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Platinum coin idea preemptively shut down
January 12, 2013 2:03 PM   Subscribe


 
Whew, for a minute there we all thought that was going to happen.
posted by axiom at 2:04 PM on January 12, 2013 [16 favorites]


Out of curiosity, am I correct in thinking that if the US government defaulted, there would be some law preventing Obama from deciding which creditors to pay on political grounds? I mean, he can't choose to pay social security benefits in some congressional districts, and not others, for example, right?
posted by tyllwin at 2:09 PM on January 12, 2013 [3 favorites]


There was also the simple fact that it would, indeed, represent an admission that the government’s executive and legislative branches could no longer be trusted to come together and effectively manage the country’s finances.

They... haven't admitted this yet?
posted by davidjmcgee at 2:09 PM on January 12, 2013 [27 favorites]


We live in interesting times.
posted by b1tr0t at 2:10 PM on January 12, 2013 [1 favorite]


Well, what if we just collected a trillion Sacajaweas?
posted by RakDaddy at 2:14 PM on January 12, 2013 [8 favorites]




I wish they would just stop with all this bs and just govern. I mean, I get there are complex issues but it seems that every week there is some new trick to get around the fact that these idiots cannot agree on anything. The end result is a never ending series of stalled processes and no results.
posted by lampshade at 2:21 PM on January 12, 2013 [7 favorites]


Out of curiosity, am I correct in thinking that if the US government defaulted, there would be some law preventing Obama from deciding which creditors to pay on political grounds? I mean, he can't choose to pay social security benefits in some congressional districts, and not others, for example, right?

I doubt SS checks are even an option, since SS is technically a different fund and runs at a surplus. Even if they could do that, I doubt they would since implementing that would cost millions of dollars.

My guess is that they would continue to pay interest on bonds, continue to pay salaries (with the possibility of government shutdown furloughs) and slow pay vendors.
posted by gjc at 2:27 PM on January 12, 2013 [2 favorites]


Why not mint a $20 trillion coin, pay off the entire national debt, and have a surplus for a while?
posted by LionIndex at 2:29 PM on January 12, 2013 [5 favorites]


Would the Fed really have the authority to refuse to accept legal tender offered by the Treasury?
posted by Jonathan Livengood at 2:30 PM on January 12, 2013 [6 favorites]


Hey - I just played Dominion: Prosperity for the first time and I had a few Platinum cards. Maybe I could donate them... At this rate it's about as effective as our so called "leadership".
posted by symbioid at 2:31 PM on January 12, 2013


We know the real reason they won't go through with it: BIDEN!
posted by briank at 2:38 PM on January 12, 2013 [4 favorites]


Well, I guess we're fortunate that the Obama administration wasn't around during the Cold War — he'd have probably told the Soviets that he'd never use nuclear weapons no matter what and then unilaterally disarmed.
posted by indubitable at 2:42 PM on January 12, 2013 [13 favorites]


I doubt SS checks are even an option, since SS is technically a different fund and runs at a surplus. Even if they could do that, I doubt they would since implementing that would cost millions of dollars.

Except we don't actually HAVE the social security money. Most of it has been spent already and replaced with... wait for it... government bonds. Which is fine, as long as those bonds are solvent. If we default, then they may not be.
posted by RustyBrooks at 2:43 PM on January 12, 2013


Uhm, let's make a very crazy, batshit lunatic helicopter hypothesis.

Presently, correct me if I am wrong, U.S. Treasuries are yelding nominally positive interest rates, but as these are lower than the inflation, so theoretically I am losing value each time I buy an U.S. Treasury.

Say I have stashes of moneys, say a lot of money I can get a 1% or less ...and I that want to get a nice cut with as low a risk as possible, above the inflation. I'd like U.S. Treasuries, but they don't cut it...right now.

Theoretically, because that's crazy talk, I could try to have my friends rattle a lot of sabers and make the U.S. appear more likely to default on its obligations. I could phone my friends in the rating agencies and make them scream "oh noes, default is the next step!" ..after all their fine print is "ours are only opinions".

Uhm...so if I do enough of that, maybe the U.S. Treasuries will become less demanded...thus leading to an higher interest rate, because they would be perceived to be "more risky".

So I could get some fine U.S. Treasuries, get a very nice yeld...let all the bruhahah subside and fetch me some fine interest rates.

But that's crazy talk, of course, for there's nobody able to generate such a big bruahah, embedded with enough media, with enough interest to do that. Or is there?
posted by elpapacito at 2:45 PM on January 12, 2013 [11 favorites]


Fox News thinks a trillion dollar coin has to have $1 trillion worth of metal.

I, for one, am glad that we set up that whole fiscal cliff scenario so that we wouldn't have to go through another debt ceiling fiasco like last time.

Wait, what?
posted by dirigibleman at 2:49 PM on January 12, 2013 [4 favorites]


But that's crazy talk, of course, for there's nobody able to generate such a big bruahah, embedded with enough media, with enough interest to do that. Or is it?

George Soros. (Who has made most of his money in currency trading, and is suspected of having crashed the Malaysian Ringgit by market manipulation.)
posted by Chocolate Pickle at 2:50 PM on January 12, 2013


Or if Soros doesn't suffice, some other guys in the golf club could join in.
posted by elpapacito at 2:52 PM on January 12, 2013 [1 favorite]


I liked the coin idea, if only that it exposed just how absurd the whole process has gotten.

"The Republicans are bravely standing up to a disastrous expansion of Federal debt!"
"Then why did the Republican run House of Representative pass a budget that required raising the debt ceiling?"

I never did receive a good answer to that one.
posted by the man of twists and turns at 2:52 PM on January 12, 2013 [10 favorites]


George Soros. (Who has made most of his money in currency trading, and is suspected of having crashed the Malaysian Ringgit by market manipulation.)

Oooook, except the total outstanding US debt is several multiples of that of Malaysia, or the UK, or any other government you'd care to mention. The market is simply too deep to manipulate.
posted by indubitable at 2:54 PM on January 12, 2013


/Wonders vaguely if America will elect more or less crazies in 2014.
posted by Artw at 2:54 PM on January 12, 2013


They... haven't admitted this yet?

It would probably be redundant at this point. Actions, after all, speak louder than words.
posted by AdamCSnider at 2:57 PM on January 12, 2013


The market is simply too deep to manipulate too big to fail?
posted by ceribus peribus at 2:57 PM on January 12, 2013 [2 favorites]


Have they considered a trillion dollar bill?
posted by Fizz at 3:00 PM on January 12, 2013 [3 favorites]


The market is simply too deep to manipulate too big to fail

That is a separate issue, but yes. The US is not going to default for silly statutory reasons, it would cause too much harm to the people who actually own the government. If all else fails, they'll hammer out a deal at the 11th hour that screws the non-powerful but avoids default (look for "entitlement" cuts and raising taxes on the non-rich through arcane reworkings of the tax code).
posted by indubitable at 3:02 PM on January 12, 2013


"The Republicans are bravely standing up to a disastrous expansion of Federal debt!"
"Then why did the Republican run House of Representative pass a budget that required raising the debt ceiling?"

I never did receive a good answer to that one.


That's because there is no good answer, that's the point. The debt ceiling is a stupid, random, pointless idea.

So I could get some fine U.S. Treasuries, get a very nice yeld...let all the bruhahah subside and fetch me some fine interest rates.

But that's crazy talk, of course, for there's nobody able to generate such a big bruahah, embedded with enough media, with enough interest to do that. Or is there?


