By Joe Firestone, Ph.D., Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director of KMCI’s CKIM Certificate program. He taught political science as the graduate and undergraduate level and blogs regularly at Corrente, Firedoglake and Daily Kos as letsgetitdone. Cross posted from New Economic Perspectives
Stories in The Washington Post and the New York Times have some in the blogosphere proclaiming that it’s time to celebrate the death of the Grand Bargain, and others at least raising a question about its death. I’ll go on record as saying that celebrating its death is definitely premature.
It is so because we’ve yet to go through the budget or continuing resolution-passing activities coming up in September, and also have yet to go through the debt ceiling conflict to come in October. Mainstream Washington commentators believe John Boehner is determined to avoid a government shutdown crisis of the budget/CR conflict and that one or the other will be passed before October 1. Assuming they’re right, that still leaves the matter of the debt ceiling “crisis,” which the same commentators are saying will happen because Boehner has to promise his tea party caucus a chance to coerce the Administration, if he’s going to get their acquiescence on the budget/government shutdown matter.
So, they think, we are looking at a debt ceiling crisis around October 15, when Jack Lew says the Government will run out of borrowing authority, and he will be reduced to juggling $50 Billion in available cash to both repay debt and pay for the other obligations of Government legislated by Congress. The position on the debt ceiling being taken by the Administration now is that it will not negotiate over it, and that it’s demanding a clean bill raising the debt limit to pay for spending Congress has already approved.
Matthew Yglesias commented on this position on August 27, 2013:
Back in 2011, in an act of hubris and weakness, the administration decided that debt ceiling negotiations might be a good backdoor way to entrap both mainstream conservative Republicans and liberal Democrats into a “grand bargain” on long-term fiscal policy. We got no bargain, just a panic. It can’t happen again. My favorite solution would be to exploit the platinum coin loophole and put this issue behind us forever. But a smarter political strategy is probably the one Lew outlined on TV. No negotiations. No tricks. Congress just needs to step up.
I’m glad using Platinum Coin Seigniorage (PCS) to avoid the debt ceiling is Yglesias’s favorite solution, since it’s mine too. But, first, I don’t see why that, alone, would put the debt ceiling issue behind us forever unless the President were 1) willing to use it again when the debt ceiling is reached or 2) he then uses Josh Barro’s terrible and unnecessary “negotiation with the Republicans” idea, to trade away the Treasury’s PCS authority in return for repeal of the debt ceiling legislation. In addition, I’d like him to explain why he thinks a smarter political strategy is “No negotiations. No tricks.”
What’s smart about a political strategy that risks default?
What’s smart about a strategy that gives tea party Republicans a chance to creates hysteria in international markets?
What’s smart about a strategy that creates a finger-pointing spectacle where Republicans blame the Administration and the Democrats for ideological intransigence and vice versa, when we don’t need to have this spectacle to completely defang the tea party Republicans?
Sure, the Administration will probably win the shouting match in the short run and the Republicans will be forced to back off, hopefully in time to avert more than minimal damage to the economy. But this kind of brinksmanship by the smart money in the Administration is the same kind, fed by the same underlying attitude, that brought us the sequester, which is now slowing down the US economy.
From where I sit, it would be an awful lot smarter to wait for the Republicans to agree to a CR and then mint the $60 T coin the day after it’s passed. That would make the debt limit a dead letter and also change the political climate in a way that would free up the Administration to push for jobs programs, Medicare for All, reconstructing the economy, doing something concrete about climate change, energy, education, and infrastructure and actually strengthen the safety net by enhancing and extending it. In that new political climate the Democrats could actually win the elections of 2014, and the President could thereby avoid impeachment, which is what he’s going to get from the tea party if the Republicans take over the Senate.
While I don’t think the President will follow that kind of strategy, it seems a lot smarter to me than a strategy of “No negotiations. No tricks.” How about you? If you like it better, then please read this Post and sign the Move-on petition linked from it.
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You’re assuming the Administration wants to be freed up to pursue the agenda you set forth. Where is the evidence supporting that point of view?
