T in free money; it's just a numbers game to get around this congressional bullshit.

          And there are plenty of people who owe student loans who have paid back a sizable chunk of what they borrowed, but due to sleazy lending practices got screwed; no one's asking for a free ride.  Just a fair one.  So can it with your self-righteousness.

          "Mediocrity cannot know excellence." -- Sherlock Holmes

          by La Gitane on Tue Jan 08, 2013 at 11:14:18 AM PST

          [ Parent ]

        •  We have a fiat currency. Money out of nowhere. (3+ / 0-)
          Recommended by:
          Phoenix Woman, priceman, mbguenth

          Free money.

          At the Federal level, money -- free liquidity points -- is free, cuz money is not a THING.

          It's merely a unit of account.  Like inches.

          Inches are free.  So with points at the bowling alley, and the Fed Gov is like the bowling alley -- keeping score of how many dollars are in circulation.

          The total deficit = dollars in the private sector.

          Money costs you your labor.

          Money costs the Fed Gov $0.  

          Of course we CHOOSE to issue debt instruments.  We don't have to do this, however.

      •  Think of it as a temp Proxy for the debt ceiling (7+ / 0-)

        Essentially, this coin is minted and begins to be spent on keeping the government running and paying its bills.

        As soon as the debt limit is lifted, new debt is issued to cover the costs which the coin had paid for (which will not be equal to the face value of the coin), effectively restoring it to $1 Trillion. It is then sent back to treasury and melted down. This is not an alternative to the debt ceiling.  It is a stop gap solution to avoid a true Government shut down.

        •  The coin is a ploy. An artifice. A much too slick (8+ / 0-)

          ... and facile way around the GOP House's unconstitutional ignoring the Full Faith and Credit clause. It would be a gimmacky sham to get around an irresponsible cadre of Congresspeople and Senators.

          If we divert attention from them with a half-witted Big Coin scheme, they will become less accountable in the eyes of the world, our creditors and the public.

          2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

          by TRPChicago on Tue Jan 08, 2013 at 09:06:16 AM PST

          [ Parent ]

          •  we must be cleansed in the fire (3+ / 0-)

            I don't think the coin should be minted in anticipation, but even though it's a gimmick, it seems like a better alternative than a "partial gov't shutdown" and the economic calamity that entails.

            •  Those aren't the alternatives. Just suck it up,... (0+ / 0-)

              ... re-read the 14th Amendment on paying our debt and maintaining our credit, keep paying the bills and issuing debt as necessary, and tell the GOP that on this one, they are both wrong and, thankfully, irrelevant.

              2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

              by TRPChicago on Tue Jan 08, 2013 at 10:39:39 AM PST

              [ Parent ]

          •  RE Full Faith and Credit Clause (1+ / 0-)
            Recommended by:
            whaddaya

            If you're referring to Article IV, section 1 of the Constitution, you're following a common misconception.  

            That clause has to do with individual states honoring certain judgments and laws of the other states -- for example, Utah honoring a marriage performed in Hawaii, or Texas helping to enforce a child support judgment issued in Minnesota.  The clause has little or nothing to do with federal debt.

            Okay, back to my corner ...

            •  14th Amendment, Sec. 4. (0+ / 0-)
              The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
              Some dismiss this as a relic of the Reconstruction period, meant to deal with post-Civil War debts. I'm sure the Artful J. Scalia would be able to parse this however he likes du jour. But it is a Constitutional directive to all three branches of the Federal government.

              What the GOP House and some Senators are doing is bootstrapping from their treasured processes of authorization (approving programs and projects) and appropriations (allocating money for them) to a third level of review - authorizing the borrowing of money to do what Congress has already mandated.

              The debt ceiling, as it is being applied by the Tea Party-dominated GOP in Congress only to a Democratic Executive (and not the Republican one that ran up much of the debt with which we are now burdened), is being used unabashedly as leverage, irresponsible political manipulation that challenges Congress's actions, not the President's.

              That's the issue to keep focus on, not some gimmickry workaround to self-float a credit line via a Big Coin that will jeopardize the credit of the country as fast as not paying its bills.

              2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

              by TRPChicago on Wed Jan 09, 2013 at 05:35:46 AM PST

              [ Parent ]

      •  No. It's still borrowing. It's just being done (3+ / 0-)

        around the debt limit.

        We're giving the coin to the Fed, and getting cash in return.

        That's the same thing, in terms of all practical impact, as when we give them Bonds and they sell the bonds and give us cash.

        The coin is really just another sovereign debt instrument.

        There is no perpetual motion here, just a different fuel.

        "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

        by JesseCW on Tue Jan 08, 2013 at 08:57:52 AM PST

        [ Parent ]

        •  And the Fed Is Still the Fed (5+ / 0-)

          The Federal Reserve is holding about $1.6T of U.S. government debt right now. Upon receiving the $1T platinum coin the Fed could, if it chooses, sell $1T worth of U.S. government bonds. There's no change in the amount of U.S. public debt outstanding, but there could be a change in the amount of U.S. public debt circulating in private hands.

          And that's only one way the Fed can vacuum up cash if it wishes. There are several monetary tools in its arsenal.

          However, the U.S. needs more (expected future) inflation, not less.

      •  physical laws of nature? (8+ / 0-)

        the problem with your initial statement is the assumption that the "debt limit" has any more validity or rational explanation than the suggested coin. as is pointed out elsewhere, it is ridiculous (if not unconstitutional) for Congress to approve spending and then not approve borrowing to pay for that spending.  the notion of a "debt limit" was created to "solve" the then problem of congress hating having to approve every instance of borrowing, particularly when there was a war going on. That solution could have been to eliminate entirely the need to approve borrowing to pay for approved spending, which would be the same thing as interpreting the language of 14th amendment to achieve that result. doing something that may be stupid and unnecessary to avoid something that is itself stupid and unnecessary not only does not violate any physical laws of nature, but can be justified on the basis of the irony alone.

        F*ck the hostage-taking, terrorist, treasonous Republicans. Mint the coin! Or read the 14th amendment to effect a rational result. In any case, shove the debt limit up their collective asses.

        We have serious problems to solve. And we need serious people to solve them. And that does not include these current day Republicans.

      •  Money is like that (1+ / 0-)
        Recommended by:
        Nada Lemming

        The only difference here is that the physical absurdity of indefinite monetary growth is made tangible to the ordinary person.

        This will help to demystify money, which will in turn help to make people believe less in its value: just the thing we need!

    •  I don't see how it could (4+ / 0-)

      Simultaneously finance govt operations and have no macroeconomic effects.  

      To the extent the risks of further fighting over the debt ceiling consist in downgrades, why would we invite that thru monetizing the debt, especially when Boehner isn't really going ahead.  Brinksmanship re a govt shutdown is cleaner and keeps political pressure on the Republicans.  

      There's no real statutory analysis here, either.  It's just repeating the conclusion.  I think Boehner (or any bondholder) could validly argue that the use of the term "denomination" is inherently limiting, and while the Treasury Sec. may mint coins, his discretion is limited to those denominations which have previously existed or which bear a plausible relationship to the market value of platinum therein.  By saying that the power to coins trillion dollar coin is unintended, Diel implicitly confirms this!  One thing about statutory construction - something can be both literally true and still wrong.  

       But it doesn't much matter because the ability and willingness to pay govt obligations - including retiring government bonds! - by coin seigniorage, would make U.S. debt only attractive in future auctions at higher interest rates.

      Difficult, difficult, lemon difficult.

      by Loge on Tue Jan 08, 2013 at 08:37:45 AM PST

      [ Parent ]

      •  you're worried about higher interest rates? (10+ / 0-)

        what effect do you suppose defaulting on our debt obligations would have on interest rates?  

        People don't buy federal bonds at 1.09% yields because Congress controls the debt limit, they buy them because America is the richest, most powerful, and stable country the world has ever known.  We pay those insanely low rates because investors have the utmost confidence they'll be paid back.

        •  It's not a case of (0+ / 0-)

          default on one side or coin seigniorage on the other.  Both are defaults in real terms.  The choices are default, government shutdown, or political deal (by far the most likely and preferable).  Admittedly, there are fewer legal problems with the coin option than explicitly repudiating payment (even a bad reading of a statute is better than ignoring the Constitution), but its a valid legal position (say, after a shutdown where we are still out of money) to acknowledge the obligation to pay creditors without actually doing so.  Nobody has to ever interpret the coin statute the way y'all want, and shouldnt.  (that Diehl sees an unintended consequence really cuts against any "authority" his position as author would give him.) I guess the fed could choose to buy up retiring debt by printing money of its own (unclear but possible whether not doing so could authorize firing for cause so i dont take a position on whether the fed chair could be ordered to do so), but that's also a default by another name.

          Difficult, difficult, lemon difficult.

          by Loge on Tue Jan 08, 2013 at 09:33:54 AM PST

          [ Parent ]

      •  Wrong on higher interest rates+many things (1+ / 0-)
        Recommended by:
        Nada Lemming

        Seignorage has as much to do with the market value of platinum as paper money has to do with the market value of paper. Fiat money, whether marked up, printed or coined first of all. It's only an obscure law that we cant use gold or anything else.

        Downgrades mean nothing like they meant nothing when S&P did it instead of downgrading the junk bonds they rated.

        That's the problem with all of your legal analysis but in this case you just don't understand how our fiscal and monetary operations work. If denomination is inherently limiting, it would have to apply to all coins minted(OMGZ no gold or silver bullion!) which do not have relation to the market value of that which mints them. It's all about legal tender. It was also "unintended" to get off the gold standard and that was completely legal in 1913 off the full gold standard and when Nixon did it in 1971. The SCOTUS never weighed in and set a scary precedent. Also even neoclassical economists know that if there were bond vigilantes it wouldn't cause higher interest rates it would cause an expansionary fall in the dollar.

        We create money for matured government bonds which is why we only issue debt as an interest rate setting tool. The fact that you think higher interest rates on bonds will be coming just because of a different process of creating currency is quite a fallacy.

        None of that will happen as this just changes the way debt is already paid and money coined as it says in the constitution and Congress regulating the value of the coin as it also says. I'm sure some will try weasel words to get out of that but it applies.

        And your faith that Boehner won't do this is ignoring history. No, I'm afraid you're just going to have to accept this is legal and that these arguments are flimsy semantics.

        I don't negotiate grand bargains with deficit terrorists!

        by priceman on Tue Jan 08, 2013 at 03:27:02 PM PST

        [ Parent ]

        •  I don't have to accept anything, (0+ / 0-)

          As it's all completely moot, for one.  Neither the law nor the economics will ever be tested.  Is not a question of faith (paragraph 6) but rather observing recent statements and  actions from Obama and other Republicans.  I found the rest of your response vague and unfocused.  What may be the problem:  If I don't accept the first sentence of paragraph 4, it can't be a fallacy in the second paragraph.  You created a strawman by treating the objections as endogenous rather than exogenous to the MMT structure.  i dont think the problem is a "different process" -- I'd find printing money to purchase sovereign debt objectionable.  The economic objections inform the legal ones (the more dangerous the consequences, the less reasonable a purely literal interpretive becomes), but each stands independently.  I think paragraph 5 reflects some confusion on your part as to what I was arguing - you used "that" in the same paragraph to mean different things, not me.