Even if it were possible, it wouldn't be worth your time. The US won't default on its debt and once the prices of USTs were attractive people would pile back into them.
posted by young sister beacon at 3:03 PM on January 12, 2013


The US won't default on its debt
It doesn't have to - as long as it appears to be on the verge, the time I need to get some nicer interest rates.
posted by elpapacito at 3:05 PM on January 12, 2013 [1 favorite]


Uh, isn't The President, like, chief executive? Couldn't he start at the top, and keep firing Treasury officials until he finds one who shows a little more flexibility? I'm guessing if this were Russia, and Putin were considering a shmillion-Ruble coin, outspoken Treasury administrators would just start disappearing.
posted by newdaddy at 3:05 PM on January 12, 2013 [2 favorites]


The thing that scares me most is that I don't believe a lot of the Republicans in the House actually understand the meaning of the debt ceiling. I think they're just that ignorant.
posted by Justinian at 3:09 PM on January 12, 2013 [29 favorites]


Uh, isn't The President, like, chief executive? ...

I'm not clear on the law involved, but I recall Reagan begging Volcker to lower interest rates in 1981 and being somehow unable to just order him to.
posted by ceribus peribus at 3:10 PM on January 12, 2013


It doesn't have to - as long as it appears to be on the verge, the time I need to get some nicer interest rates.

True, but last time this happened, in 2011, people piled into treasuries. So I think it might have to take a lot more before we see a mass exodus from government debt. In normal economic times, this would be different, but the US is kind of looking like the best house on a bad block right now.
posted by young sister beacon at 3:10 PM on January 12, 2013


Would the Fed really have the authority to refuse to accept legal tender offered by the Treasury?

It is not quite the same situation as a shop refusing to accept coins as payment. You make money from seigniorage because banks want to buy currency from you, and you book the sale as an interest free loan until the coin is rebought from banks at face value and destroyed. It may be the case that if the Fed doesn't want to buy the coin, then it doesn't have to.
posted by kithrater at 3:11 PM on January 12, 2013


Oh, great, now Obama has set up a showdown with a group of people who think that a financial apocalypse is a great idea because it will wipe away the sin of overspending, with rebirth in a purer form to follow.
posted by Dasein at 3:13 PM on January 12, 2013 [2 favorites]




The wikipedia page on the debt ceiling provides some good background.
posted by young sister beacon at 3:19 PM on January 12, 2013


I'm not clear on the law involved, but I recall Reagan begging Volcker to lower interest rates in 1981 and being somehow unable to just order him to.

That's because Paul Volcker was the chairman of the Federal Reserve at the time, not Secretary of the Treasury. The Fed is an entity that is deliberately insulated from political pressures, which is why Reagan's requests carried no weight.
posted by indubitable at 3:25 PM on January 12, 2013 [2 favorites]


The Fed is a self-funding independent quasigovernmental agency. The president appoints its leaders, but beyond that has no legal control of its actions. This is on purpose, to prevent politicians from making short term decisions to print money that could destroy the economy. The president can't fire Bernanke any more than he could fire the house republicans who are causing this mess.
posted by miyabo at 3:26 PM on January 12, 2013 [4 favorites]


Yeah but could they just make a commemorative version with the Lannister lion on it?
posted by Beardman at 3:28 PM on January 12, 2013 [3 favorites]


"the Federal Reserve would not accept it."
If they want to break it down into like earrings and bracelets, I'll take it.
(What? That is no weirder than the monster coin)
posted by Cranberry at 3:30 PM on January 12, 2013


ceribus peribus: "I'm not clear on the law involved, but I recall Reagan begging Volcker to lower interest rates in 1981 and being somehow unable to just order him to."

Volker was Chair of the Federal Reserve. They're appointed and confirmed, but once that happens there's very little recourse until their term ends.

indubitable: "deliberately insulated from political pressures, Reagan's requests carried no weight."

Volker was appointed by Carter. The Fed Board, like other political appointments, can comply with political requests. While Reagan did re-appoint Volker, the Chairman pretty much carries no extra power and more substantial reporting duties.
posted by pwnguin at 3:30 PM on January 12, 2013


Well, I guess we're fortunate that the Obama administration wasn't around during the Cold War — he'd have probably told the Soviets that he'd never use nuclear weapons no matter what and then unilaterally disarmed.

Another way of looking at this is that, by rejecting audacious Executive Branch escape plans, Obama is forcing the House to raise the debt ceiling, or face being visibly responsible for massively damaging their rich benefactors
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 3:31 PM on January 12, 2013 [3 favorites]


this seemed like less a solution to a problem than a mockery of the concept of money itself.

I've been hearing talk of this coin for weeks and still have trouble believing it isn't a prank
posted by ninjew at 3:39 PM on January 12, 2013 [4 favorites]


I wish they would just stop with all this bs and just govern.

My fear is that they believe they are governing, and if it is the way I think it is, it is at best deceiving.

Money is an interface. We need some more focus and leadership on that which money is an interface to: services and more critically resources. Different light bulbs and newer versions of my Chevy Cavalier, for example, may not be enough.

Perhaps what I would propose is this: some public, repeated (don't stop repeating, it's a key to good communication) lecturing, on the fundamental problems that exist because of the way we structure our society. Then, our leaders in government come up with a long term action plan for citizens, and then a contract (which admittedly could always be broken but it is worth a shot) saying if we see such and such progress in society on resolving these issues, legislators would develop the legal framework that supports this evolving society. Keep some form of solid healthcare, defense, etc. in place, but respects the need to restructure how we do day to day work and life.

Of course, this may already be happening, albeit much less naked, which is not helpful for a fair number of people who want to know what to do (call it X) so that they can do X because they are fully capable, and so they can move on to the next step and find a way to nicely manage those who couldn't do x.

On another note, and contrary to a previous comment on a different thread, there are some terrific conservatives out there as there are terrific liberals. Problem is, yeah, math is not a specialty on either side. Additionally, as in other fields that deal with multiple variables, they all often dismiss a ton a variables that they might just want to reconsider. The big one: variations in people, and we do see this happen elsewhere. As a result of this narrow view, we still get cases of attempting to fit gloves of one size on everyone. And then they either wonder why problems arise, wait a little long hoping the glove fits, or just simply dismiss it without resolving the issue.

Something to keep in mind as finance and economics debates rage on.

TL;DR - I'm in a love/hate relationship with money. Reasonably good interface, problem is everyone or lots of people kinda forgot what they were interfacing with (much like when we pump gas in and drive an 80mph car, tap into some water, or flip an electric switch).
posted by JoeXIII007 at 3:47 PM on January 12, 2013 [2 favorites]


I've been hearing talk of this coin for weeks and still have trouble believing it isn't a prank

I've been feeling this about every television newcast I have seen since I moved from England to America.
posted by srboisvert at 3:47 PM on January 12, 2013 [9 favorites]


Just remember, all Speaker Boehner has to do to settle this debt ceiling business is dispense with the whole "majority of the majority" b.s. and allow a vote on it. He did it with the fiscal cliff deal, he can do it again.
posted by Cash4Lead at 3:52 PM on January 12, 2013 [3 favorites]


The thing with the trillion dollar coin is that is really does have magic powers. If you cut a hole in the middle of it and wear it on your finger, then you, and all your debts, become invisible.
posted by twoleftfeet at 4:00 PM on January 12, 2013 [1 favorite]


Well, I think really Obama should've minted it: Put Ronald Reagan on the front, crossed AR15's and a quote from the second amendment on the back. Then see if any Republicans dare to speak against it.
posted by tyllwin at 4:08 PM on January 12, 2013 [10 favorites]


Have they considered a trillion dollar bill?

Are you kidding? it would be the size of Delaware.
posted by mattoxic at 4:23 PM on January 12, 2013 [8 favorites]


Oh, great, now Obama has set up a showdown with a group of people who think that a financial apocalypse is a great idea because it will wipe away the sin of overspending, with rebirth in a purer form to follow.