An Obama conversion to MMT? When pigs fly. THe agenda of the people he represents is antithetical to your agenda.
Move On petitions? Get over it. That’s “make work” for deluded progressives. Makes them feel better and keeps them off the street.
Know the enemy.
I don’t think I’ve said anywhere that I expected Obama to do this. What does that have to do with my advocating it? By doing so, I’m trying to increase the likelihood (not the probability) that he might use PCS. Sometimes he does do the unexpected. For example, yesterday in relation to Syria.
On petitions, yes they don’t work. But they’re part of a mosaic of different things you can do, and I think that taken as a whole the variety of things can have an effect. We can argue about what I might have done that would have been more effective than a Move-on petition. But I may already have done some of those things.
You’re assuming the Administration wants to be freed up to pursue the agenda you set forth. Where is the evidence supporting that point of view?
An Obama conversion to MMT? When pigs fly. THe agenda of the people he represents is antithetical to your agenda.
Move On petitions? Get over it. That’s “make work” for deluded progressives. Makes them feel better and keeps them off the street.
Know the enemy.
Concur.
Yeah, sign the petition.
“and the President could thereby avoid impeachment, which is what he’s going to get from the tea party if the Republicans take over the Senate.”
Excellent plan. I just hope they come up with a better story than last time.
I’m not saying I want him to avoid impeachment; but I do want him to mint the coin, and I suppose that he may want to avoid impeachment, but, hey, maybe not!
Know your enemy ?
I am not so sure people on this site understand the deep sophistication of the money power and its monopoly of scientific knowledge.
For example the role of Matrix chambers and its combination of legal means and behavioral science so as to control ALL its human assets no matter what the political borders.
http://eutopialaw.com/2013/06/24/what-if-anything-is-wrong-with-a-copenhagen-commission-the-idea-of-democracy-protection-in-the-eu-revisited/
I have to say even I am shocked by this and I take some shocking mate.
The Anglo American cartel will not stop
The corporate model of control has at the very least 400+ years of success.
Why should it ?
The fact that liberal minds such as Robert Harris have finally woken up to this all encompassing darkness strikes me as a sign it is all too late to stop it.
http://en.wikipedia.org/wiki/The_Ghost_(novel)
Obama engineered the sequester and he is trying to engineer the Grand Bargain/Great Betrayal. Indeed the sequester was supposed to create pressure for the Grand Bargain. And the purpose of the Grand Bargain from Obama’s point of view is to gut Social Security, hence the more accurate name the Great Betrayal. But Republicans are boxed in by their ideology. They remain opposed to a Grand Bargain, not because they support Social Security but because they are opposed to any tax increases no matter how small and illusory.
Both the Democrats and the Republicans want to screw us, just in different ways. Both have contributed over the last 35 years to the construction of the kleptocracy we suffer under. Democratic Presidents, Republican Presidents, Democratic Congresses, Republican Congresses, split Congresses, it is all the same. So who cares who controls the Senate? Democrat or Republican, it won’t be our Congress but the kleptocrats’. And who cares if Obama is impeached. It takes a vote of 2/3 of those present in the Senate to convict, and that won’t happen. So just more meaningless kabuki, and again why should any of us care?
Impeachment at least as the virtue of being a political solution to “a political problem,” as opposed to offering up endless technical solutions that you know will be blocked by that “political problem.”
As far as kabuki theatre goes, it at least has that much going for it. And, it’s not like there aren’t grounds for impeaching Obama. As far as kabuki theatre goes, one can waste one’s time on less consequential topics than publicly rehearsing those grounds.
One may think the teahadists are wrong headed and influenced by all the wrong people, but at least they get some credit for insisting they have the right to govern themselves as opposed to signing petitions offered up by would-be technocrats in the hopes that some ghost of New Deal paternalism will be miraculously revived tomorrow morning.
Now I know some economist or would-be technocrat is bound to rise up and blow farts in my face in response.
But I don’t care!!
The First Amendment:
Why do you feel that the exercise of a Constitutional right is not a form of self-governance?