          Difficult, difficult, lemon difficult.

          by Loge on Tue Jan 08, 2013 at 04:31:59 PM PST

          [ Parent ]

          •  The economics have been tested (0+ / 0-)

            since 1971 and when Lincoln created Greenbacks to finance the civil war. This is all pretty basic.

            Calgacus really provided a better answer for all the economic nonsense you believe in below.

            But this:

            I'd find printing money to purchase sovereign debt objectionable.
            I'm sorry you find routine monetary policy objectionable. Of course it's marked up like a savings account at a commercial banks by a computer before it is printed. This happens whether the Fed does it by buying bonds at commercial banks or whether householder or firms do it when the money supply increases by the Fed as the Treasury's fiscal agent increases it. All this coin does is temporarily create a credit for when we create money appropriated by Congress to pay off debt we already rung up happens per the debt ceiling(it's really a legal matter and political danger of default rather than operational).

            The trillion within the coin is destroyed as soon as it is made up for once the debt ceiling is raised and if it isn't, it's still fiat money. Unless you think this country is in danger since the creation of fiat money like Ron Paul, I really don't' see any reason why anyone should take your scare monger interest rate and inflation claims(showing you don't know what this entails as none of that will happen)I understand now why you may be confused and not able to interpret law correctly on a broad array of things.

            I don't negotiate grand bargains with deficit terrorists!

            by priceman on Tue Jan 08, 2013 at 06:05:46 PM PST

            [ Parent ]

            •  I detect some friction (1+ / 0-)
              Recommended by:
              Sharon Wraight

              between the argument that the coin thing is silly but justified because the whole debt ceiling debate is a farce; and your argument, which seem to think that we should do it even if there were no debt ceiling (per the comment about commercial bank markups).  Against that backdrop, it's hard to say I'm necessarily a Paulite (I am not), or even confused.

              As you know, it's not at all settled that this is "routine monetary policy," which is the point I made above.  It doesn't support the initial premise to point out a contradiction I would make if and only if i also adopted that view of what the federal reserve does, but (per your last sentence) faithful attribution of arguments / appreciation of subtlety is not your forte.  The argument that it's ok because the coin doesn't circulate is the closest to a germane argument, but it doesn't quite get you there.  The assumption of how markets would react derives from the same initial assumption of the relationship of the federal reserve to government borrowing, so it's bootstrapping all the same.  Instead of enlisting past practice into your theory, what if the only reason going off the gold standard worked was because the federal reserve maintained independent control of the money supply?

              The whole thing is silly -- the idea, and the outward attention it's getting on a slow news week. We're not convincing each other, call it a night.  If you weren't so quick with ad hominem attacks, I'd be more interested in keeping this going.  

              Difficult, difficult, lemon difficult.

              by Loge on Tue Jan 08, 2013 at 06:52:42 PM PST

              [ Parent ]

    •  He's right. No effects. (31+ / 0-)

      The coin never gets "issued" and circulated.  No one can surrender it for reimbursement, as they could with a bond.

      But --- imagine minting enough of these little beauties to pay off every last residential mortgage in the country --- and then liquidating the investment banks that caused the mortgage fiasco in the first place.  I could live with that....

      Proponents of gun violence own guns. Opponents of gun violence do not own guns. What part of this do you not understand?

      by Liberal Panzer on Tue Jan 08, 2013 at 08:37:50 AM PST

      [ Parent ]

    •  That's right (4+ / 0-)

      He's wrong when he says that the trillion dollars would not be in circulation.  The physical coin won't be, but the value that coin represents certainly will be.  If it weren't, there would be no need to melt the coin later and withdraw it from the Treasury.

      I think it's amusing that of all the possible strategies for dealing with Republican hostage-taking and the debt ceiling, this is the one that this site is obsessed with and has rallied behind as the best: just have the President create more money.

      To believe that markets determine value is to believe that milk comes from plastic bottles. Bromley (1985)

      by sneakers563 on Tue Jan 08, 2013 at 08:40:30 AM PST

      [ Parent ]

    •  I think the assumption is (2+ / 0-)
      Recommended by:
      TomP, bmcphail

      and it is stated in the letter... that congress comes to its senses (HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA) and the coin is subsequently eliminated therefore no macroeconomic effect. But your point is quite valid... what if the coin becomes the "new norm" and congress does nothing and the... unraised... debt ceiling is approached again and the mint needs to mint a second $1 trillion coin... yeah... that could and would have some macroeconomic effects because then it would start becoming real money.

      "Do what you can with what you have where you are." - Teddy Roosevelt

      by Andrew C White on Tue Jan 08, 2013 at 08:54:51 AM PST

      [ Parent ]

    •  I think it has absolutely no economic effects (3+ / 0-)
      Recommended by:
      Odysseus, Vote4Obamain2012, priceman

      It simply shifts the baseline.
      Let's say I tell you, look I have a debt of $1 trillion.
      Then I go back to the books and shift the number so I have a debt of $0.
      Well I still have to sevice the debt and pay all interest payments. So it really changes nothing at all.
      It just changes the baseline debt number that is used for the debt ceiling calculation.

      Obama 2012...going to win it with our support!!!

      by mattinjersey on Tue Jan 08, 2013 at 09:03:20 AM PST

      [ Parent ]

    •  Well, it's pretty simple (1+ / 0-)
      Recommended by:
      Laconic Lib

      All of our money is backed up by the federal reserve.  We've been living on "notes".  The actual money that the government owns, is locked up in the Fed.  

      Under this ascertion, there is ZERO actual money in circulation.  This simply puts another trillion of fiat currency into circulation, while the actual money resides in the federal reserve.

      The ONLY reason we've seen inflation at all since 1970, has been been speculation.  Items and goods TRADE for higher, which makes inflation rise.

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Tue Jan 08, 2013 at 09:09:23 AM PST

      [ Parent ]

    •  His point is that this is no different (1+ / 0-)
      Recommended by:
      Laconic Lib

      than issuing bonds, which has to be done anyway.

      When someone tells you they are lying, you should believe them.

      by shoeless on Tue Jan 08, 2013 at 09:54:00 AM PST

      [ Parent ]

      •  But bonds DO have a macroeconomic effect. (0+ / 0-)

        So, if it is no different from issuing bonds, then it is wrong to say that it will have no macroeconomic effect.

        LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

        by dinotrac on Tue Jan 08, 2013 at 10:10:11 AM PST

        [ Parent ]

        •  Defaulting on the debt would have a bigger (2+ / 0-)
          Recommended by:
          Vote4Obamain2012, antirove

          macroeconomic effect. There is no way around it at present.

          When someone tells you they are lying, you should believe them.

          by shoeless on Tue Jan 08, 2013 at 10:30:18 AM PST

          [ Parent ]

          •  The possibility that we are screwed is not the (0+ / 0-)

            same as saying the trillion dollar coin would not have a macroeconomic effect, however.

            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

            by dinotrac on Tue Jan 08, 2013 at 10:41:21 AM PST

            [ Parent ]

            •  The the strategy involves offset against the coin/ (1+ / 0-)
              Recommended by:
              Sharon Wraight

              "Democracy is a life; and involves continual struggle." ---'Fighting Bob' LaFollette

              by leftreborn on Tue Jan 08, 2013 at 11:04:06 AM PST

              [ Parent ]

              •  Yes it does, but still a different thing. (1+ / 0-)
                Recommended by:
                Sharon Wraight

                People want to believe in magic, much as investors convinced themselves that old-fashioned ideas like profits  and price-earnings ratios didn't matter during the dot.com bubble.

                Parrot a magic line, and people will want to apply the magic wherever they can.

                LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                by dinotrac on Tue Jan 08, 2013 at 01:06:48 PM PST

                [ Parent ]

                •  Yep, mass self-hypnosis (0+ / 0-)

                  Surprising to see what levels it can reach, in seniority and pitch! :-)

                  If the underlying perhaps of this farce is to try and highlight how farcical the GOP has become, then I 'get it' -- except that with such a batsh*t-crazy GOP they might call our bluff, then we're stuck.

                  With all that's been written and commented on here, I'm struck by how relatively little proponents have to say about the precedent this sets for future generations of Presidents and GOP wing-nuts.

                •  I've written a diary that was very critical of the (1+ / 0-)
                  Recommended by:
                  Sharon Wraight

                  coin idea. I'm aware of all the implications.

                  "Democracy is a life; and involves continual struggle." ---'Fighting Bob' LaFollette

                  by leftreborn on Wed Jan 09, 2013 at 05:05:55 AM PST

                  [ Parent ]

    •  My understanding is that (1+ / 0-)
      Recommended by:
      antirove

      it only serves the purpose to lower the debt to the amount allowable under the debt ceiling, so that we can continue to spend.  It's not necessarily money that will be spent; it's only purpose is to fudge the books.

      Once the debt ceiling fight is over and the limit is raised, the trillion goes back on the books and it's business as usual.

      "Mediocrity cannot know excellence." -- Sherlock Holmes

      by La Gitane on Tue Jan 08, 2013 at 11:04:46 AM PST

      [ Parent ]

    •  They already spent it, voting on the budget (0+ / 0-)

      This is just a bit of legerdemain to make the invisble-money they already voted for (aka: the debt), visible. The debt already exists and must be paid, according to the constitution. The coin is a lovely fiction that allows the treasury to keep paying on the debt until the idiots blocking the debt ceiling vote cry uncle.

      It removes their bargaining chip against our social safety net, but does nothing to change the budget.

      For the scenario you fear, they would need to hold another vote, on a new budget, adding another trillion dollars of debt to the trillion they already voted for and are pretending to protest in order to increase the debt by a trillion beyond its current level. It's absolutely not going to happen.

    •  The assumption is (0+ / 0-)

      that the coin gets shipped back only after the debt limit problem has been permanently fixed by new legislation. If congress refuses to do so, the coin stays at the Fed and the administration continues to mint additional coins as the need arises.

  •  And that is that... an open and shut case. (20+ / 0-)

    Please proceed, Mr. President.

    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 08:26:26 AM PST

  •  It's still electoral suicide (0+ / 0-)

    not that there are any better options.

    •  In what sense is it electoral suicide? (23+ / 0-)

      I really don't see it.

      And if they try to impeach him for it, it will simply backfire that much worse.