The people he is dealing with, and the people that listen to them, are either phenomenally stupid or dangerously insane, and often both. The showdown happens no matter what.
posted by zombieflanders at 4:23 PM on January 12, 2013 [1 favorite]


I read this allegory somewhere: imagine that you arrive home one evening and find out that due to a sewage disaster your entire house is filled with shit up to the roof. What would you do: get rid of the shit or raise the ceiling?
posted by Pyrogenesis at 4:34 PM on January 12, 2013 [1 favorite]


Well, I think really Obama should've minted it: Put Ronald Reagan on the front, crossed AR15's and a quote from the second amendment on the back.

This should just mint a trillion dollar gun as legal tender. The conflict-ion would be priceless.
posted by drezdn at 4:35 PM on January 12, 2013 [1 favorite]


I read this allegory somewhere: imagine that you arrive home one evening and find out that due to a sewage disaster your entire house is filled with shit up to the roof. What would you do: get rid of the shit or raise the ceiling?

In this case, you put the shit in there yourself. Why did you do that? Given that you have decided to put more shit into your house than it holds (and apparently you want that shit there), of course you raise the roof.
posted by RustyBrooks at 4:46 PM on January 12, 2013 [5 favorites]


Why not mint a $20 trillion coin, pay off the entire national debt, and have a surplus for a while?

The coin idea was never about paying off national debt. The problem is that congress has passed a budget requiring a certain amount of spending, but is now threatening to refuse to raise the debt limit to allow that spending, and is thus risking a federal default.

The coin was a silly idea, but it solved a silly problem.
posted by heathkit at 4:46 PM on January 12, 2013 [3 favorites]


I read this allegory somewhere: imagine that you arrive home one evening and find out that due to a sewage disaster your entire house is filled with shit up to the roof. What would you do: get rid of the shit or raise the ceiling?

Wait, I'm not sure I understand. Is the sewage disaster the New Deal? Must have been one wild evening.
posted by nobody at 4:47 PM on January 12, 2013 [2 favorites]


Parliament bans cannibalism in Ireland!
posted by boo_radley at 4:54 PM on January 12, 2013 [7 favorites]


yeah, it's less like debating between getting rid of shit in a house and raising the roof, and more like debating whether or not we want to pay the credit card debt we paid off. The Republican Party solution is to keep charging things to the card, but to not pay when the debt collectors call.

Except that analogy doesn't work either, because nations aren't family and families aren't sovereign states that issue their own currency.

Also debt isn't shit, especially in a period where people are paying the US government to hold onto their money for a while.

I'm not sure I've ever read an analogy on this topic that doesn't conceal more than it illuminates...
posted by You Can't Tip a Buick at 4:56 PM on January 12, 2013 [9 favorites]


The Federal Reserve and what army?
posted by Smedleyman at 5:13 PM on January 12, 2013 [1 favorite]


It's dine and dash. You order food, eat it, and then leave without paying the bill. The $1 trillion bill.
posted by indubitable at 5:22 PM on January 12, 2013 [3 favorites]


I think the shit in the allegory is the Gold Standard and the roof is the Wizard of Oz. Or something.
posted by Justinian at 5:24 PM on January 12, 2013 [3 favorites]


And we're not getting a Death Star, either?? BOOOOOOOO on this day of news, BOOOOOOOOO, I say!
posted by argonauta at 5:27 PM on January 12, 2013 [5 favorites]


Can Ol' Barry declare war on ... congress?
posted by seanmpuckett at 6:17 PM on January 12, 2013


Mint them anyway, sell them as collectibles for $10 each, see how far you can get.
posted by Apocryphon at 6:35 PM on January 12, 2013


Well, so much for Ocean's 27. :-(
posted by anonymisc at 6:36 PM on January 12, 2013 [2 favorites]


I wish that Obama would stop giving away options before negotiating. He's up against Huns and Visigoths who want to burn rather than govern, and I was hoping that his earlier refusal to rule it out was because his balls were finally starting to descend.
posted by klangklangston at 6:46 PM on January 12, 2013 [5 favorites]


Are you saying "Boooo", argonauta, or "Booo-urns"?
posted by Purposeful Grimace at 6:51 PM on January 12, 2013 [1 favorite]


...congress has passed a budget requiring a certain amount of spending...

Congress hasn't passed a budget in four years. The House has passed a budget every year, but Harry Reid has allowed every one of them to die in the Senate.
posted by Chocolate Pickle at 7:07 PM on January 12, 2013


I was thinking more like "BOOO-udgetary constraints."

(Or "BOOO-urgers." Mmm, burgers....)
posted by argonauta at 7:21 PM on January 12, 2013 [2 favorites]


I read this allegory somewhere: imagine that you arrive home one evening and find out that due to a sewage disaster your entire house is filled with shit up to the roof. What would you do: get rid of the shit or raise the ceiling?

Can I say this is just plain offensive? My salary is paid out of the Federal budget. The salary of every Federal worker and every armed service member is paid out of the budget. The Social Security check of all my living ancestors comes from the budget. The money that pays for roads you drive on, National Parks you visit, clean water you drink and clean air your kids breathe and inspections for the food your family eats all comes from the Federal budget. It's not shit. It's how we choose to organize the things that we agree everyone should be a part of. Find a better metaphor already.
posted by newdaddy at 7:44 PM on January 12, 2013 [81 favorites]


That's because Paul Volcker was the chairman of the Federal Reserve at the time, not Secretary of the Treasury. The Fed is an entity that is deliberately insulated from political pressures, which is why Reagan's requests carried no weight.

I had a friend who worked at the Fed for a while. Apparently, despite all outward appearances, they were technically not employees of the federal government. Rather fed employees are employees of the Fed's Board of Governors. This was doubly amusing because of the resemblance to the UC Regents.
posted by hoyland at 8:23 PM on January 12, 2013


The White House was behind the original idea being floated in the mainstream media, believe it. The Republicans are run entirely by conspiracy theorists at this point, this is also true.

By issuing a denial describing how the Executive would not order such a coin to be made, and the Fed affirming it would not accept such a coin in any event, the Republicans are now convinced the coin has already been struck and a little golden throne for it has been constructed in the Federal Reserve building in Boston. (The one with the anti-aircraft missiles on top, you can totally see the launcher on Google Earth. Drunken democrat Irishmen with shillelaghs patrol the streets below.)

The options are to vote to raise the debt limit, or risk Obama unleashing the mighty coin! You win this one, barrack HUSSEIN obama! We'll be back!
posted by Slap*Happy at 8:29 PM on January 12, 2013 [2 favorites]


It seems so odd that all these World War 1 and 2 era ideas and things are coming to bite us in the ass now. Health Care from your employer as a way around wage controls, the debt ceiling during World 1 so bonds were easier to finance.
posted by 922257033c4a0f3cecdbd819a46d626999d1af4a at 8:38 PM on January 12, 2013 [1 favorite]


Pyrogenesis: I read this allegory somewhere: imagine that you arrive home one evening and find out that due to a sewage disaster your entire house is filled with shit up to the roof. What would you do: get rid of the shit or raise the ceiling?

For this stupid, stupid analogy to be complete, imagine that one of the people living in the house is a millionaire, but he won't pay $50 to have a plumber fix the broken pipes that have filled the house with shit. Even though everyone else in the house is broke and he's the one who keeps jamming the toilet.
posted by Mitrovarr at 8:42 PM on January 12, 2013 [19 favorites]


The Senate voted on the House passed budget last year. It lost 58-41, 5 of the no votes came from Republican senators. The alternative budget proposal has been fillibustered by the minority party.
posted by humanfont at 8:47 PM on January 12, 2013 [1 favorite]


I keep hearing people say that congress hasn't passed a budget, but then how is the government functioning? Is there something in the law that says that if a new budget isn't passed, the old budget continues into perpetuity?
posted by PigAlien at 8:53 PM on January 12, 2013


Congress keeps passing short term "continuing resolutions" which fund the government for days, weeks, or months at a time.
posted by Justinian at 9:40 PM on January 12, 2013


Can I say this is just plain offensive?

