So, the latest rumblings are that Obama and Boehner may be near a deal, but if they are not, or if it will not pass in time, there may be another way to get around the debt ceiling without provoking a constitutional crisis and possible impeachment by having Obama ignoring it, as I have supported, or in conjunction declaring it unconstitutional, which I also think it is, or violating the constitution by making arbitrary cuts in spending not approved by Congress. This is to coin one, or maybe several, platinum coins of very high value, depositing it or them in the NY Fed, and keep on paying bills.
This can be done due to a peculiar and little known act passed in 1996 that allows the US Treasury to mint platinum coins of arbitrary value, but no other metals. Why this was passed, I have no idea, but it is in the code apparently. A single one trillion dollar platinum coin deposited at the NY Fed by the Treasury would do the trick for some time.
I thank James Galbraith for bringing this to my attention. Apparently this was suggested initially some time ago by the commentator known as "beowulf." Matt Yglesias provides more discussion at http://tinyurl.com/6xub2ab .
*_M-A-V-E-L-O-U-S_*!!! I have been on this one and on "Fed To Burn Treasury Securities From QE In Furnace", for some time now. The FED action is a no brainer and the FED is well within its charter to take the action. After all, the FED is supposed to be the monetary authority in this country. A "take out" on the seignorage is that the Treasury mints the coins and uses them to BUY the treasury notes on the books of the FED thus reducing the "national debt" and allowing more Treasuries to be issued.
ReplyDeleteThe beauty of the seignorage play is that it unmasks the ninnies that insist that the sky is falling due to our debts. Owing a debt in money you can whip up in the basement makes it impossible to go bankrupt. At last!! A counter to the "government is like a family" crap!!!! What family can create its own money?
It appears that the TinyUrl people have removed that link. Here is another (link) that I made about 2 weeks ago http://tinyurl/jumbocoin. This is a link to an article at Kos that lays out the argument very well, with links to other articles and to the actual legal codes.
ReplyDeleteIf you google "naked capitlism platinum coin debt ceiling" you get links to a whole series of the past postings on this matter, including early ones by "beowulf."
ReplyDeleteThe "serious" people are the people who look at this as a means out of the Keynesian neoclassical standoff. The neoclassical folk being grounded in Richardian equivalence and "the money multiplier". The Keynesians seem grounded in endogenous money and interest rate games. The Obama "stimulus" would have been sufficient if the money was not "borrowed" into existence. Had the money been created without selling interest bearing notes and bonds then the resulting inflation would have cured the problems. Please note that the money that went to state and local governments did, in fact, go to wages. Please note that fewer treasury auctions will force people to actually INVEST.
ReplyDeleteyou get links to a whole series of the past postings on this matter, including early ones by "beowulf."
ReplyDeleteI always thought this "beowulf" fellow was a myth. :o)
Anywo, this is the eye-opening WSJ article that got me digging into the US Code.
"Miles for Nothing: How the Government Helped Frequent Fliers Make a Mint"
http://online.wsj.com/article/SB126014168569179245.html