      Happy little moron, Lucky little man.
      I wish I was a moron, MY GOD, Perhaps I am!
      —Spike Milligan

      by polecat on Tue Jan 08, 2013 at 08:34:15 AM PST

      [ Parent ]

      •  I agree but . . . (1+ / 0-)
        Recommended by:
        Vote4Obamain2012

        They should go with a partial government shutdown first.  Let it last about a week with constant calls from the White House, the Senate and the House minority that the Republicans should do their job.

        This followed by Pelosi and Reid urging the president to act for the sake of the country and finally the president reluctantly agreeing that "the system is clearly not functioning as it was intended and as your president, I cannot allow a group representing a minority of Americans to bring the American economy and with it the world economy to ruin.  Accordingly, I have instructed the Secretary of the Treasury to take all necessary steps to end this crisis and acting under the authority granted to him by [name of statute] he has directed the mint to issue a platinum coin which will allow the United States of America to meet its legal obligations and preserve the full faith and credit of the United States of America."

        Chaos ends.  President seen as adult in the room and savior of the American economy.

        Ceterum censeo Factionem Republicanam esse delendam.

        by journeyman on Tue Jan 08, 2013 at 09:05:55 AM PST

        [ Parent ]

        •  No, he should proclaim to the markets that there (4+ / 0-)

          will be no gap if Congress refuses to raise the limit because he will deposit the coin at the stroke of Midnight.

          This should lend confidence to the markets, but also demonstrate the failings of the House.

          Avoiding that "week long gap" as you describe it would be vastly preferable.

          Happy little moron, Lucky little man.
          I wish I was a moron, MY GOD, Perhaps I am!
          —Spike Milligan

          by polecat on Tue Jan 08, 2013 at 09:24:23 AM PST

          [ Parent ]

          •  It might keep confidence in the markets to (0+ / 0-)

            know Obama has the coin authorization available, in his vest pocket, ready to drop at any time, especially if Congress goes beyond another week of bad faith 'deliberating'.  

            It's only fair that Congress experience austerity and government shutdown like the rest of us, and get back some of the hardball treatment they've tried to dish out.  So, putting a hold now on all spending going to keep Congress's offices and buildings and salaries going might also help put on some pressure. Have the USPS refuse 'franked' mail.  If they're not doing their job, no need for any federal expenditures to support them.  Turn off their lights, computers and phones, heat, water, parking lots, transportation, security, cancel credit cards, payroll, etc. until they pass a real funding bill and set an appropriate debt ceiling.

            When life gives you wingnuts, make wingnut butter!

            by antirove on Tue Jan 08, 2013 at 02:14:40 PM PST

            [ Parent ]

    •  the better option is Sec 4 of the 14th amendment. (4+ / 0-)

      Mr Diehl has answered several objections I had to the coin (constitutionality being the biggest one) but the tactic is still fraught, and the unintended consequences down the road are as many and varied as the mind of a neocon or neoliberal can imagine.  Plus, it's a hook for the right to shift the discussion from their brinksmanship to Obama's gimmickry.

      That section of the 14th is utterly unambiguous.  There was a diary here yesterday touting Krugman's endorsement of the coin gambit, but what that diary didn't focus on was the fact that Krugman made that endorsement only as a fall back if invoking the 14th wasn't doable.  

      And the only reason it isn't doable is if Obama decides not to do it.

      "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

      by nailbender on Tue Jan 08, 2013 at 08:36:33 AM PST

      [ Parent ]

      •  There is nothing unambiguous, (1+ / 0-)
        Recommended by:
        sneakers563

        and in fact, the stronger argument points the other way.  There is a conflict between the obligation to pay existing debt and the authorization to issue new bonds.  As the Constitution gives the power to issue debt to congress, and the 14th amendment explicitly only protects holders of bonds authorized by law, that means the debt ceiling is likely constitutional and that any attempt to ignore it would mean lenders would demand protection in the form of higher interest rates.  The clause affects who gets paid first in the event of a shortfall, but the main remedy is largely political - we're not supposed to be a country that pulls such stunts.  But seigniorage, too, is tantamount to default, in real terms.  Obama shouldn't risk his credibility by sinking to the level of gimmicks.  

        Difficult, difficult, lemon difficult.

        by Loge on Tue Jan 08, 2013 at 08:46:30 AM PST

        [ Parent ]

        •  Let me get this straight: (2+ / 0-)
          Recommended by:
          telamonides, priceman

          US Bond holders would demand higher interest rates if the debt ceiling were shown to be unconstitutional?  How?  The only mechanism I know of is for them to sell their bonds, there being no US govt shareholder's meetings that I know of (other than elections).  Of course, a sell off would cause rates to rise, as they should given the unnaturally low rates the FED has been engineering via the QE (are we into the 4th tranche now?) "gimmick."

          And where do you get this from Sec 4:

          The clause affects who gets paid first in the event of a shortfall,
          ??  I see no hierarchical ordering of the debt in that clause, and indeed, I only see a proscription for any "shortfall" whatsoever.

          More to the point, the debt ceiling, once congress has appropriated beyond it as they have today (and have always done when politics demands it of them), calls the public debt into question.  Period.  Therefore it's unconstitutional.  Period.

          "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

          by nailbender on Tue Jan 08, 2013 at 09:05:44 AM PST

          [ Parent ]

          •  Nope, the opposite actually. (0+ / 0-)

            Purchasers at auction (which is how treasury would pass the ceiling) would demand higher interest rates for the risk that it wouldn't be unconstitutional -- and their bonds, being unauthorized by law, would lack the Constitutional protection that prior issuances have.  The hierarchical ordering derives from the fact that a Constitutional right to payment trumps a statutory right, and most expenditures are statutory.

            Laurence Tribe had a good argument on the last point, where conceivably any act of congress making repayment any less likely could be unconstitutional, so that reading devolves into a balanced budget amendment by other means.  Clearly wrong.  And it still doesn't address the point I first raised, which is: where is the authorization for the treasury to issue new debt assuming that's true?  Could treasury pay creditors by unilaterally raising taxes or selling national parks?  Unworkable.  The remedy is ultimately political.  Less than that, it means bondholders or vulture funds would get a default judgment in a collection suit and could then initiate judgment enforcement proceedings, as happens in any case with defaulted soverign debt.  The only difference might be that the federal government can't explicitly repudiate, which happens with some other sovereigns.  

            Generally,though, seeing unambiguity in legal text is a leading indicator of not understanding the issues.  it denies the existence of arguments, which is rather different from prevailing upon them.

            Difficult, difficult, lemon difficult.

            by Loge on Tue Jan 08, 2013 at 09:20:56 AM PST

            [ Parent ]

            •  When arguing you disambiguate. (0+ / 0-)

              When pondering prior to formulating you do the opposite.  Thanks for the points to ponder.

              But take the 2nd Amendment, as an illustration.  How ambiguous is that language?  And how ambiguous was the Chicago and DC  rulings that the SCOTUS laid down in that regard?  And how ambiguous was the argument that the gun fetishists prevailed with?

              Bonds are debt.  Can that be argued?  If not, where in Section 4 is there an exclusion for bonds?  

              "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

              by nailbender on Tue Jan 08, 2013 at 04:52:01 PM PST

              [ Parent ]

              •  "Can that be argued *with*" nt (0+ / 0-)

                "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

                by nailbender on Tue Jan 08, 2013 at 04:56:36 PM PST

                [ Parent ]

              •  Each side in the 2nd amendment (0+ / 0-)

                debate has some textual support for the position.  In my view, the view that gives more latitude to gun regulations is a better fit, textually, historically, and in terms of large-scale policy.  Generally speaking, legislatures should be free to act for the common good unless there's a much stronger countervailing reason than a second best gloss on a convoluted sentence.  I favor gun control as a policy matter, but that's neither necessary nor sufficient to resolve the 2nd amendment question, but legal realists will assert that bias appears inevitably.

                I'm not going to repeat the separation of powers argument concern re the 14th amendment that you're glossing over.  Obviously the definition of debt has nothing to do with it.

                Difficult, difficult, lemon difficult.

                by Loge on Tue Jan 08, 2013 at 05:51:58 PM PST

                [ Parent ]

      •  Oh, and one more thing: (0+ / 0-)

        Mr Diehl's assurances that the coin trick would be constitutional is just so much chaff before the partisan wind that blows from the mouths of the SCOTUS' Right Wing majority.  The 14th is a much stronger position to take, both Constitutionally and politically.  

        "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

        by nailbender on Tue Jan 08, 2013 at 08:47:27 AM PST

        [ Parent ]

        •  Aren't the 14th Amendment and the coin minting.... (1+ / 0-)
          Recommended by:
          Calgacus

          ... complimentary to each other. The coin minting is a means for the Country to do what it's got to do and therefore adds another arrow in the quiver for the administration's lawyer to argue the constitutionality of the coin minting?

          No snowflake in an avalanche ever feels responsible.

          by Magster on Tue Jan 08, 2013 at 08:55:49 AM PST

          [ Parent ]

          •  My point is that it's an arrow that is unfletched. (0+ / 0-)

            It won't work politically even if it would constitutionally.

            "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

            by nailbender on Tue Jan 08, 2013 at 09:12:14 AM PST

            [ Parent ]

            •  It's a little bit a chicken/egg thing... (1+ / 0-)
              Recommended by:
              Calgacus

              If you think the 14th is more politically serious, then Obama can invoke it as the primary thing, and then say that in order to execute his oath of office and the mandates of the 14th, the minting is necessary, then fine. But I think Obama has to throw out both justifications, and defend each because of the consequences of default.

              No snowflake in an avalanche ever feels responsible.

              by Magster on Tue Jan 08, 2013 at 09:24:32 AM PST

              [ Parent ]

              •  Well he's already signalled that he's going to (0+ / 0-)

                confront the house on this, and I can't see how he'll do it absent one or both of these tactics.  It's just that the 14th offers a very clean execution of his position ('The Constitution made me do it!"), whereas the coin has all the hallmarks of a sideshow and tabloid frenzy.  It's just plain stupid, politically.  I don't think anybody, including the Mint guy who Kos quotes in this diary (note that he's hardly a political expert) has fully thought through all the combinations and permutations of possible long and short term consequences of the coin trick.  Even Diehl's description of the way it would go down (coin delivered to Treasury, entry made in the books, coin returned to the Mint and melted) brings nothing so much to mind as the classic Shell Game.  

                Hell, even the term "coin trick", which will undoubtedly become the viral monicker for this gambit, has connotations that Obama's political operation should be repulsed by.

                I'm totally amazed that someone as savvy as Kos, btw, has bought into this coin business.  If there was a word for "fraught" that was a couple of orders of magnitude stronger as to the perils involved, I'd certainly be using it.