Sorry 'bout that. In my excuse, I live on the other side of the world and so I don't follow this topic, I just read it somewhere and thought it was funny.
posted by Pyrogenesis at 12:10 AM on January 13, 2013


It seems so odd that all these World War 1 and 2 era ideas and things are coming to bite us in the ass now. Health Care from your employer as a way around wage controls, the debt ceiling during World 1 so bonds were easier to finance.

I think the term is kludge / kluge.
posted by the man of twists and turns at 12:10 AM on January 13, 2013


It was a short-sighted idea. Give a man a trillion-dollar platinum coin and he'll eat for a day. But give a man a Death Star and he'll eat for a lifetime.
posted by sebastienbailard at 12:19 AM on January 13, 2013 [4 favorites]


Congress hasn't passed a budget in four years.

Not quite accurate. The last budget resolution was passed in 2009 for fiscal year 2010.

It is also worth noting that no budget resolutions were passed for fiscal years 2003, 2005, and 2007 when Republicans controlled both houses of Congress with majorities.

The budget resolution is just that, a resolution, stating the intent of Congress. It is not a law and is not signed by the President. Actual spending is determined by appropriation bills that are independent of any budget resolution.
posted by JackFlash at 12:26 AM on January 13, 2013 [5 favorites]


I read this allegory somewhere: imagine that you arrive home one evening and find out that due to a sewage disaster your entire house is filled with shit up to the roof. What would you do: get rid of the shit or raise the ceiling?

You hire someone to clean up your mess, because it's such a big one that you can't do it on your own. What Congress is proposing is that, having hired that cleaner, we now just don't pay them.
posted by solotoro at 3:03 AM on January 13, 2013 [2 favorites]


Sorry 'bout that. In my excuse, I live on the other side of the world and so I don't follow this topic, I just read it somewhere and thought it was funny.

My apologies also. My cousin-in-law (whatever the proper term is) made the sewage argument recently, and I held my tongue, so as not to start a family row. I'd been waiting for a chance to vent, I guess.
posted by newdaddy at 3:45 AM on January 13, 2013


if this were Russia, and Putin were considering a shmillion-Ruble coin, outspoken Treasury administrators would just start disappearing.
Isn't it weird that this analogy is flawed because Russian politicians are less crazy and corrupt than the republicans?
I bet the G8 meetings are just everyone hugging a crying Barry because of the shit he has to deal with at home.



Obama [through tears] : And then they said the coin would be too big, I mean did these people go to school?

Merkel : It's ok Barry, you don't deserve this.

Putin [stalking the room, fists clenched] : Those fucking Kockhs Just get them off US soil, I'll fuck them right up.

Hollande : Vlad mate, that will just cause too much hassle dude.
posted by fullerine at 4:00 AM on January 13, 2013 [7 favorites]


> For this stupid, stupid analogy to be complete, imagine that one of the people living in the house is a millionaire, but he won't pay $50 to have a plumber fix the broken pipes that have filled the house with shit. Even though everyone else in the house is broke and he's the one who keeps jamming the toilet.

You don't get to be a millionaire by writing checks, son.
posted by davelog at 5:12 AM on January 13, 2013


Don't forget that everyone in the shit house gets worms too.
posted by crapmatic at 5:45 AM on January 13, 2013


The sewage argument is right-wing Republican framing and nothing more.

The same text is being copied and pasted among blogs and outlets on the right-hand end of the political spectrum over the last couple of weeks.

Dana Perino, a Fox News host, appears to have repeated it on the air without further analysis, on Tuesday, Jan 8.

The blurb tells you nothing about the U.S. national debt, but may tell you a lot about the psychological underpinnings and neuroses of the U.S. extreme right. What emotional images resonate with them? There's your answer.
posted by gimonca at 7:33 AM on January 13, 2013 [4 favorites]


Federal Reserve building in Boston. (The one with the anti-aircraft missiles on top, you can totally see the launcher on Google Earth.

Oh that's funny, but for the terminally clueless, that's actually a window washer crane.

I have made the suggestion that there is one single balcony on that building *just in case there is another full fledged depression*.
posted by sammyo at 7:44 AM on January 13, 2013


Yes, the Federal Reserve is different from the Treasury. The president appoints the head of the Federal Reserve, but can't tell him or her what to do. So this is not a case of the President saying he won't do this. This is a case of the bank saying they won't accept the coin. The president is doing the right thing here: he is demanding that Congress do their job, rather than resorting to funny trickery to end-run around them.

Here's how the platinum coin thing would supposedly work: you have a credit card from your bank. You are at your limit and need to spend more. So you print out an IOU for a trillion dollars and send it to the bank. Because of some arcane law/loophole, they have to put that trillion dollar IOU in your account as an asset which you can borrow against. Bam, problem solved.
posted by gjc at 8:11 AM on January 13, 2013 [1 favorite]


of course you raise the roof

This advice applies to most situations.
posted by one more dead town's last parade at 8:31 AM on January 13, 2013 [2 favorites]


I am just disappointed that this shuts down the second-best heist movie idea I've ever heard.

The best heist movie idea, of course, is stealing the kilogram.
posted by ckape at 8:41 AM on January 13, 2013 [3 favorites]


The house, the house, the house is full of sewage!
posted by box at 9:03 AM on January 13, 2013


I work for the government. We just had a planning meeting Friday. We don't yet know how much money we have for this year (fiscal year began in October) and no idea what the debt ceiling collapse would do to us, or the budget cuts yet to be decided for the fiscal cliff. Our building is falling apart, but we have to simultaneously plan for renovating its broken-down-ness (while continuing to work in it) and for designing a new terrorist-secure eco-friendly state-of-the-art building that congress in a different mood might insist on giving us because of the important nature of our work. We have cut staff because years of continuing budget resolutions have made it impossible to pay for salaries. For years we have found out what our budget is a few weeks before the year ends, so we have to hurriedly spend any excess on supplies that we don't have the staff to use, in the hope that NEXT YEAR, we'll get a budget and hire the staff necessary to do the projects that our 5-year-plans dictate we must accomplish.

Needless to say, we accomplished nothing in the planning meeting.
posted by acrasis at 9:08 AM on January 13, 2013 [5 favorites]


Well, I guess we're fortunate that the Obama administration wasn't around during the Cold War — he'd have probably told the Soviets that he'd never use nuclear weapons no matter what and then unilaterally disarmed.

Considering the cost in lives and loot (from the 50's until 1989), that might have been a better option than the one we chose. The danger in acting as if you are insane is that some of your decisions turn out to be, well, nuts. Wait...you were snarking, right?
posted by mule98J at 10:56 AM on January 13, 2013


Actually, I was thinking about this earlier, but it seems to me that Obama might actually be legally required to mint the coin. Think about it: If the republicans refuse to raise the debt ceiling, the executive branch can't legally issue bonds. That means they won't be able to pay back bonds and won't be able to pay for other stuff that congress already authorized. Neither of those things is legal.

So the only legal alternative would be to mint the coin.

I think one of the real problems that Obama has with this is that if he mints the coin it would be a (small) political win for the republicans . They wouldn't have to take any responsibility for it, it would all be on the president. The president wants to force a showdown, and make the republicans look like the crazy, irresponsible party (which they are) But if he mints the coin he'll look like the irresponsible party - even though he's not.

So, if the republicans stand firm, which they are certainly capable of, Obama might actually have to mint the coin, in fact, as I said as far as I can tell he might be legally required to do it.