I wasn’t expressing a preference when I said he could avoid impeachment, but just putting forward a notion that might be persuasive to him and his advisers. You know I agree with everything you said in this comment, Hugh. But I’m still going to push the actions I think are the best ones, and then the kleptocrats can decide for themselves what they’re going to do in response to those ideas, provided they get out there.
War is hope.
Yet another reason to ignore any solution offered by an economist. You guys can be great when it comes to analyzing what went wrong and even predicting what’s about to go wrong, and why. Which is why I read this blog. However, you are terrible when it comes to problem solving. As illustrated by the never ending saga of the Platinum Coin.
First of all, that is just about the dumbest sounding idea I’ve ever heard. And, yes, I’ve read all the many explanations offered up by economists for how it is legal and why it would work. Even if that were true, which I doubt: so what?
Only an economist would be so totally blind to the political implications of such a measure. Any president attempting to sell such an idea to the American people would be instantly laughed out of office. Impeachment wouldn’t be necessary. He would no longer be able to show his face in public.
It never fails to impress (and amuse) me how blind economists can be to the political implications of their bright ideas.
I’m sorry you feel the idea is dumb. Oxygen sounded dumb too, in the days of phlogiston. Also, heavier objects fall faster. It stands to reason, Mr. Smarty Pants.
Also, an “economist”? Did you read the bio? It’s at the top of the article. I think you need to get that knee seen to.
Sorry, Lambert. I stand corrected. That sentence should have read:
“Only a ‘political scientist’ would be so totally blind to the political implications of such a measure.”
As for the economic implications, here’s what Marc Thiessen, of the Washington Post, had to say:
“In a town that specializes in stupid ideas, this one reached a new level of stupid. Think about it: If the president could really create a trillion dollars out of the ether simply by minting a single $1 trillion coin, why would we stop at one? We could mint 17 of these puppies and eliminate the national debt! Heck, we could mint 18 and have a trillion-dollar surplus!
Imagine all the problems in Washington that could have been solved with this one fiscal-policy innovation. There would be no need for more fights over whether we should cut spending or raise taxes. Just mint more trillion-dollar coins. Want another trillion-dollar stimulus spending bill? Mint a coin! Make Medicare and Social Security solvent without cutting benefits? More coins!”
And speaking of Phlogiston, the Platinum Coin sounds a lot more like alchemy than anything Galileo and company ever came up with. If we could only spin lead into gold all our troubles would be over, right?
The “coin” is not a stupid idea. It’s been a bonanza for the 1% only they call it “national security” or ‘rescuing the economy” or some other shock doctrine. When the 99% get it, the jig will be up.
Heavy irony aside, quoting another guy saying heavier objects fall faster is no more effective than you saying it. Do some homework, study up, then come back.
Nah! I prefer quoting from those other guys, it’s less work and more fun. Here’s some more:
Mark Kleiman: “So what if the Mint produces three platinum coins with face values of $1 trillion each? (There’s some debate about whose portraits should adorn them, but my nominees would be Ronald Reagan, George W. Bush, and Alfred E. Neumann; the last coin could have “What, me worry?” in place of “In God We Trust.”)”
Jonathan Chait:
“I actually feel like this plan could, in addition to rescuing the economy, provide the spark our film industry requires. I could sit here for ten minutes and rattle off a half-dozen great film concepts based on this story.
Bank caper: a dashing Clooney-esque figure assembles a team to steal the trillion dollar coin.
Comedy: a bumbling assistant Treasury Secretary played by Jack Black accidentally picks up the trillion dollar coin and spends it on a Mountain Dew, sending the entire government into a mad scramble for the coin before the world economy collapses.
Noir: Regular person somehow acquires the coin, and is slowly twisted.
Action: Super-villain plots to destroy the coin and bring the economy to its knees, from which he stands to profit due to a nefariously brilliant hedge he has prepared. Maybe we’ll call him “Eric Cantor.””
Brad de Long: “Think how much money the federal government could make from the movie rights alone..,”
The Economist: “As the date on which Treasury runs flat out of money grows nearer, various harebrained ideas to workaround the statutory limit on borrowing and keep paying the bills have been getting more attention. This one, one of my favourites, seems like it just might work”
Galileo Galilei: “The only thing that can fall faster than the US economy is a platinum coin.”