                "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

                by nailbender on Tue Jan 08, 2013 at 03:23:11 PM PST

                [ Parent ]

                •  Diehl (2+ / 0-)
                  Recommended by:
                  nailbender, Phoenix Woman

                  Is probably more of a political expert than you believe he is. For all of his working life, he has worked in regulatory and legislative environments

                  From his wiki entry

                  When Diehl returned to Austin from Stanford, he worked for Bullock at the Texas Comptroller of Public Accounts office. Later he held positions as assistant to Commissioner Dennis L. Thomas and Director of Telephone Regulation at the Public Utility Commission of Texas (PUC).

                  In the wake of the Bell system divestiture, he oversaw a dramatic change in the regulation of telecommunications utilities. He was the PUC's liaison to the Texas Legislature during a rewrite of the state's telecommunications regulatory laws and championed the commission's opposition to AT&T's attempt to be deregulated by the legislature. The proposal was defeated and the legislature mandated a market dominance case be held to determine whether AT&T retained market power.[1] Diehl led the case against AT&T's deregulation which prevailed at the administrative trial level. The decision was unanimously confirmed by the commission and upheld on appeal in state district court.

                  Diehl was responsible for adoption of the state's first programs to make telephone service more affordable for low income households: Lifeline rates and Link Up Texas. He also spearheaded creation of Texas Relay Service, the state's first program to make telecom service available to the deaf and hard-of-hearing. In 1988, Diehl joined Dallas-based International Telecharge, Inc. as Vice President of Regulatory Affair. He was responsible for state regulatory and legislative affairs and was the company's expert witness in administrative law and appeals court proceedings.

                  In January 1991, Diehl was named legislative director to U.S. Senator Lloyd Bentsen. In September 1992, the Senator promoted him to majority staff director of the Senate Finance Committee.[2] On the first day of the Clinton administration, he moved to the U.S. Treasury Department and was named Chief of Staff to Treasury Secretary Bentsen.[3] In December 1993, President Clinton announced his intent to nominate Diehl as Director of the United States Mint, and the U.S. Senate confirmed him unanimously in June 1994.[4]
                  Director of the United States Mint and thereafter

                  Diehl executed a dramatic turnaround of the Mint. By the time he left the agency in March 2000, the Mint had convinced Congress to exempt it from all procurement regulations and annual appropriations,[5][6] eliminated nine of ten political patronage positions,[6] and resolved its long-standing financial management weaknesses.[7][8] The Mint also reformed its troubled commemorative coin program[6] and built one of the most successful e-Business sites on the web.[6][9]

                  •  Good point. But I still think the coin idea (1+ / 0-)
                    Recommended by:
                    Sharon Wraight

                    sucks and that everyone who's been promoting it hasn't thought it through.  Krugman calls it a necessary gimmick if the 14th doesn't get invoked. But a gimmick nonetheless, and it will be framed as such by the GOP and the Pundit class.

                    "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

                    by nailbender on Tue Jan 08, 2013 at 04:28:19 PM PST

                    [ Parent ]

                    •  The US Government (2+ / 0-)
                      Recommended by:
                      katiec, nailbender

                      could choose to pay its obligations in one dollar coins. That is another way to get around the debt ceiling.

                      Dollar bills issued by the Federal Reserve are considered "debt." However, US Notes and coins issued by the Treasury are not. But the US Congress put a limit of $350 million on the amount of US Notes that the Treasury can issue. This limit has been there since the time of Abraham Lincoln. There is no such limitation on coinage.

                      However, since 1917, there exist a law, (because of the Gold Standard) that says that all US  Government spending should come from Government Revenues, or from borrowing. The borrowing, because of the need to make sure that there was enough gold on hand to cover the borrowing was limited to the debt ceiling. So the government cannot just "print money" to cover the deficit spending.

                      However, profits from minting coins is considered to be Revenue.

                      So spending by dollar coins, and funding the deficits by Seigniorage profit is what we are talking about. There is more seigniorage profit (1,000,000,000 X) in a Trillion dollar coin, than there is in a dollar coin (6.25X)

                      That is really what Diehl is talking about.

                      Thus this is a "direct funding" of Government deficits as opposed to "borrowing" from the Federal Reserve. Ever wonder why US Treasury Auctions NEVER

                  •  also, Diehl is not an economist (0+ / 0-)

                    A great government intrapreneur, great bureaucrat (in the best leadership sense of that word), an amazing businessman (including government-owned biz), etc. But none of his lifework involved forecasting or managing macroeconomic policy. Nothing, nada, zip.

                    His email is a coup for DailyKos (and Markos), and carries some Beltway pundit weight. But at the end of the day, he's not an economist.

                    •  There are plenty of economists (0+ / 0-)

                      who back the idea as well.

                      However, my comment was more a response to the statement

                      including the Mint guy who Kos quotes in this diary (note that he's hardly a political expert)
                      and note that I responded beginning with
                      Diehl is probably more of a political expert than you believe he is.
        •  The White House itself (1+ / 0-)
          Recommended by:
          Phoenix Woman

          doesn't buy the 14th amendment argument.

          •  Obama said he was for the public option... (2+ / 0-)
            Recommended by:
            nailbender, Nada Lemming

            ... and a $250,000 cap on making Bush tax cuts permanent.

            How about a walk balk this time in the direction of the good guys??!!

            No snowflake in an avalanche ever feels responsible.

            by Magster on Tue Jan 08, 2013 at 09:41:35 AM PST

            [ Parent ]

          •  I thought there was more than one opinion on that (0+ / 0-)

            in the confines of that building.  But even if that were not the case, there's this short paragraph that can be spoken at the opening of a press conference on the subject, if and when Obama clues into the no-brainer aspect of it:

            After much serious consideration and in consultation with Constitutional scholars and legal experts, I have come to the conclusion that Section 4 of the 14th Amendment, which simply states that:
            The validity of the public debt of the United States, authorized by law,...shall not be questioned,
            requires that any financial obligation that has been incurred by Congress must be paid by the Treasury Department, regardless of the so called Debt Ceiling.  Therefore I am directing Treasury to faithfully fulfill all such obligations as they normally would, going forward, the Debt Ceiling notwithstanding.  We will continue to work constructively with Congress to bring our national debt under control, but we will no longer do so under the threat of an unconstitutional and unethical shutdown of legally established Government services and obligations.
            I mean, he reversed himself on marriage equality.  He can do it on this.  

            BTW, I know that the WH has refused so far to buy this approach. That's why I've been posting these comments.  But OTOH, you might note that the text of that little speech I just wrote comports nicely with Obama's recent statements that he will not countenance horse trading with the House over payment of debts that they've already incurred in the appropriations process.  

            "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

            by nailbender on Tue Jan 08, 2013 at 03:04:03 PM PST

            [ Parent ]

            •  Here's Bmaz on the 14th (0+ / 0-)

              http://downwithtyranny.blogspot.com/...

              Basically, to invoke it is to give yet more power to an already-amped-up Executive Branch -- power that we wouldn't want a Republican president to have.

              Visit http://theuptake.org/ for Minnesota news as it happens.

              by Phoenix Woman on Tue Jan 08, 2013 at 08:18:36 PM PST

              [ Parent ]

              •  If you read that post in its entirety you'll see (0+ / 0-)

                that the 14th is actually being held out as a stop gap in the event that the teabaggers do indeed trigger their suicide vest which is a default.

                "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

                by nailbender on Sat Jan 12, 2013 at 06:43:21 PM PST

                [ Parent ]

              •  and one more thing: (0+ / 0-)

                this isn't about taking power from one branch and giving it to another.  The POTUS' job is to enforce the law.  The 14th is a preeminent law which supersedes any law (such as the debt limit) that contradicts it.  The Executive has the responsibility for paying the lawful debts, through the Dept of the Treasury, that Congress incurs.  Congress cannot incur debts and then refuse to let them be paid.  If they do, the President has the responsibility to ignore them and execute his duty to prevent Section 4 from being transgressed upon.

                "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

                by nailbender on Sat Jan 12, 2013 at 06:48:06 PM PST

                [ Parent ]

    •  I don't see why- if Obama campaigns vigorously (7+ / 0-)

      in advance, to make it clear that the GOP is trying to paint everyone into a corner, then he can pin it on them. And he's not running for re-election, so to be "electoral suicide" somehow a "taint" would have to rub off on other Dems, and likewise I don't see how (since most of the Democratic office holders are less reticent than Obama about blaming the GOP).

    •  Last I checked (1+ / 0-)
      Recommended by:
      Laconic Lib

      Obama isn't up for reelection any time soon.

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Tue Jan 08, 2013 at 09:13:53 AM PST

      [ Parent ]

    •  The debt ceiling is an entirely arbitrary (0+ / 0-)

      political tool that for many decades was simply lifted pro forma, as a matter of course.

      What this is is a simple effort on the part of the administration to prevent the credit rating of the US to be held hostage to the impossible demands of a few dozen wingnuts in Congress.

      If the WH is savvy about the politics, I think this is a winner for them -- both in terms of political optics, and in terms of the ultimate policy goals of the administration.

      Nothing requires a greater effort of thought than arguments to justify the rule of non-thought. -- Milan Kundera

      by Dale on Tue Jan 08, 2013 at 09:31:10 AM PST

      [ Parent ]

    •  Seriously (5+ / 0-)

      the electoral suicide argument is the least sensical one against the coin.

      For starters, Obama isn't running for reelection.

  •  If Republicans want to play their debt ceiling (7+ / 0-)

    game again, I think Obama should give the platinum coin serious consideration.  Maybe best, however, at this point to let it be known he'll exercise the option:  maybe Republicans will cave.

    •  maybe they will cave in any case (1+ / 0-)
      Recommended by:
      phrogge prince

      their bravado seems to have grown thin

      "Show up. Pay attention. Tell the truth. And don't be attached to the results." -- Angeles Arrien

      by Sybil Liberty on Tue Jan 08, 2013 at 08:31:57 AM PST

      [ Parent ]

    •  Trillion Dollar Coin is no Sillier (16+ / 0-)

      than having a debt limit which conflicts with another law that Congress passed, i.e. the federal budget and its appropriations.

      "The problem with posting quotes off the Internet is you never know if they're genuine."--Gen. George Washington at the Battle of Gettysburg, February 30, 1908

      by Aspe4 on Tue Jan 08, 2013 at 08:35:37 AM PST

      [ Parent ]

      •  Exactly (3+ / 0-)
        Recommended by:
        Aspe4, Vote4Obamain2012, priceman

        The choices are:

        Break an important, primary law (power of the purse, appropriations, etc.) by stopping the spending and break the whole world's economy.

        or,

        Break a secondary and contradictory law (debt ceiling) and keep the world's economy on a (somwhat) even keel.

        Pretty much a no-brainer.  If minting a $1T platinum coin or two to legitimize it makes it easier to swallow, then do it.  It seems to me that the minting laws permit it in any case.  If the mint can produce dollar coins in enough bulk that are of the roughly same order of magnitude in value, which they can, the thing is legal.