I personally think they should do it, just because it would be kind of awesome. And certainly more interesting then hearing politicians bitch and moan and talk about how we are about to blow up the country. But like I said, just the fact that the coin is out there strengthens the republican position - they can refuse to raise the debt ceiling without risking the entire world economy, and weakens the president's - he can't make them look like irresponsible crazies willing to destroy said economy.
Have they considered a trillion dollar bill?
Legally it has to be made of platinum. It's using a legal loophole that allows the treasury to create platinum coins of any denomination.
The Fed is a self-funding independent quasigovernmental agency. The president appoints its leaders, but beyond that has no legal control of its actions. This is on purpose, to prevent politicians from making short term decisions to print money that could destroy the economy. The president can't fire Bernanke any more than he could fire the house republicans who are causing this mess.
Sure, but Obama needs to reappoint him every 4 years. Also, if the alternative is to destroy the economy by defaulting obviously the fed will accept the coin. The job of the fed is not to blow up the economy on general principles, and Bernanke isn't insane. Why wouldn't they take the coin?
Another way of looking at this is that, by rejecting audacious Executive Branch escape plans, Obama is forcing the House to raise the debt ceiling, or face being visibly responsible for massively damaging their rich benefactors
I think that's what Obama wants. But ultimately, if the platinum coin option is out there, Obama has to pro-actively chose not to use it and let the world economy blow up. Which means the buck actually stops with him here. It dramatically lowers the stakes on any showdown, giving the republicans the opportunity to take it to the brink and force him to mint it.

So I actually do think it will happen, either that, or congress will raise the ceiling without getting any concessions (or Obama will cave on something, which certainly wouldn't be out of character)
if this were Russia, and Putin were considering a shmillion-Ruble coin, outspoken Treasury administrators would just start disappearing.
Well, in this case it's just bloggers and pundits talking about the coin. In Russia, they'd be the ones disappearing as Obama wishes it wasn't an option.
posted by delmoi at 1:05 PM on January 13, 2013


Anyway, let's think about this from a game theory perspective, and I'll use that to explain why I think the coin will happen - and the president is just bluffing that he won't do it.

First let's analyze the situation with no coin, and let's look at the possibilities, and put some values on how much the house republicans and Obama win/lose. on a 100 point scale.

1) Obama can cave into republican demands, in order to get them to up the ceiling.
  We'll say this is R+20, O20 and a result that's bad for the country overall, but hopefully not too much.

2) Republicans can cave.
  We'll say this is O+20, R-20. and probably good for the country.

3) Some kind of compromise
  We'll say this is O+10, R+10 +/- some n value depending on how good the compromise is for each side.

4) No one caves and the economy is destroyed.
  We'll say this is O-80, R-100. and apocalyptic for the country.


BUT Obama has said that he will not negotiate.

If he holds to that, in the above scenario that removes options 1 and 3 from the possibilities. So we just have 2, -50 for the republicans and 4, -100 for the republicans. Obama would expect them to take option 2, for -50.

But wait, why would he do that when the other option is still terrible for him? Isn't that irrational? Sure, but in this case you have to consider future rounds of the game - the republicans are executing a "Mad man" strategy. By acting semi-crazy, they are forcing better concessions. Obama will is trying to use brinksmanship to force them to behave rationally. After all option four is so terrible that even the republicans won't do it.

the problem is that now that Obama has said he won't negotiate, it will be bad for him if he does. This means he'll have less credibility in terms of bluffing in future rounds. So let's lower it to O-2 R+10 +/-n.

But now we have option 5. the platinum coin. On the balance I'd say the platinum coin is like O-0.05 R+0.1, and completely neutral for the country.

I say it's positive for the republicans because they can 1) Avoid taking any responsibility 2) use the coin as a symbol of the fiscal irresponsibility that republicans claim Obama has. If you think back to the election, Mitt Romney's economic policies were total nonsense, but voters actually trusted him more on the issue of the national debt - just that they trusted Obama more on everything else. The American people don't really understand economics and will think of the platinum coin as a kind of silly gimmick.

On the other hand, it will be slightly bad for Obama and the dems for the same reason. Except Obama doesn't need to run again so it's not that big of an issue.

So that explains why Obama wishes the platinum coin option wasn't there - and want's to make it seem like it's not an option. If it wasn't, and he was truly willing not negotiate, then he would be in the best position to win the most arbitrarily assigned points.

But, ultimately the republicans know that if they also refuse to cooperate with Obama and raise the ceiling there are two results possible. One is catastrophic, and the other is almost meaningless but with some symbolic benefits for them.

So, ultimately I think the coin will get made. Or we'll see some kind of minor compromise between Obama and the republicans - but that strikes me as unlikely, now since the existence of the platinum coin option makes it the most attractive for the republicans, and the least bad for Obama.

And of course the fed will take it if it gets made. they aren't going to blow up the world economy.
posted by delmoi at 1:26 PM on January 13, 2013 [3 favorites]


Sure, but Obama needs to reappoint him every 4 years.

Reappoint him as Chairman, but the seven Governors eligible to appoint as Chairman all have 14-year terms. Of course, the President can remove any Governor for "cause", which is delightfully vague. Given the Fed's mandate of price stability and full employment, an argument could be made for removing any Governor who is not on board with the platinum coin option if the alternative was drastic price instability that could result from a US default.

Here's how the platinum coin thing would supposedly work: you have a credit card from your bank. You are at your limit and need to spend more. So you print out an IOU for a trillion dollars and send it to the bank. Because of some arcane law/loophole, they have to put that trillion dollar IOU in your account as an asset which you can borrow against. Bam, problem solved.

That's not how the platinum coin option works. It is straight forward seigniorage - the Treasury mints the coin for an expense equal to the cost of production, the Federal Reserve buys the coin from the Treasury at its face value, when the coin is deemed to be no longer required in circulation the Treasury buy the coin back at face value and destroys it. On the books, the Treasury record this as an interest-free loan it is receiving from the Federal Reserve.
posted by kithrater at 1:38 PM on January 13, 2013


The idea that Obama is legally obligated to mint the coin is complete hogwash, and no amount of dressing it up in game theory or whatever supports the assertion. He'd have better luck just deciding to continue ordering the Treasury and/or Fed to issue debt, which is far more defensible in front of the courts than either the platinum coin or refusing to fund the government with money already obligated.

I don't think that's his endgame, but if it came down to it, from a legal standpoint the best place for the administration to be is where they can blame Congress for not allowing funding they have already authorized to be disbursed. At that point, Obama's technically much closer to the letter of the law than he would be if he minted the coin or than Congress would be in refusing to pay debts they already ran up. Not exactly 12th-dimensional chess, but still an advantage politically and economically.
posted by zombieflanders at 2:20 PM on January 13, 2013 [1 favorite]


That's not how the platinum coin option works. It is straight forward seigniorage - the Treasury mints the coin for an expense equal to the cost of production, the Federal Reserve buys the coin from the Treasury at its face value, when the coin is deemed to be no longer required in circulation the Treasury buy the coin back at face value and destroys it. On the books, the Treasury record this as an interest-free loan it is receiving from the Federal Reserve.

What I'm not clear on is what happens to the money? I know that if the Treasury deposits $1tr in their account at the Fed (putting $1tr on the asset side of the Fed's balance sheet), it would not be inflationary, because the money would never be circulated and wouldn't enter the money supply (monetary base??). Then theoretically, the Fed or the president could just melt down the coin. But what would then happen to the asset on the Fed's books? I guess my question is: can the Fed permanently remove money from circulation? I know that if the Fed wants to remove money from the economy to combat inflation they can buy bonds but the bonds mature and the money goes back into the economy eventually. Can the Fed ever just remove money from the monetary base permanently? It would always need to be on their balance sheet right? Can they just leave it there indefinitely to keep it from becoming inflationary?
posted by young sister beacon at 3:31 PM on January 13, 2013


/Wonders vaguely if America will elect more or less crazies in 2014.

Always bet on crazy.
posted by stavrosthewonderchicken at 8:24 PM on January 13, 2013 [1 favorite]


I know that if the Fed wants to remove money from the economy to combat inflation they can buy bonds but the bonds mature and the money goes back into the economy eventually. Can the Fed ever just remove money from the monetary base permanently? It would always need to be on their balance sheet right? Can they just leave it there indefinitely to keep it from becoming inflationary?