Buster: “What could go wrong?”
Pretty funny, though of course since you don’t provide any links, it’s all just chaff and a time suck for both me and the readers. Here’s a handy timeline that includes links and a history of the concept from propagation through acceptance by Yglesias, Felix Salmon, Cullen Roche, etc. Not to argue from authority on the truth of the matter, just to point out that plenty of sensible, mainstream people kicked the tires and thought the idea had merit. Now, don’t you have a bridge you have to be under?
All my quotes were taken from that page, Lambert.
Except the one by Galileo, which arrived via email.
:-)
I’ll take your word for it; good to know my compilation treated all sides equally. The funny thing about the jokes is that they tend to be about the physical nature of the coin. Not a very sophisticated (or accurate) view of money, I’m sure you agree. So I guess, if we want a reading on the seriousness of the coin as a proposal, we’ll have to put a bunch of ignorant snarky jokesters plus one troll on one side of the balance, and (to pick a few at random) Cullen Roche and Felix Salmon on the other. Decisions, decision. I have real work to do now. Have a good evening.
Thanks for the reference to Felix Salmon, Lambert. I managed to find a very interesting commentary by him on this issue, and must say it makes a lot of sense (http://blogs.reuters.com/felix-salmon/2013/01/07/why-we-wont-mint-a-platinum-coin/)
Here’s a sample: “The trillion-dollar coin is the fiscal equivalent of the Flying Spaghetti Monster: a logical reductio ad absurdum designed to emphasize the silliness of an opposing position.”
This does seem to be the key to the whole coin debate, i.e. the value of the coin idea is that it functions as a hypothetical reductio absurdum, revealing the absurdity of the very real, and very dangerous, debt limit law — if not our monetary system generally. And I think that this is the spirit in which most who take it seriously see it.
Unfortunately, to the average American, the debt limit sounds like prudent management, while the Platinum Coin sounds like a desperate last-ditch gimmick. Which is why it would never float politically — as Salmon points out.
This Salmon guy is a real trip.
Is the coin legal? Yes. Is the coin economically sound? Is the coin a good idea? No. Because I don’t like it!
But at no point does he ever give us a reason to suspect he knows what the coin is; only that he thinks it’s a stupid idea. Even after he concedes that it will work. With thinking like this is change, is it any wonder we keep ending up in one disaster after another.
MMT argues that because the US prints its own currency, it is impossible for US government to go bankrupt or to drown in its own debt – by definition. The debt crises are a bit like insisting we need to invade the country that lies north of the north poll. The classical economist however insist that we DO have a debt crises and need to cut SS and other social spending before it’s too late.
The coin is the acid test that would conclusively prove MMT as sound theory, and leave classical economics discredited… again.
The only thing the coin threatens… is the free market orthodoxy.
docg, As Lambert says. I’m not an economist, and certainly don’t reflect the perspectives of most economists. On the other hand, your own rant reflects what they think perfectly: ignorance and a failure to reason. I’ve considered the political objections to the platinum coin at some length in my e-book, but evidently you prefer to read a lot of ad hominems, labeling, and ridicule of a new idea, rather than a serious consideration of objections. However, that probably doesn’t matter since anyone reading your comments can see that they’re composed primarily of logical fallacies and rhetorical tricks.
The title of the post is accurate at least.
On the point of a Move-on petition, I think there are at least two problems with the generalized anti-petition point of view being expressed here. The first is that it’s looking at petitions in isolation and not part of a broader effort to communicate a point of view. The second is that petitions are being viewed as some kind of participation in paternalism rather than as part of self-government.
The first point: For some time now I’ve been trying to move the political system away from the point that there is a Government Budget Constraint (GBC), to the is that there is no such constraint. My advocacy of HVPCS is part of that context. Thus far, I’ve been partly successful in gaining at least some currency for the idea that PCS is legal and is an option the President can use to avoid the debt ceiling. People supporting PCS got close enough to creating a groundswell in January 2013, that the White House actually had to notice the point and make a deliberate successful effort to put an end to all the talk about it.