        My core tenets:
        • I am intolerant of only intolerance
        • I am prejudiced only against prejudice
        • I hate only hate
        I don't know why Republicans continue to contrive to be on the wrong end of these three tenets.

        by DrSpalding on Tue Jan 08, 2013 at 09:01:07 AM PST

        [ Parent ]

      •  Practical question... (1+ / 0-)
        Recommended by:
        Aspe4

        How much would it cost to mint, ship, ship back and melt the coins? Wasn't there a problem with excess minted coins (state quarters?) that treasury was going to have to build a secure new storage place for?  Even if they are going to be melted rather than stored, I am in a mental quandary over the expense for something that is simply a workaround for the GOP obstruction tactics.

        Which is easily nowhere near what another S & P downgrade would cost...  The GOP willingness to defy common sense, facts and reason, has become a national disaster.

        "People, even more than things, have to be restored, renewed, revived, reclaimed and redeemed; never throw out anyone. " Audrey Hepburn "A Beautiful Woman"

        by Ginny in CO on Tue Jan 08, 2013 at 09:23:58 AM PST

        [ Parent ]

    •  Obama will never do that (1+ / 0-)
      Recommended by:
      aitchdee

      He isn't the type to do gimmicky things even if it would be legal. We know how this will go, the day before they will come to an agreement because the big money on wall street won't let them screw up the economy.

  •  "Spurned on"? you mean "spurred on"- spellcheck (7+ / 0-)

    strikes again.

    But seriously, thanks to Philip Diel for the great letter, and thanks to you for parsing this on.

    I mean passing it on.  (/snark)

  •  Mint several so that they're already done in case (4+ / 0-)
    Recommended by:
    Aspe4, Thumb, Brooke In Seattle, JesseCW

    someone tries to repeal the law.  Once they already exist it is relatively simple to deposit them with the Fed and/or take them back.  Once melted down, they'd have to be re-minted.

    So Obama should MINT the coins now and keep them in reserve in the event that the GOP Congress loses (their sh*t or) whatever is LEFT of their minds.

    Happy little moron, Lucky little man.
    I wish I was a moron, MY GOD, Perhaps I am!
    —Spike Milligan

    by polecat on Tue Jan 08, 2013 at 08:32:41 AM PST

  •  Why stop at 1? Let's make 16 of 'em (9+ / 0-)

    We'd never have to worry about the debt limit again.

    Filibuster reform now. No more Gentleman's agreements.

    by bear83 on Tue Jan 08, 2013 at 08:34:06 AM PST

  •  Could the coin be stolen? (1+ / 0-)
    Recommended by:
    Roadbed Guy

    And if so, would it have an actual trillion dollar value? Theoretically, if it was stolen out of the treasury and given to a foreign government? Does the government have the right to "devalue" a physical coin once it has been minted? Just curious.

    "The majority of a single vote is as sacred as if unanimous." - Thomas Jefferson

    by cartwrightdale on Tue Jan 08, 2013 at 08:34:40 AM PST

  •  It's better than destroying the world's economy... (13+ / 0-)

    I understand (at least sort of) the implications of both the $1 trillion coin and the 14th Amendment 'end-runs' around the debt limit, and frankly, either one of them is better than doing nothing.

    The coin isn't something to either implement or even talk about ahead of time. Minting the coin now would only get the case into court too early. Better to wait until the last couple of days, and use it as the ultimate chip in the standoff....

    President Obama gives a speech on Feb 26:

    'Republicans in Congress are refusing to meet its Constitutional obligations to pay for the spending it has authorized. I refuse to allow them to take our economy hostage again and again to push their extremist policies of making poor and middle-class Americans suffer and die in order to protect millionaires and billionaires.

    'To prevent an economic collapse, I have just authorized the Secretary of the Treasury to mint a $1 trillion platinum coin and send it (certified mail, of course) to the Federal Reserve. This will prevent the horrible consequences of failing to raise the debt ceiling - temporarily, of course - that the House Republicans have been puahing for.

    'Go suck an egg, tea-baggers!'

    Cheers.

    Against stupidity the gods themselves contend in vain. Friedrich Schiller

    by databob on Tue Jan 08, 2013 at 08:36:05 AM PST

    •  A few hours later... (0+ / 0-)

      ...impeachment proceedings would begin.

      (-5.50,-6.67): Left Libertarian
      Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

      by Sparhawk on Tue Jan 08, 2013 at 09:23:53 AM PST

      [ Parent ]

      •  But the debt limit would be taken care of.... (2+ / 0-)
        Recommended by:
        Vote4Obamain2012, Nada Lemming

        and impeaching the President for trying to save the country - or the world, if you prefer - from economic collapse would hardly improve the Republican brand.

        While the Constitutionality of the $1 trillion coin might be questionable, that's not up to the House of Representatives. It's fairly clear that the President will have obeyed the LETTER of the law, so how this constitutes 'high crimes or misdemeanors' is beyond me.

        Again, even impeachment - which won't go beyond the kabuki theater we saw in the Clinton case - is better than destruction of the world's economy.

        And if we let these rabid nihilists keep doing this, sooner or later they will make it happen.

        Better to stop it now.

        Cheers.

        Against stupidity the gods themselves contend in vain. Friedrich Schiller

        by databob on Tue Jan 08, 2013 at 09:44:17 AM PST

        [ Parent ]

  •  I love it when the source replies with (13+ / 0-)

    a rational, fact based and un-emotional response in support of an idea.  Even though this is all about politicking,  I honestly don't know how factual the statements are but I'm going with "benefit of the doubt based on a seriously significant job title".  I'd love to hear from a similarly kickass titled economist too, however.

    The third-rate mind is only happy when it is thinking with the majority. The second-rate mind is only happy when it is thinking with the minority. The first-rate mind is only happy when it is thinking. A. A. Milne

    by Memory Corrupted on Tue Jan 08, 2013 at 08:36:30 AM PST

    •  Krugman is for it (8+ / 0-)

      he's pretty well titled and awarded, for an economist:

      Be Ready To Mint That Coin

      Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious.
      •  I did a read through of your link and found this (0+ / 0-)

        as a support for no effect.  It's still a bit weak on support and uses mostly background with the one caution against the coins potential inflationary effect.  Basically it seems that given the near zero interest rates we currently have, the coin is just an end around to where we'll end up anyway, deeper in debt waiting for our elected officials to get us out of this mess. Since it seems Obama still looks like our only hope while the republicans continue to act like reprobate bullies I will continue to support his process.

        But leaving the debt ceiling on one side, isn’t it true that since spending can currently be financed by Fed money printing, we shouldn’t care at all about the notional debt owed to the Fed? Alas, no.

        It’s true that printing money isn’t at all inflationary under current conditions — that is, with the economy depressed and interest rates up against the zero lower bound. But eventually these conditions will end. At that point, to prevent a sharp rise in inflation the Fed will want to pull back much of the monetary base it created in response to the crisis, which means selling off the Federal debt it bought. So even though right now that debt is just a claim by one more or less governmental agency on another governmental agency, it will eventually turn into debt held by the public.

        The third-rate mind is only happy when it is thinking with the majority. The second-rate mind is only happy when it is thinking with the minority. The first-rate mind is only happy when it is thinking. A. A. Milne

        by Memory Corrupted on Tue Jan 08, 2013 at 10:00:13 AM PST

        [ Parent ]

  •  There is one minor difference (3+ / 0-)
    Recommended by:
    Sandino, Matt Z, Calgacus

    between the trillion dollar coin and raising the debt limit if it is indeed the Fed that buys the extra bonds: The Treasury will not pay interest on the coin. With interest rates at historic lows, that isn't a big deal, but it could eventually amount to a lot of money.

  •  Mint that sucker - put Boehner's face on it (1+ / 0-)
    Recommended by:
    Vote4Obamain2012

    Obama ought to just do this quietly, not even tell Congress (if he issues an exec order with no publicity, at what point is it made public?)

    So, in 2 months, Boehner spends time prepping, and, oops! debt ceiling not an issue.

    The object of persecution is persecution. The object of torture is torture. The object of power is power. --George Orwell

    by jgkojak on Tue Jan 08, 2013 at 08:38:38 AM PST

  •  I say mint the coin NOW (1+ / 0-)
    Recommended by:
    TealTerror

    and stop the nonsense.

  •  I really don't see a downside to doing it.... (3+ / 0-)

    If Congress authorized the spending and the coin's minting, versus default and global recession, what's the problem?

    No snowflake in an avalanche ever feels responsible.

    by Magster on Tue Jan 08, 2013 at 08:39:16 AM PST

  •  Why melt it down to sell bonds? (1+ / 0-)
    Recommended by:
    Jim P

    Sure the Fed and the banksters want to collect interest on every bit of publicly issued debt, but there is no real reason that it must be so. Let the treasury collect interest from the Fed.

  •  Numismatic Neverland: unintended consequences (2+ / 0-)
    Recommended by:
    Rich in PA, Sparhawk

    Is exactly why this wont work as Diel recognizes in his last sentence when his legalistic arguments square off with legislative intent and the rule of law. This idea is a dangerous slippery slope that belongs as a thought experiment in acadamia not as a policy that could dismantle our economy and make us a worldwide joke.

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

    by Kvetchnrelease on Tue Jan 08, 2013 at 08:42:34 AM PST

    •  As opposed to the (7+ / 0-)

      slippery slope that we are actually on - the one that probably started out as a thought experiment in Goldman Sachs.

    •  Diel isn't a lawyer (0+ / 0-)

      and he "co-authored" the law the same way Mitt Romney "wrote" his autobiography. Yeah, maybe he read it (or some of it) after the lawyers on his staff wrote the text of the bill.

      •  That may be (1+ / 0-)
        Recommended by:
        priceman

        but someone among the authors must have known exactly what he doing!

        •  I suspect the lawyers who actually wrote this (0+ / 0-)

          statute don't think it can be used to mint a magic coin, but I guess we'll never know about that.

          •  Here is Lawrence Tribe's view (1+ / 0-)
            Recommended by:
            Calgacus

            Laurence H. Tribe, the Carl M. Loeb University Professor and Professor of Constitutional Law at Harvard.

            The title "University Professor," which Tribe has held since 2004, is Harvard's highest academic honor, awarded to just a handful of professors at any given time and to fewer than 70 professors in all of Harvard University's history.

            Harvard Law School Professor Laurence Tribe on the Legality of #mintthecoin

            I don’t think it makes sense to think about this as some sort of “loophole” issue. Using the statute this way doesn’t entail exploiting a loophole; it entails just reading the plain language that Congress used. The statute clearly does authorize the issuance of trillion-dollar coins. First, the statute itself doesn’t set any limit on coin value. Second, other clauses of 31 USC §5112 do set such limits, but §5112(k)—dealing with platinum coins—does not. So expressio unius strengthens the inference that there isn’t any limit here.

            Of course, Congress probably didn’t have trillion-dollar coins in mind, but there’s no textual or other legal basis for importing this probable intention into the statute. What 535 people might have had in their collective “mind” just can’t control the meaning of a law this clear.