I'm not sure, but I think the answer is 'more bonds' and then 'more bonds' and so on. Though I think you sell bonds, not buy, to decrease the monetary base (because then people give the Fed money in exchange for bonds, so the money leaves).
posted by hoyland at 8:37 PM on January 13, 2013


The idea that Obama is legally obligated to mint the coin is complete hogwash, and no amount of dressing it up in game theory or whatever supports the assertion. He'd have better luck just deciding to continue ordering the Treasury and/or Fed to issue debt, which is far more defensible in front of the courts than either the platinum coin or refusing to fund the government with money already obligated.
How can you say it would be better for the president to do something that is clearly, explicitly illegal then to do something that is clearly, explicitly legal?
Obama's technically much closer to the letter of the law than he would be if he minted the coin
What law are you talking about? The law clearly, explicitly allows the platinum coin. Perhaps the fed isn't legally required to take it, but multiple legal experts have looked at the platinum coin and said it's legal for the treasury to make. What law do you think makes it illegal?

It's possible that Obama could go to the courts and get the debt limit law overturned as unconstitutional. I thought he should have done that a long time ago.

But again, what you're saying about the letter of the law makes zero sense. The platinum coin is allowed under the letter of the law. Issuing bonds past the debt ceiling is not.

Obviously he's not explicitly required to mint the coin. But I don't see any alternative if the republicans refuse to raise the ceiling.
I guess my question is: can the Fed permanently remove money from circulation?
Yes? The fed can add and remove money from existence.
posted by delmoi at 10:45 PM on January 13, 2013 [1 favorite]


What I'm not clear on is what happens to the money?

The Treasury sell the coin for $1 trillion, and then use that $1 trillion to pay existing commitments. That's the whole point of the exercise - the US Government needs money to pay its commitments, and is unable to raise the money through usual sources.

I know that if the Fed wants to remove money from the economy to combat inflation they can buy bonds but the bonds mature and the money goes back into the economy eventually.

Other way around. When the Fed buys bonds, it is exchanging money for non-money so you end up with more money in circulation. When the Fed sells bonds, it is exchanging non-money for money, so you end up with less money in circulation.

it would not be inflationary

It depends on how you want to define inflation, but no, it is not inflationary in the long term, because the Treasury has to eventually buy the $1 trillion coin back from the Fed.

Can the Fed ever just remove money from the monetary base permanently?

Yes.
posted by kithrater at 11:09 PM on January 13, 2013


"Supporters of the coin... think that Republicans really will push the country into default rather than, say, fold and choose to fight over the sequester or the continuing resolution. They think the media will report on the debt ceiling as if it’s the fault of both sides, obscuring the lines of accountability. They think the business community either won’t involve itself or won’t be able to move the Republicans.

"I’m the precise opposite. I think that it’s very likely that, in using the coin, something will go wrong... the political backlash will strengthen the Republicans’ hand and, even worse, make it harder for sober Republicans to persuade the party to back down on the debt ceiling. In addition, there’s a good chance that the markets will see the coin as a kind of default-lite — evidence that American politics is tipping into a dire and unpredictable period of crisis and mismanagement.

"The lesson of the fiscal cliff fight is that, yes, Republicans fold. There are already cracks in the GOP’s coalition over whether holding the debt ceiling hostage is such a good idea, with Newt Gingrich, the Wall Street Journal and assorted columnists beginning to head to the exits. The closer we get to default, the more focused and unbearable the pressure from the business community is going to become. As Gingrich put it, 'The whole national financial system is going to come in to Washington and on television, and say: ‘Oh my God, this will be a gigantic heart attack, the entire economy of the world will collapse. You guys will be held responsible.’ And [Republicans will] cave.'"

A lot can go wrong with a platinum coin
posted by weston at 1:44 AM on January 14, 2013


Sorry, I did know that the Fed sells bonds to combat inflation (take money out of circulation), that was my mistake in typing.

Can the Fed ever just remove money from the monetary base permanently?

Yes.


I'm wondering what the mechanism is for them to do this. Can they literally just destroy currency and then cross that asset off their balance sheet?
posted by young sister beacon at 7:01 AM on January 14, 2013


How can you say it would be better for the president to do something that is clearly, explicitly illegal then to do something that is clearly, explicitly legal?

Because (a) the coin is neither clearly nor explicitly legal, and (b) the point is that Congress would be engaging in the more illegal of the two, i.e. appropriating money and not spending it as appropriated.

What law are you talking about? The law clearly, explicitly allows the platinum coin. Perhaps the fed isn't legally required to take it, but multiple legal experts have looked at the platinum coin and said it's legal for the treasury to make. What law do you think makes it illegal?

The laws regarding funding of the US government. Remember, the debt ceiling is related to money that Congress has already said they are going to spend. And again, the law does not clearly or explicitly allow the platinum coin. Both the Treasury Department and the Fed have said they don't have the authority, and as many if not more legal experts have looked at the platinum coin and said it's not legal.

It's possible that Obama could go to the courts and get the debt limit law overturned as unconstitutional. I thought he should have done that a long time ago.

That's the "Fourteenth Amendment" solution, and it's on about as shaky ground as the platinum coin, with potential for nasty political blowback.

But again, what you're saying about the letter of the law makes zero sense. The platinum coin is allowed under the letter of the law. Issuing bonds past the debt ceiling is not.

No, at this point they are all varying levels of at best grey legality, but at least issuing bonds puts the onus back on Congress in both the political and legal spheres.
posted by zombieflanders at 7:26 AM on January 14, 2013


Can the Fed ever just remove money from the monetary base permanently?

Yes.

I'm wondering what the mechanism is for them to do this. Can they literally just destroy currency and then cross that asset off their balance sheet?


When we talk about money, actual physical currency and coins is only a small part of it, about $1 trillion dollars. Most of the money in circulation is electronic, just numbers in your bank for your savings account, for example, which amounts to about $10 trillion. This electronic money is just as real as dollar bills because it can be used to write checks and pay bills.

Currency in circulation is a liability on the Fed balance sheet, not an asset. The amount of physical currency in circulation is remarkably constant. It increases at a very slow and constant rate as the economy grows and is just sufficient to allow everyone to carry around cash they require. You can think of cash as just a subset of electronic money and readily converted to and from electronic money. If a bank has too much cash, it can send it to the federal reserve and the federal reserve credits that bank with electronic money to replace it. If a bank has too little cash, it can ask for more from the federal reserve and the the federal reserve debits the bank electronically for the cash it receives.

Usually the Fed creates and destroys money electronically, and it does it every day. When the Fed buys a bond from the public, it just makes an electronic credit to that person's bank account, thereby creating money. The Fed pays for their purchase of the bond with money created out of thin air. When the Fed sells a bond to the public, it just makes an electronic debit from that person's bank account, thereby destroying money out of thin air. That is the basic way the Fed every day controls the money supply.
posted by JackFlash at 8:52 AM on January 14, 2013 [1 favorite]


But selling a bond doesn't actually destroy money out of thin air, like buying a bond creates it, as bonds are redeemed by the bondholder.

Instead of thinking of it as destroying money, which it doesn't really, thinking of it as restricting the supply of money is a lot more accurate — that debt doesn't destroy money, it just takes it out of circulation.

The other, blunter instrument that the Fed can use is by increasing reserve requirements, which again takes money out of circulation but doesn't destroy money per se.
posted by klangklangston at 10:28 AM on January 14, 2013


But selling a bond doesn't actually destroy money out of thin air, like buying a bond creates it, as bonds are redeemed by the bondholder.

Sure it does. When the Fed buys a bond, money is created by crediting the seller's account. When the Fed sells a bond, money is destroyed by debiting the buyer's account. You can't believe in one without believing in the other. They are completely symmetrical.