Now we have a new debt ceiling moment coming again, and the same alternatives as before exist, with the President now becoming more insistent that he will not negotiate over raising the debt ceiling, amidst a consensus that he should have been much tougher last time. In this context, the coin is being mentioned again in mainstream circles at least by Yglesias, someone read by the denizens of the echo chamber.
If the echo chamber starts another feeding frenzy over the coin as the debt ceiling crisis approaches, then the PCS alternative will again be posed as a way not to negotiate over the debt ceiling, and as a way in which the President can end the crisis on his terms. I think there’s still a chance he will find this the least harmful of all the alternatives, especially if he limits himself to a TDC, a Trillion Dollar Coin. This is not the answer I would like to see, and I’ve argued it and still will. Nevertheless, it does help to make the fiat money case, and so is an improvement over what we have now, and it block the tea hadists for now.
Second, I really don’t think that petitions should necessarily be viewed as part of a paternalistic model. The central problem of modern representative governments is their lack of accountability to the people. The way to make them accountable is to persuade office holders that they will be held accountable for what they do. How can we do that. Well, the first thing we can do is to communicate our displeasure with what is and propose what we want our office holders to do instead. All the methods of peaceful expression of what we think, and want them to do can be part of that effort, and one proposal needs to be pushed with a variety of methods. No one method will be uniquely or always effective. So, I think we have to use them all.
You seem to think that petitions are peculiarly more ineffective than other methods. But I think that depends on the number of signatures. I think officeholders start paying attention to a petition when the numbers are great enough, and that the same goes for demonstrations, protests, viral blog posts, and social media events. Of course, today the growth potential of a petition can be enhanced by social media, so maybe their chances of being effective are greater now than they were before.
The way to drag the Overton Window left is to drag the Overton Window left.
There’s a lot to critique about petitions as a business model for people like Kos — they take a tiny cut of each clickthrough, in essence renting out their readership — but I don’t see that invalidates petitions as such as long as matters don’t stop there. (Cue the “strength of weak ties” argument on why matters do stop there.)
IIRC (I’m hazy, because it’s been a long time since I read Making of the English Working Class) electoral reform supporters in the 1830s UK actually had a giant, physical petition, which they carried from city to city. It would also be interesting to know (I don’t know) whether or how the Abolitionists, Populists, and Suffragettes (and, I suppose, the Prohibitionists) used petitions. Petitions are #6 on Gene Sharp’s 198 Methods of Non-violent Protest and Persuasion. The right to petition “for redress of grievances” is in the Constitution.
Nothing works until it does. And the MoveOn platform is there to be used…
Petitions are meaningful when they articulate the grievances and demands of a group with enough power to cause concern in the ranks of rulers. There needs to be an implicit threat that petitioning is the first step in a process that will escalate into violence or game-changing electoral opposition. Vox Populi is right. Move On and its followers have no credibility that an escalation of any sort will follow when their petition is ignored.
“. . . Vox Populi is right. Move On and its followers have no credibility that an escalation of any sort will follow when their petition is ignored.”
From your point of view this is Move-on’s petition. But from mine Move-on is just a platform for MY petition, and I’m doing a number of things, other than that petition to spread my point of view. As for escalation, I think that has something to do with how popular the thing gets. If it goes viral, it might be followed by escalation or maybe not. As Lambert says things like this don’t work, until they do.
Petitions are meaningful when they articulate the grievances and demands of a group with enough power to cause concern in the ranks of rulers. There needs to be an implicit threat that petitioning is the first step in a process that will escalate into violence or game-changing electoral opposition. Vox Populi is right. Move On and its followers have no credibility that an escalation of any sort will follow when their petition is ignored.
It’s not their petition, as lets points out.
Our beloved President can convincingly declare the Debt Limit increase “non-negotiable” ONLY if he is prepared not to budge in the face of House opposition and let the limit stand. Which would, of course, defeat his purpose. You draw that line in the sand ONLY if YOU are in the position of strength, NOT your opponent.