            It’s also quite clear that the minting of such a coin couldn’t be challenged; I don’t see who would have standing.

            Bottom line: This is a situation where the political and economic considerations, not the legal considerations, have to drive the decision-making about this option. It’s certainly a lot better from just about every perspective than having the nation stuck on either horn of the very real dilemma you outlined below, which I agree offers no plausible way out as long as enough leaders in Congress insist on playing Russian Roulette with our economy and risking our full faith and credit by using the debt ceiling as a bargaining chip as they are threatening to do.

            •  My suspicion (0+ / 0-)

              is that Professor Tribe is not familiar with and didn't bother to delve deeply into the weeds of this statute or the rules governing minting of commemorative coins. It's his off the cuff reading of a statute he's never looked at before.

              •  There is a long (0+ / 0-)

                case history regarding the power of seigniorage, and of seigniorage profit. The law was designed so that the mint could reap seigniorage profit. It reaps seigniorage profit when it mints nickels, dimes, quarters half dollars and dollars. So why is a trillion dollar coin different, other than in magnitude. And the language of the law regarding denomination was not an accidental oversight - as has been attested by the then Director of the Mint.

                There is no matter of principle involved here. Also, the annual spending of the US Federal Government is $2.67 trillion. The US Government could if it chose pay for all of that spending in one dollar coins. In that case, there would be a net income (seigniorage profit) to the Treasury of $0.82 for every dollar spent. More than enough to cover any deficit. So in effect, the trillion dollar coin is no different than one trillion "one dollar" coins. Accounting wise, both would be treated similarly.

                So no sane judge could object to the use on the Trillion dollar coin.

    •  Our Banker-debt-based customary approach (1+ / 0-)
      Recommended by:
      Nada Lemming

      not only has us on a slippery slope, it's greased the path and put skis on our feet and a jet-pack on our back.

      This is actually better, if we issue our own money, than if we borrow it.


      The Internet is just the tail of the Corporate Media dog.

      by Jim P on Tue Jan 08, 2013 at 09:33:56 AM PST

      [ Parent ]

      •  Right, rely on chartalism from 1895 in today's (0+ / 0-)

        economy.

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

        by Kvetchnrelease on Tue Jan 08, 2013 at 11:39:54 AM PST

        [ Parent ]

        •  Printing one's own currency is a thing (4+ / 0-)

          nations have always done, at least until the Bank of England was created. And even then that continued for another 2 centuries in most of the world.

          Economic theory since 1895 has been worth about as much as entrails reading and blindfolded dart throwing in terms of its actual agreement with actual experience. And is worthless for predictions.

          The whole point is today's economy is deeply suicidal. Not sure? Look at the world's workers conditions. Look at the environment. Look at the Permanent War.

          Where's the solution outside of driving everyone's wages down to slave-labor level under our current Debt (aka Banker/Bonds) system? There is no, it only gets worse.

          We've issued currency for half the life of this nation. This nation exists today because Lincoln did it.

          Move from chartalism to charlatanism, and now were talking the modern economy.

          Our current Banker/Bonds/Interest is entirely about wealth transfer and war-mongering in the final analysis, and it's either change that or get fucked. The Conventional Wisdom around Economics is the wisdom of a deaf and blind imbecile.


          The Internet is just the tail of the Corporate Media dog.

          by Jim P on Tue Jan 08, 2013 at 12:02:28 PM PST

          [ Parent ]

  •  Kos (2+ / 0-)
    Recommended by:
    Sharon Wraight, indie17

    at the very opening sentence of the diary, Mr. Diehl's name is spelled wrong.

  •  He still didn't address the several to many (0+ / 0-)

    month lead time in selecting the coin's design, engraving the dies, etc.

    If this groundwork has not been done already, there's no way this coin can be minted in anything like a timely fashion (e.g., for the next "crisis" scheduled for 7 or 8 weeks from now).

  •  What about Plaintinumfinger? (10+ / 0-)

    Won't he try to steal it?

    One piece of free advice to the GOP: Drop the culture wars, explicitly.

    by Inland on Tue Jan 08, 2013 at 08:44:23 AM PST

  •  Kudos indeed (8+ / 0-)

    My own position... further reinforced by this letter:

    I don't favor minting the coin.

    Acknowledging it could be minted is sufficient to completely undermine the House Republican debt ceiling position.

    The President should simply face the House Republicans down and not have any conversation with them that includes them saying anything about not raising the debt ceiling. Such words out of any House (or Senate) Republicans mouth should end all conversation and have them escorted out the door. The President should simply say "I expect a bill on my desk ready for signing that either raises or eliminates the debt ceiling and I expect it to be there before the nation defaults."

    Period.

    The Republicans got no juice on this issue.

    "Do what you can with what you have where you are." - Teddy Roosevelt

    by Andrew C White on Tue Jan 08, 2013 at 08:44:25 AM PST

  •  Put the trillion dollar coin on Ebay. The richest (0+ / 0-)

    billionaires in the world can bid for it. Who wouldn't want a trillion dollar coin and the bragging rights that go with it?

  •  The House Is Going To Continue To Say No (0+ / 0-)

    to anything that passes the senate.  President Obama should give it up and just mint the coint today, now, not tomorrow.  The debt limit max is coming up quicker than predicted.  Why wait until the last minute and just do it now.

    "Don't Let Them Catch You With Your Eyes Closed"

    by rssrai on Tue Jan 08, 2013 at 08:46:44 AM PST

  •  My question: (1+ / 0-)
    Recommended by:
    Jim P

    This common sense, no-nonsense explanation puts to rest the idea that minting the coin might be unconstitutional.  My question is this: Isn't in unconstitutional for Congress to refuse to raise the debt limit, which directly negates their own previous laws (i.e., expenditures they put into effect by their own bills)?

    "Why reasonable people go stark raving mad when anything involving a Negro comes up, is something I don’t pretend to understand." ~ Atticus Finch, "To Kill a Mockingbird"

    by SottoVoce on Tue Jan 08, 2013 at 08:46:54 AM PST

    •  How do you figure that? (0+ / 0-)

      This is just one dude's opinion, and he's not even a lawyer.

    •  The "debt-limit" is Constitutional only (2+ / 0-)
      Recommended by:
      SottoVoce, Calgacus

      in that each Chamber is free to make their own rules and procedures.

      But House procedures cannot prevail against any other provision of the Constitution. So, no, they can't repudiate (in effect) standing expenses they've or a previous Congress has authorized.

      No more that they can make a procedure that requires each Member to show up with something they got from breaking into people's homes and stealing, before they can vote.


      The Internet is just the tail of the Corporate Media dog.

      by Jim P on Tue Jan 08, 2013 at 09:40:07 AM PST

      [ Parent ]

  •  I goota admit, I thought this whole platimun (5+ / 0-)

    coin rig-amoral was completely kookie.  But, then again, I hadn't truly thought it through.  I now simply view it as a simple mechanism to allow the government to pay for its obligations, something we should NEVER have to question.

    To any wingnut: If you pay my taxes I'll give you a job.

    by ban48 on Tue Jan 08, 2013 at 08:47:22 AM PST

  •  I'm confused (2+ / 0-)
    Recommended by:
    Sharon Wraight, jeff in nyc

    Would the coin only be booked against the debt limit, or would it increase actual Treasury liquidity to pay debts?  I thought it would only do the former, since when the debt limit is raised legislatively it doesn't actually give the Treasury any more money to pay debts, merely the authority to incur new debt to pay what's coming due.  If that's all the coin would do, then I'm grudgingly OK with it. (Personally I prefer a 14th-Amendment approach that denies the notion of a debt ceiling.)  But if it would give the Treasury another trillion dollars, then it's Weimar-quality crazy.

    You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

    by Rich in PA on Tue Jan 08, 2013 at 08:47:34 AM PST

    •  Functionally the same as raising the debt limit. (5+ / 0-)

      But if it was done a lot, bond sales might drop off and some other funky effects.

      Ultimately the Pres can't spend money the Congress doesn't authorize, so it really is the same as raising the debt limit, just less bonds are issued.

      Happy little moron, Lucky little man.
      I wish I was a moron, MY GOD, Perhaps I am!
      —Spike Milligan

      by polecat on Tue Jan 08, 2013 at 09:00:52 AM PST

      [ Parent ]

      •  SO long as it's spending money that the Congress (3+ / 0-)
        Recommended by:
        JesseCW, Calgacus, priceman

        has already authorized (i.e., debt), there shouldn't be a problem, then, right?

        The Class, Terror and Climate Wars are indivisible and the short-term outcome will affect the planet for centuries. -WiA "When you triangulate everything, you can't even roll downhill..." - PhilJD

        by Words In Action on Tue Jan 08, 2013 at 09:06:10 AM PST

        [ Parent ]

        •  Mostly. Like I said, the bond markets would (1+ / 0-)
          Recommended by:
          aitchdee

          act a little funny because typically 3rd parties would be able to own the debt and that isn't happening here.  

          Not clear if it is making existing bonds more or less valuable.  Find a macroeconomist and get an opinion.  But since the amount is a relative fraction of America's outstanding debt, and since it would remove the specter of default, it'd be a good thing.

          Given the intent to buy the coin back from the Fed and then sell bonds when the debt ceiling is raised, it should be moot.

          If that doesn't happen (raising the ceiling and issuing more debt), I could see some long term imbalances in the bond markets.  Ask Bernacke.

          Happy little moron, Lucky little man.
          I wish I was a moron, MY GOD, Perhaps I am!
          —Spike Milligan

          by polecat on Tue Jan 08, 2013 at 09:11:29 AM PST

          [ Parent ]

      •  Thanks, that gets to my 2nd-round question (1+ / 0-)
        Recommended by:
        aitchdee

        Is any lawmaking necessary for the Treasury to sell new debt?  If so, then there's no way around the debt ceiling legislation or the same thing under a different name; if not, why bother even minting the coin unless it's all-purpose money, in which case it's no different than printing another trillion in paper money. BUt all this is way outside my area of expertise.

        You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

        by Rich in PA on Tue Jan 08, 2013 at 09:08:19 AM PST

        [ Parent ]

        •  Back in the 80's when Japan seemed unstoppable (3+ / 0-)
          Recommended by:
          MKinTN, Rich in PA, aitchdee

          there was talk in some circles about simply printing enough money to pay off all of our foreign debt (and screwing them over).  The immediate impact would be a bolus of inflation from essentially increasing the amount of specie in circulation by 10x, but what we're talking about in this case is a lot smaller as a fraction of our debt.

          The Fed can change the mix of bond types that are out there, just not raise the limit, so if rates were really low (like they are now), the Fed could be evil and only sell long-term bonds thus locking in low interest rates for 30 years.  