The fact that the bond is redeemable makes no difference. A bond is not money. It is an asset. You can't buy groceries with a bond. When a bond matures and is redeemed, the Treasury just issues a new bond to replace it with no net change in the money supply.

Perhaps you are thinking of the Treasury auctioning new bonds to finance debt. In that case, the Treasury auctions off new bonds. The buyer's money is taken out of circulation to pay for the bond and then spent by the Treasury to pay their bills, putting the same money back in circulation. Again, there is no net change in the money supply.

Money is created only when the Fed buys a bond by crediting the seller with electronic money. Money is destroyed when the Fed sells a bond and electronically destroys the credit in the buyer's account.
posted by JackFlash at 11:05 AM on January 14, 2013 [2 favorites]


The laws regarding funding of the US government.

It is legal to finance the US government through seigniorage operations. The Treasury does this every day, and usually contributes hundreds of millions of dollars a year in off-budget receipts via profits from seigniorage. That's the beauty of the platinum coin approach - it uses an existing and thoroughly legal arrangement.

the point is that Congress would be engaging in the more illegal of the two, i.e. appropriating money and not spending it as appropriated

Congress doesn't spend money - the Executive does. Congress passes laws, including appropriate laws, and then the Executive is required to implement them. The ability of the President to refuse to spend money as directed by a vote of Congress is limited.

But selling a bond doesn't actually destroy money out of thin air, like buying a bond creates it, as bonds are redeemed by the bondholder.

JackFlash is right - setting aside the rather minor role of currency, money is federal reserves. Anything that increases the amount of federal reserves increases the amount of money, and anything that decreases the amount of federal reserves decreases the amount of money. Everything else is just shuffling existing amounts about.
posted by kithrater at 1:39 PM on January 14, 2013 [1 favorite]


Because (a) the coin is neither clearly nor explicitly legal
So all the legal people who have read the law are lying? What are you basing that claim on?
b) the point is that Congress would be engaging in the more illegal of the two, i.e. appropriating money and not spending it as appropriated.
You seem seriously confused about what the word "illegal" means.
The laws regarding funding of the US government.
Again, which ones? What specific laws are you talking about? The platinum coin law is 31 USC 5112. Which explicitly states
"(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
The debit ceiling is 31 USC 3101, which clearly states:
(b) The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government (except guaranteed obligations held by the Secretary of the Treasury) may not be more than $14,294,000,000,000, outstanding at one time, subject to changes periodically made in that amount as provided by law through the congressional budget process described in Rule XLIX [1] of the Rules of the House of Representatives or as provided by section 3101A or otherwise.
So the text of these laws is absolutely clear. The treasury may not issue bonds once they have exceeded $14,294,000,000,000. But they may mint platinum coins of any value.

What specific law do you think makes it illegal to mint the platinum coin? What specific laws do you think make it legal to just straight up ignore 31 USC 3101?
Remember, the debt ceiling is related to money that Congress has already said they are going to spend.
So? Nothing in the law requires that it be paid for by bonds instead of platinum coins. Yet, clearly the law says that you can't print bonds beyond 14.2 trillion. So coins are legal and bonds are not. That's what the clear text of the law says.

What is the actual evidence that what you're saying is true? You're just repeating the same thing over and over again without providing any actual evidence.
posted by delmoi at 3:23 PM on January 14, 2013 [1 favorite]


Obama's Wrong, We Kind of Are a Nation of Deadbeats
President Obama wanted to make one thing clear about the looming fight over raising the debt ceiling on Monday morning. "The issue here is whether or not America pays its bills," he said at a White House press conference that touched on control, Congress, and the loneliness of the human condition. "We are not a deadbeat nation."

"Deadbeat Nation" sounds like a great name for book. And as it turns out, it is a book. In A Nation of Deadbeats: An Uncommon History of America's Financial Disasters, William & Mary professor Scott Reynolds Nelson argues that American history consists of a neverending string of defaults at the individual, municipal, and state levels. Credit bubbles alternately finance transformative policies like westward expansion and infrastructure improvements, and then remake the nation's political landscape when they invariably pop. Economist Tyler Cowen, in a New York Times Magazine review last July, needed just one sentence to summarize the book: "We have hardly ever had a well-functioning banking system."
posted by the man of twists and turns at 3:17 AM on January 15, 2013


National Review just put up an editorial bylined the Editors calling on the GOP to raise the debt ceiling and not let the country default on its obligations.

We have two big speeches coming up. This hostage taking shit is gonna end. Its not politically sustainable. The GOP has to choose between the nuts and the rest of the country. It will choose the rest of the country or be destroyed.

Also the Platinum Coin is both legal and politically a loser.

Obama's not negotiating on this. Every Platinum coin and 14th Amendment debt issuance scheme is the same thing. Giving the GOP a hand up out of the hole they're digging. The coin is an easily ridiculed idea that will make the President look dumb. He's not going to do it. Of course it has value as a negotiating tactic, if people don't keep bringing it up and giving the GOP the ability to ridicule it ahead of time.
posted by Ironmouth at 7:28 AM on January 15, 2013


Ironmouth: " Also the Platinum Coin is both legal and politically a loser. "

It's a loser politically, but it's the least illegal option the executive branch has. Failing to pay bills on time violates the law. Minting the platinum coin does not.
posted by tonycpsu at 10:25 AM on January 15, 2013


It's politically a loser for obama, and a winner for the republicans if they can force him to do it.

If you think it's illegal, you have to explain what law you think it violates.
posted by delmoi at 11:54 AM on January 15, 2013


It's a loser politically, but it's the least illegal option the executive branch has.

Something is either legal or illegal. There are no degrees of illegality. By its very definition, it is a binary choice. One could argue that it is the choice with the lowest negative outcome. But a government is either authorized or not authorized to take an action. There simply is no constitutional requirement that a president take the "least illegal" action.
posted by Ironmouth at 12:00 PM on January 15, 2013


I said that minting the coin does not violate the law, but in reality, it is specifically called out in the law as a legal means for the Treasury to make money off of commemorative coins. It is clearly not the intent of said law to use it as an end around GOP obstruction, but it is explicitly legal. So there is no gray area here. The executive branch not spending money as directed by congress is illegal, minting the coin is legal, so minting the coin is the least illegal option, seeing as it has an illegality score of zero.
posted by tonycpsu at 12:06 PM on January 15, 2013


I said that minting the coin does not violate the law, but in reality, it is specifically called out in the law as a legal means for the Treasury to make money off of commemorative coins. It is clearly not the intent of said law to use it as an end around GOP obstruction, but it is explicitly legal.

It has to be read within the statutory scheme granting the Fed the ability to determine the size of the money supply and how much money to print. Furthermore, the legislative history is going to have an impact on determining whether it is legal or not.
posted by Ironmouth at 6:10 PM on January 15, 2013


Something is either legal or illegal. There are no degrees of illegality. By its very definition, it is a binary choice.

Is this really true? I can see the argument that something is either judged legal or illegal by someone at some specific time.

But as far as I can tell, in the process of making that judgment, someone is going to be essentially weighing a number of legal considerations that are relevant. In some cases, those considerations might be close to balanced on one side of the line or the other -- perhaps some could even go either way depending on the weight assigns to the relevant considerations. In other cases, most of the law might be coherently tugging in the same direction.

It seems to me you could use "less legal/illegal" as shorthand for the former cases, though it might be more precise to say something else like "more/less legally defensible."
posted by weston at 6:34 PM on January 15, 2013 [1 favorite]


Minting the coin doesn't increase the money supply until that money has goods or services to chase, which only happens when Congress uses the power of the purse to appropriate funds. Once the coin arrives at the Fed, it gets booked as $1T on its balance sheet, but no actual money is created.