Once again, as per last time he made the same lame bluff, Obama is demonstrating his own pathetic ineptness. How I’d love to sit down at a game of no limit poker with this guy.
Of course he’ll wind up negotiating — and since he’ll be negotiating from a position of weakness (since he doesn’t have the votes), he’ll be forced to give away the farm (OUR farm!).
As I see it, he really should refuse to negotiate, i.e. he should let the House Republicans slit their own throats by forcing the US gov’t to default. That’s what Roosevelt would do. But NOT Barack Obama, oh no.
I think you’ve missed the point of the post. That point is that since the President has PCS he can use; it is he who is the position of strength with respect to the debt ceiling. It is he who can, in effect, declare it to be a deal letter, just by minting one $60 T platinum coin. So, he really does have to negotiate nothing. He can insist on a clean deal or end any more deals over the debt ceiling forever. I think that’s strength, not weakness. So, the question has always been. Will he use that strength, or will he continue to play kabuki, while denying that he has the power to stop them from pushing the nation around in this ridiculous way.
Thank you for the post, Lets. We need to push back on the centrist/corporatist opinion writers who shill for corporatist Dems.
To one commenter–strongly “disagree” with escalation into violence.
But, strongly “agree” with premise that the organization “MoveOn”–which is an apparatus of the Democratic Party–will bring about positive actions, in regards to the decisions of this Administration, or of ANY of the corporatist DLC/Third Way/No Lables/Problem Solvers Democrats–who are the Leadership, and the only Dems who will receive the Dem Party nomination for President.
Of course, this is true of many other “astro-turf” Dem organizations.
Having said that, I too have a MoveOn T-Shirt hanging in my closet–you know, the “Voting is not a spectator sport” model. But, in my defense, that was from the early 2000’s. ;-) IMHO, since then, the leaders of MoveOn have exposed themselves too many times to be shills for the Dem Party.
Guess signing wouldn’t hurt anything–I just wouldn’t “hold my breath” that it will yield any real positive outcomes.
Closer to the election, I’ll be posting video of the now head of MoveOn literally shilling for “tax reform” earlier this summer–using the prospect of “corporate” tax reform, to rope in unsuspecting “would-be supporters.”
This, after the “March 2013” Financial Times piece which stated that PBO has assured Republicans that any corporate tax reform will be “revenue neutral.”
I may be a tea party guy, but I believe in our democratic government, flaws and all. I think it is awesome that we have representation that can stand up to the president on issues of money and war. I am glad that we have brinksmanship in politics instead of blood in the street. I am glad we have strong opinions on all issues.
The Platinum coin would be the end of progressivism, so be careful what you wish for. Much power derives from legitimacy, and deeming a law passed in the long run is counterproductive.
The beauty of the coin is that it is, in fact, “legitimate.”* Perhaps your false claim is based on your disagreement with the policies it would enable?
NOTE * That’s one reason Yglesias, among many others, supports it.
I find the *beauty* in its application…
Showing…
The complete illusory footing the system operates under…
skippy… the unfit must sacrifice…. so the fit may live… echos of P.I.E. – see Dr Horrible def~
I like your scare quotes around legitimate. It certainly was legitimate for the supreme court to get the last word on Bush v. Gore. I certainly was legitimate to have the house deem Obamacare passed after Scott Brown won the election. But I would put both of those in scare quotes as well. Legitimacy is a fact in hearts and minds, not in law. When law is interpreted well legitimacy rises. When I say to be careful of what you wish for, I do not mean I wish for the demise of liberalism. I do not wish for that. I mean that such a blatant act of cynicism will cause more harm that good.
In what way will the coin cause more harm than good?
As I understand it, the mere fact that the coin is a possibility, exposes the lie behind the entire debt crises. This in turn breaks the power of the Federal Reserve over US fiscal policy, removing it as a barrier to a more rational and evidence based approach.
It might be incredibly damaging, to the banking regime and completely discredit (again) neo-liberal economic policy. But I hardly see this as a negative.