          The amazing part right now is that people are practically throwing money at us for nearly free.  Heck, I just did a refi on my house at 2.75%.  The amount of profit that the bank gets on that over the life of the mortgage is a pittance.  (And the 1040 write off is a lot less than it was, too.)  The money is out there and is BEGGING to be spent to increase the economy.

          The PROPER use of this cheap liquidity is to stimulate the economy.  To not do that is essentially criminal in my view.  It's not like we've forgotten the 30's or what Deflation is.

          This Austerity Fetish thing has been disproved multiple times and we get to see it again in Germany/Greece.  Germany's self-induced Euro Recession is just desserts in my view.

          Regarding printing money - we can't spend it if Congress doesn't authorize it, so it's not "JUST PRINTING MONEY" as you might expect in a hyper-inflation case.

          Happy little moron, Lucky little man.
          I wish I was a moron, MY GOD, Perhaps I am!
          —Spike Milligan

          by polecat on Tue Jan 08, 2013 at 09:21:28 AM PST

          [ Parent ]

  •  why (3+ / 0-)
    Recommended by:
    Sharon Wraight, TampaCPA, Matt Z

    Why make it a trillion dollar coin--why not 2 trillion--lasts long and melts just as quickly?

    Apres Bush, le deluge.

    by melvynny on Tue Jan 08, 2013 at 08:48:33 AM PST

  •  from here on out every time Obama gives a presser (6+ / 0-)

    he should have a coin in his hand and do that thumb flip with it while he talks to the press

    while it wouldnt be THE Trillion dollar coin it would be a good visual that would remind the carazee's of the gop that they have no real leverage on this issue either cause Obama CAN mint a coin that will make them and their threats irrelevant

    "You've got to be an optimist to be a Democrat, and a humorist to stay one" - Will Rogers

    by KnotIookin on Tue Jan 08, 2013 at 08:48:36 AM PST

  •  So Ezra Klein, et al., are incorrect? (4+ / 0-)

    I mean, about this point, as opposed to the other things they are always going on about.

    Klein's been subbing for Lawrence O'Donnell on The Last Word this week, and he keeps saying that this is a pipe dream.

    Nice to hear from the actual author instead of some Villager's (or wannabe Villager's) interpretation.

    "The difference between the right word and the almost-right word is like the difference between lightning and the lightning bug." -- Mark Twain

    by Brooke In Seattle on Tue Jan 08, 2013 at 08:49:16 AM PST

    •  Ezra Klein exists only as a way for the White (2+ / 0-)
      Recommended by:
      GayIthacan, Nada Lemming

      House to say things without direct accountability.

      I think he may have been grown in a vat for that purpose, but I'm not stating that as a fact, because I can't prove it.

      I lost the baggie of goop and the pictures came out really fuzzy.

      "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

      by JesseCW on Tue Jan 08, 2013 at 09:12:22 AM PST

      [ Parent ]

    •  He's not the actual author (0+ / 0-)

      It's his name on the bill, like Sarah Palin's name is on her book but it was written by someone else.

      He's not even a lawyer.

  •  What are the chances... (0+ / 0-)

    ...that Obama goes for this?

    I mean, really.  A big bold way to get around the idiots in the GOP.  Does that really sound like something Obama would be up for?

    I won't hold my breath.

  •  Unless... (1+ / 0-)
    Recommended by:
    Calgacus

    * 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,

    ... and then I, spiritplumber, Robot Overlord, will send my mechanical minions to take it right in front of their eyes! Mwhahaha! MWHAHAHAHAHA!!!!!

    http://www.youtube.com/... No, really, it's a cute little doombot.

    I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

    by spiritplumber on Tue Jan 08, 2013 at 08:53:13 AM PST

  •  Regardless of policy, I like Mr. Diehl. (1+ / 0-)
    Recommended by:
    Vote4Obamain2012
    * 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

    Yep.  Whaddya gonna do.

    One piece of free advice to the GOP: Drop the culture wars, explicitly.

    by Inland on Tue Jan 08, 2013 at 08:55:05 AM PST

  •  Even if legal (1+ / 0-)
    Recommended by:
    Sparhawk

    Republicans in the house would CERTAINLY impeach over this. Yeah, Senate would never convict, but do we want to go through that?

  •  For more rational commentary also see (1+ / 0-)
    Recommended by:
    Magster

    Bloomberg
    Ezra Klein is coming around & Krugman says yes. Once the public understands the options, this won't seem so goofy.

    Warren is neither a Clintonesque triangulator nor an Obamaesque conciliator. She is a throwback to a more combative progressive tradition, and her candidacy is a test of whether that approach can still appeal to voters.-J. Toobin "New Yorker"

    by chuck utzman on Tue Jan 08, 2013 at 08:56:02 AM PST

  •  Honey... have you seen my Trillion$ coin? (2+ / 0-)
    Recommended by:
    Matt Z, aitchdee

    Now where did I put that??

    Connecticut, Iowa, Maine, Maryland, Massachusets, New Hampshire, New York, Vermont, Washington, Washington D.C. and California (pending)

    by cooper888 on Tue Jan 08, 2013 at 08:58:35 AM PST

  •  What a great heist movie plot this would make (2+ / 0-)
    Recommended by:
    Vote4Obamain2012, Matt Z

    but seriously, mint the coin.  

    Don't be so afraid of dying that you forget to live.

    by LionelEHutz on Tue Jan 08, 2013 at 08:59:29 AM PST

  •  Well, then, put Joey on that coin! (12+ / 0-)

    biden coin

    A conservative is a man who looks at a mess he created and asks you why you haven't cleaned it up yet.
    ~~ @LOLGOP

    by smileycreek on Tue Jan 08, 2013 at 09:07:01 AM PST

  •  I wonder if Obama has already decided to do so... (0+ / 0-)

    His public statements that he will not negotiate on the debt limit is not like him. For a president who is otherwise so cautious and compromising, maybe he's already been advised that he has a way through without even having to do any deals with Congress.

    No snowflake in an avalanche ever feels responsible.

    by Magster on Tue Jan 08, 2013 at 09:13:28 AM PST

  •  Ah, magical thinking. (3+ / 0-)
    Recommended by:
    Sparhawk, Beelzebud, jeff in nyc

    Mint the coin and, here, a miracle occurs.  

    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.
    It's like printing or borrowing more money, only easier!  

    No need to negotiate increases in revenue and budget cuts.  Why do today, what you can do tomorrow, by striking a coin!

    The fact that so many people here think this is a good idea, simply because it deprives Republicans of any leverage in the House of Congress where all spending bills must originate, is a sad sign as to how much of our public policy is governed by politics and tribal hate, as opposed to good government.

    The real time to have governed was when both parties, both houses of Congress and multiple Presidents were spending money they didn't have to fight wars and cater to their respective constituencies.

    Better to get our house in order now, as the cuts that will come of necessity, later, will hurt a lot more.

    Intolerance betrays want of faith in one's cause. - Gandhi

    by SpamNunn on Tue Jan 08, 2013 at 09:15:08 AM PST

  •  Stephen Colbert says... (3+ / 0-)

    ...."We should have known he (Obama) would do something like this! It's right there in his slogan: 'Change'!"

    Everybody got to elevate from the norm....

    by Icicle68 on Tue Jan 08, 2013 at 09:16:15 AM PST

  •  It has come to this (4+ / 0-)

    We're now in the "government by gimmick" stage.  We have "fiscal cliffs", COLA's that don't reflect reality, and a Democratic president who boasts he'd be a moderate Republican during the Reagan hey day.  

    I'm starting to believe the world really did end on 12/12/2012 and we're in another dimension.  Makes about as much sense as the US government.  

  •  The best thing about free lunches... (1+ / 0-)
    Recommended by:
    Sharon Wraight

    ...is that they're free!

    Seriously I cannot believe this lunacy and banana republicanism is supported by so many people here. It is horribly sad and depressing.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Tue Jan 08, 2013 at 09:35:16 AM PST

  •  To "coin" a phrase: (0+ / 0-)

    Mint, baby, mint!

    Evolution IS Intelligent Design!

    by msirt on Tue Jan 08, 2013 at 09:35:24 AM PST

  •  Mint the coin, become a historical joke. (0+ / 0-)

    When one side isn't doing their jobs, you don't one-up them by doing something even more insane.  

    The tent got so big it now stands for nothing.

    by Beelzebud on Tue Jan 08, 2013 at 09:37:06 AM PST

  •  Money is debt anyway... (3+ / 0-)
    Recommended by:
    Calgacus, Nada Lemming, aitchdee

    The way to think about this coin is simple. Forget the coin idea even came up. Do the exact same thing but with dollar bills. The same outcome occurs. The money supply is increased by 1 trillion dollars in both cases. In this time of very low inflation and interest rates, the economic affect is minimal. What exactly do you think your local bank does when they take your deposits? They create more money out of thin air at a 10 or 11 to one ratio. The difference is the bank expects interest to be paid. In this case, there is no interest due.

    Do facts matter anymore?

    by Sinan on Tue Jan 08, 2013 at 09:38:08 AM PST

  •  Fantastic addition –points to bigger issue (2+ / 0-)
    Recommended by:
    whaddaya, aitchdee

    This is, by far, the best explanation I have read about the intricacies of minting the $1T platinum coin, and we know it to be reliable because of its source.  This also points to a broader issue: explaining these complexities to the public.  A careful explanation such as this one goes a long way.  It would be great, for example, if people in the Administration found a way to explain to the general what the debt ceiling is. I truly think that very few people understand that the debt ceiling is not a license to spend more, but rather a tally of expenses that the government has already incurred in order to function.  Republicans, unfortunately, have twisted the meaning for their own rhetorical benefit as they have done with many other issues (the ACA "death panels" come to mind).

  •  Coin (2+ / 0-)
    Recommended by:
    Vote4Obamain2012, OLinda

    Grover Norquist on the Front. Eastwood's empty chair on the back.

  •  Um, look in back of my brown slacks nt (0+ / 0-)
  •  No, I took the bus from Treasury and--Oh nooo nt (1+ / 0-)
    Recommended by:
    OLinda
  •  It's a fiscal singularity, Captain nt (3+ / 0-)
  •  I thought (1+ / 0-)
    Recommended by:
    Nada Lemming

    that the point of minting the trillion dollar coin was to buy the treasury bonds back from the fed.  When Bernie Sanders' bill to audit the fed revealed that they created 3$T and bought treasury bonds with that money effectively forcing us to pay them to make money(wtf!?),  that by minting a trillion dollar coin (or 3) we could wipe out that debt obligation?

  •  A solution equal to the problem. (1+ / 0-)
    Recommended by:
    Vote4Obamain2012

    The gravity of the situation is cause for sobriety.  The focus is on fiscal stability, the survival of our economic system, and national security.  This isn't rhetorical.  

    There would be unknowns ahead if the statutory debt ceiling is permanently capped at $16.394 trillion.  Limited disruption of banking and financial operations could lead to irreparable damage without a reasonable solution regarding public debt.  

    Minting a platinum coin to facilitate the existing partnership between the US Treasury and the Federal Reserve should be understood as protection against the potential of devastating consequences without another mitigating measure.

    "Democracy is a life; and involves continual struggle." ---'Fighting Bob' LaFollette

    by leftreborn on Tue Jan 08, 2013 at 10:43:47 AM PST

  •  Cool!! (0+ / 0-)

    While I believe the president not only has the constitutional right to override the debt ceiling, but the constitutional duty, I love this idea.

    It's elegant, and even fun.  Let's do it!

    "Mediocrity cannot know excellence." -- Sherlock Holmes

    by La Gitane on Tue Jan 08, 2013 at 11:00:47 AM PST

  •  Why melt it? Sell it on EBAY! (1+ / 0-)
    Recommended by:
    Calgacus

    After the coin has served its use, instead of melting it, they could simply stamp "VOID" on the coin.  Then, hold an auction for the coin on EBAY with proceeds going to debt reduction.  I'd bid.  It would make a great collector's item!

  •  Good to see this (8+ / 0-)

    appear. Thank you, Markos, for featuring it; and thank you Philip for your kind words about my post. We've been blogging about the coin at The DailyKos Money and Public Purpose Blog since March of 2011, and before that my personal blog at DailyKos did some blogging on it as early as January 2011. So, we've been at it now for two years. The TDC controversy we're seeing now is the first step toward getting Platinum Coin Seigniorage (PCS) accepted. But the eventual goal is to end debt financing altogether, and with it austerity arguments from the Pete Peterson crowd off the table forever. This piece is really about that goal.

  •  I have it! The billionaires want to be Royals (2+ / 0-)
    Recommended by:
    Calgacus, Sharon Wraight

    so let's mint platinum coins in denominations of $1 billion, $10 billion, and $100 billion with the faces of Kochs, Waltons, Murdoch etc.

    Then when we nationalize their US holdings, we can repay them with these coins. Each one can have coins with his own face on it.

    All fair and square.

  •  or, it could be sold for a fair markup to a (0+ / 0-)

    well- off coin collector.  (In mint condition!)

  •  Why mint? Why not strawberry? (1+ / 0-)
    Recommended by:
    Sharon Wraight

    I'm soakin' fused.

    "Never wrestle with a pig: you get dirty and the pig enjoys it"

    by GrumpyOldGeek on Tue Jan 08, 2013 at 03:01:20 PM PST

  •  Reply to Loge's posts above (8+ / 0-)

    Loge, the problem is that the economic assumptions - of the "goes without saying" type, that you and several others here, and the vast majority elsewhere hold, are entirely nonsensical.

    It's not a case of default on one side or coin seigniorage on the other.  Both are defaults in real terms. No. Default is default. Coin seignorage is not default legally, and there is not the slightest reason to believe it is default "in real terms". Printing/minting money need not be inflationary, need not "dilute" or devalue existing money or bonds.

    Economically yes.  What are they being paid with?  This has especial implications for foreign creditors, as well, who would be paid less in real terms than domestic ones.  If the dollar falls as a result of such a stunt, then for intents and purposes, the government had paid its obligation by appropriating the difference in movement between relevant currencies.

    There are no especial implications for foreign creditors. This is a very common error. The only even moral, as opposed to legal, obligation that a government has is to not inflate its currency. To make it roughly equal in value as time goes on, in terms of what it can buy domestically.  This applies equally to foreign and domestic creditors.

    If the dollar falls as a result of such a stunt, then for intents and purposes, the government had paid its obligation by appropriating the difference in movement between relevant currencies.

    Absolutely not! Since exchange rates of currency A vs currency B are NOT determined, controlled by the issuer of currency A alone, there is no way that it could conceivably be an obligation of  issuer A, the US government  here.  Such a foreign complaint is like somebody who won the lottery complaining to his bank that the dollars in his account have lost value relative to his lottery ticket. The more widespread an economic belief is, pretty much the crazier.

    On other points, "the bond market" doesn't decide on interest rates. The US government does, through the Treasury and the Fed. More government spending has the immediate effect of decreasing interest rates, rather than increasing them. The authority of the Treasury to issue new debt comes from the Congress, which gets it directly from the Constitution. The hierarchical ordering here is dubious. Both would be constitutionally protected "government obligations", which are not limited to bonds, btw, and which the Supremes have ruled (Cherokee Nation 2004)  need not be paid from specific appropriations.  On the other hand, bondholders could only sue the US if the US allowed it - sovereign immunity. But it would never come to that. The debt limit, the fiscal cliff: all a show, to impose needless austerity and economic destruction on the 99.9%.

    "Political deal" may be sadly the most likely outcome, but it is the least preferable, because it amounts to sacrificing the real economy to innumerate, nonsensical supersitions about money, debt and finance.
    The leading one is that any sovereign government can "run out" of its own money. Can it "run out" of its own debt, "run out" of promises it can make? Because that is all that (base) money is - government debt. And vice versa. And as everyone used to know, both are "one and the same thing" (FDR). Both are just promises. The "debt limit" law makes an entirely arbitrary restriction on one type of government promise: Treasury Bonds. So why not make another kind, which it does not restrict?: Platinum coins, for one. Consols, for another.

    •  Exactly. Well said. nt (2+ / 0-)
      Recommended by:
      LaEscapee, gooderservice

      I don't negotiate grand bargains with deficit terrorists!

      by priceman on Tue Jan 08, 2013 at 03:31:47 PM PST

      [ Parent ]

    •  Unintended consequences of unintended consequences (0+ / 0-)

      The letter explains the mechanics of how coinage is handled in the US. It ends with the absurd notion of leveraging the unintended consequences of this loophole because we've historically exploited loopholes regardless of the consequences.

      Everybody cheats, so it's ok for me to cheat. The Republican mantra, it seems.

      A small political tradeoff seems to make sense here. Trade the platinum coinage loophole for a permanent elimination of the debt ceiling nonsense. Should that fail, the unintended consequences of the 14th Amendment remains as leverage.

      I understand why President Obama seems reluctant to challenge the debt ceiling threat based on the 14th Amendment. With the current Supreme Court, a challenge might result in another Citizens-like catastrophic decision. Money is not a corrupting influence according to Citizens. Corporations are people (sort of). This court has shown us that it can be unpredictable and is willing to overreach and overturn precedent established a hundred years ago.

      Minting a platinum coin is less risky, but it's really just exploiting a loophole. It's not a permanent solution to the debt limit nonsense.

      The Republicans are double-dipping here. They demand debt reduction to authorize spending. Dip number one.

      Then they demand debt reduction to authorize payment for that spending. Dip number two.

      Double-dip extortion. Now, THAT's nonsense.

      "Never wrestle with a pig: you get dirty and the pig enjoys it"

      by GrumpyOldGeek on Tue Jan 08, 2013 at 03:47:00 PM PST

      [ Parent ]

  •  "It's just money. It's made up... (0+ / 0-)

    Paper w pictures on it so we don't have to kill each other to get something to eat." - John Tuld, Margin Call (movie)

    "All politics is national."

    by Auriandra on Tue Jan 08, 2013 at 06:29:38 PM PST

  •  Yeah. (0+ / 0-)

    But will it work in the Coke machine?

  •  I've been in favor of this for a while (0+ / 0-)

    but there are negative macroeconomic effects (sort of): both debt and credit are worth less, and inflation might jump a tiny little bit.

    "Your victory has demonstrated that no person anywhere in the world should not dare to dream of wanting to change the world for a better place." -- Mandela

    by agoldnyc on Wed Jan 09, 2013 at 10:11:11 PM PST

Meteor Blades, skybluewater, sdf, bink, Thumb, davej, chuck utzman, vicki, Phoenix Woman, murphy, miasmo, Joan McCarter, Gooserock, madmsf, PeterHug, greenbird, krwada, Jim in Chicago, OLinda, LEP, Aspe4, oysterface, mslat27, eeff, polecat, elfling, sidhra, exNYinTX, expatjourno, Heart of the Rockies, Addison, agoldnyc, TheMomCat, Zinman, xopher, ivote2004, Ignacio Magaloni, Nate Roberts, clonal antibody, kharma, annan, TexDem, Sinan, figbash, kj in missouri, rlharry, bsegel, randallt, schuylkill, jcrit, lyvwyr101, Sybil Liberty, drofx, Los Diablo, 3goldens, basquebob, ratzo, Fury, CompaniaHill, Sandino, Ginny in CO, Rusty in PA, psyched, jay23, Born in NOLA, tarheelblue, tommymet, flying shams, vigilant meerkat, Mr Bojangles, cjfb, 8ackgr0und N015e, tonyahky, Gorette, technomage, Wary, SherriG, NBBooks, triv33, gpoutney, gooderservice, JVolvo, NearlyNormal, el cid, OMwordTHRUdaFOG, ER Doc, livjack, onionjim, profh, doingbusinessas, shaharazade, bmcphail, phonegery, FlamingoGrrl, john07801, Loudoun County Dem, ksp, offgrid, Msinformed, Brix, FishOutofWater, some other george, mbh1023, jhop7, leonard145b, skod, homerun, JayC, revm3up, Ponder Stibbons, Involuntary Exile, NewDealer, elwior, lineatus, KJG52, rssrai, Jake Williams, triplepoint, temptxan, Gemina13, glendaw271, phrogge prince, priceman, Nica24, Old Surgeon, Throw The Bums Out, rsmpdx, divineorder, Sarge in Seattle, notrouble, BlueInRedCincy, JesseCW, Munchkn, winsock, Edge PA, Words In Action, BlueOak, Railfan, Renie57, FogCityJohn, dorkenergy, blueyescryinintherain, TealTerror, renzo capetti, Klaus, tb mare, Funkygal, Nada Lemming, cocinero, annieli, Maximilien Robespierre, zooecium, implicate order, Mr MadAsHell, cooper888, Possiamo, BlueJessamine, FarWestGirl, mikejay611, trumpeter, PorridgeGun, thomask, BarackStarObama, createpeace, MuskokaGord, whaddaya, Liberal Mole, sound of progress, Caddis Fly, SoCalSal, DRo, Auriandra, quill, GrumpyOldGeek, anodnhajo, TheLizardKing, charliehall2, The Lone Apple, Letsgetitdone, This old man, Mr Robert, bunnygirl60, BusyinCA, OllieGarkey, Vote4Obamain2012, Victim of Circumstance, scilicet, Real Fact Bias, T C Gibian, Blue Bell Bookworm, leftreborn, Dustin Mineau, weck, aresea, Yo Bubba, Jerry Hicks, mindara, Constantly Amazed, helpImdrowning, Icicle68, Ishmaelbychoice, pragmaticidealist, bbussey, RUNDOWN, CurriousOutsider, Blackhawks, central oregon progressive

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site