Quoting your chosen word didn’t scare me; and had I not quoted it, that could have implied I agreed with your claim. Do some homework on this.
Putting quotation marks around a single word does not make it a citation, it makes it a scare quote. To use your favorite insult, do some homework. Highlighting a disagreement in terminology has other linguistic conventions.
I am not sure why you insist upon using disparaging techniques when someone raises a valid point: I believe that using the platinum coin will have more PR downsides than upsides to your cause. I am afraid you are so blinded by your ideology that you believe anything short of genocide will be accepted in a democracy.
Chicago Manual of Style:
Smarter trolls, please. Joe shows elsewhere on this thread how the coin is, in your words, entirely “legitimate.”
Bob, it’s not a blatant act of cynicism. It’s the law. The Congress gave the President that authority. If he claims it and uses PCS in the interests of the people to stop the debt ceiling hostage-taking, it will be regarded as a perfectly legitimate thing to do. Its legitimacy will be further enhanced if it is used to pay off the public debt and to stop issuing new debt.
I meant say: “when there is new deficit spending.” at the end of my reply.
I was not making a broad statement against debasing the currency. You are right that it is demonstrably true that legitimacy can be maintained through such techniques if, as you say, the ends can be shown to justify the means. I was making the statement that using legal loopholes (for example like using the supreme courts absolute legal right to interpret the law as a way to select Bush instead of Gore) tends to diminish the actors. I stand by my belief that this applies to the platinum coin. If you want to debase the currency, go for it. If you want to play games with democracy I think the voters will catch on.
So, is the coin “legitimate” or not?
How does the coin debase the currency?
It doesn’t. Only what dollars are spent on can “debase” – inflate the currency.
The high value platinum coin with a value of $1-$70 trillion is a gimmick but one with a serious purpose. It is a way under current law for the federal government to take back the power to create money, a power which the federal government unconstitutionally ceded to the Fed. It does this by exploiting an exception to an exception. The Treasury never gave up its power to create money through coinage (as opposed to paper and electronic money creation vested in the Fed). And under 31 USC 5112(k), it can create platinum coins of any denomination:
Under Section 4 of the 14th Amendment,
the Fed would be required to accept such a coin and credit to the government’s account the electronic money it has the power to create. The Fed would retain its power to create electronic money. Only now with the platinum coin, it would have effectively to share that power with the federal government.
This would not mean that the federal government would inject $70 trillion into the economy tomorrow. It could only use this money to pay for budgeting which the Congress has already approved. Effectively, this would be the difference between its inflows and outflows, its deficits in other words. This would have a couple important consequences. First, it would allow the government to stop a subsidy primarily to banks, the rich, and foreign entities in the form of interest on Treasuries. The government would no longer need Treasuries to finance its deficits and could allow outstanding Treasuries to be retired as they reached maturity. And the debt ceiling as a source of political blackmail and kabuki would be irrelevant. The government would always have the power through its platinum coin fueled account at the Fed the funds to keep its debt below the ceiling. Indeed over time, the national debt would decline.
Now this is what the government could do. But we live in a kleptocracy so it won’t do this, just as it won’t spend money to benefit us in the 99%. And if we didn’t live in a kleptocracy, then the Fed could be folded back into the Treasury where constitutionally it belongs, ending the control of the country’s money supply by a private banking cartel. And in contrast to modern conditions, the government would use its moneymaking powers to help us build and maintain a fair and just society for all.
Excellent summary of the argument, Hugh!
But the problem, you see, is that the friction is not between the treasury and the fed. If the coin were a mechanism to suppress theft that is obviously flowing from the fed to asset holders, then it would not be seen as undermining democracy. The friction is between the executive branch which wants to expand spending and one branch of the legislature which is controlled by a different party. You will be giving a gift to future generations historians who will be able to highlight the cynical slight of hand with two words: “platinum coin.”
“Sleight of hand.” Please don’t bother to thank me.
But the fed just creates this money from out of thin air. How it that theft? You have yet to give us a good reason why the coin is some how a bad idea – apart from that you don’t like it.