And please show me the statutes that require the Fed to abide by the debt ceiling, which is an artifact of legislation passed in 1917 that would likely be found unconstitutional if it were challenged, since it creates a conflict between the 14th Amendment's clause on the validity of U.S. debt not being questioned and the executive branch's duty to spend money as directed by the legislative branch.

Technically, articles of impeachment could be drawn up against Obama if he doesn't pay the bills for spending that Congress directed him to pay for. The idea that the debt ceiling trumps the 14th Amendment is one I'm going to have to ask for more specificity on.
posted by tonycpsu at 6:35 PM on January 15, 2013


(Technically, the Fed would book the $1T and reduce the money supply by $1T at the same time, but the point is the net supply stays the same.)
posted by tonycpsu at 6:37 PM on January 15, 2013


Obama's not negotiating on this. Every Platinum coin and 14th Amendment debt issuance scheme is the same thing. Giving the GOP a hand up out of the hole they're digging

Totally. At Obama's press conference yesterday he kept repeating the line about how our debts are a result of spending bills that have already been passed by Congress, which I don't think the general public fully grasps. He has the inauguration and SOTU before we hit the debt ceiling and he is going to keep repeating this. He also keeps comparing it to running your credit card up to the limit and not paying it off, which should play well with the dumb analogy making the rounds that a national budget should somehow resemble a household budget. There is little downside for him politically if he just lets the GOP be crazy and obstructive and drive us over the cliff. Invoking the 14th amendment or minting a coin moves the focus of the crazy cam directly to him and makes the GOP look sane. No way is he going to do that. He'll let them continue to dig their own grave.
posted by young sister beacon at 7:11 PM on January 15, 2013


young sister beacon: "He'll let them continue to dig their own grave."

I wish I shared your optimism, but the power of the bully pulpit tends to be systematically overvalued, meaning the PR effect you're expecting is unlikely to materialize. How many people actually paid attention to Obama's press conference versus the number who just want "Washington" to do something?

With the way the 2011 debt ceiling fight and the recent fiscal "cliff" fight went down, the GOP has every reason to believe that Obama and congressional Democrats will get cold feet and white knuckles when the GOP leadership does their "bad cop, worse cop" act with the Tea Party insurrectionists. And after last month's "plan B" rebuke, Boehner can credibly say "I have no idea what these clowns will do." Why would these GOP members who almost exclusively hail from safe districts get nervous about Obama saying mean things about them?
posted by tonycpsu at 7:31 PM on January 15, 2013


With the way the 2011 debt ceiling fight and the recent fiscal "cliff" fight went down, the GOP has every reason to believe that Obama and congressional Democrats will get cold feet and white knuckles when the GOP leadership does their "bad cop, worse cop" act with the Tea Party insurrectionists.

Really? Hello, they are fucking cracking. Collins and Murkowski came out against using the debt ceiling, and National Review did the same.

Why? Because the GOP just swallowed a giant shit sandwich in the revenue fight. Plan B was a total defeat for the GOP and in no way a win. Listen, the GOP ate the fucking Hastert rule on that. And it is over. This evening the Sandy relief bill was brought to the floor despite the majority of the majority not being for it. And it passed, with every Dem vote and only a few GOP votes. These are titanic events.
posted by Ironmouth at 7:40 PM on January 15, 2013


And after last month's "plan B" rebuke, Boehner can credibly say "I have no idea what these clowns will do." Why would these GOP members who almost exclusively hail from safe districts get nervous about Obama saying mean things about them?

Because 85 House GOPers ended up voting for the tax hikes on the recent tax part of the fiscal cliff negotiations. Only 151 voted against. This is of the original 236 (out of 242) House Republicans who have signed the anti-tax pledge. So the hard right of the party is losing some support. And I think the more Obama talks about it, especially with the high profile speeches he has coming up, the more I think he can educate the public. And then the GOP House members who are in more sway-able districts will start to get pressure from their constituents. Everyone is sick of Congress right now but the majority of Americans blame the GOP. There will always be a core set of hard right GOPers who will never lose an election. But I don't think they have a majority and I think as things get more dire, they will start to lose some of their members.
posted by young sister beacon at 7:45 PM on January 15, 2013


Collins and Murkowski are GOP Senators, so their relevance to this debate matches that of House Democrats, which matches that of the drapery patterns used in the Senate and House cloak rooms.

The Hastert Rule thing is overblown. The fact that Hastert himself broke it twice tells you all you need to know about it. The GOP routinely broke their own rules in the 112th Congress, including breaking the "bills must be posted online X days before passage" rule to get the debt ceiling deal done. These unwritten rules are worth the paper they're written on.
posted by tonycpsu at 7:55 PM on January 15, 2013


Something is either legal or illegal. There are no degrees of illegality. By its very definition, it is a binary choice.
If something is either legal or illegal, then there are two degrees of illegality: 1 and 0. And the platinum coin option is legal. If you think it's illegal, you have to explain what law you think it's breaking.
There is little downside for him politically if he just lets the GOP be crazy and obstructive and drive us over the cliff. Invoking the 14th amendment or minting a coin moves the focus of the crazy cam directly
Except for the destruction of the world economy?

The last time congress refused to raise the debt ceiling in a timely fashion, the US had it's credit rating downgraded. That turned out to not matter too much, but still.

People talk about "credibility" of the government's bonds. But what's more damaging to credibility: Minting a coin, or coming close to default?

If you were going to buy a government bond, would your rather buy one from a government that mints giant coins, or one that regularly comes close to defaulting on it's bond payments?

Just the argument over the "fiscal cliff" is said to have dampened consumer confidence - another lengthy, drawn out debate might do the same thing again.

Anyway, the problem is brinkmanship doesn't work if it's not really the brink. Congress actually can refuse to raise the debt ceiling if they think the Obama administration can mint the coin. Which is why they will demand serious cuts or symbolic concessions before they'll agree to raise the ceiling again.

Actually, I think that is the most likely outcome: Obama will turn back on his insistence on not negotiating over the debt ceiling. In fact, that's already happened. In one of the rounds of negotiation, Obama agreed to a deal that included a two year extension of the debt ceiling - which meant he negotiated for it.

Either way one of two things will happen:

1) Obama will cave and negotiate spending cuts in exchange for an increase in the debt ceiling. -- or --

2) Obama will mint the platinum coin.

The ball is really in the republican's court here - once they finally refuse to raise the debt ceiling without concessions, obama will have to chose either to let the country default on it's debts (hint: he won't) or he'll have to mint the coin.

(earlier, I said the coin would happen, but that was assuming Obama would actually stand his ground and refuse to negotiate. Now I think he will actually cave. We'll see)
posted by delmoi at 9:13 PM on January 15, 2013 [1 favorite]


There's a third option:

An up or down vote. Which means it passes. This is why the Hastert rule being crushed on critical votes that mean so much is incredibly important. The GOP on 2 occasions previously broke its rule. Both times, it was on signature bills advanced by their own sitting President, George W. Bush.

This time the Hastert rule went down on huge votes that everyone in the party opposed. That's right. The GOP did not want to raise taxes at all but they were actually afraid of the American voter.

In this regard, tonight's Sandy vote was more instructive and more of a watershed. There was no deadline to meet. If the House GOP did nothing, then the bill would not have passed and that would be that. No one in the GOP core constituency of the massively wealthy would have been harmed.

Instead, it was brought to the floor due to naked fear of American voters. Obama's not going to cave. He has vastly more political strength right now. Instead, the GOP leadership will put a clean bill up and allow all but a handful of GOPers the right to vote no, knowing that the Dems will provide the lift.

Let's get this in focus: it isn't that the GOP won't supply the votes to raise the debt limit. It is that their leadership is threatening to not bring the bill to the floor. If there is a free vote, 38-45 GOP House members will vote yes and the Dems will vote 171-1 or even greater for the bill, exactly like tonight's vote.
The decision to allow the bill on the floor or not is exclusively Boehner's. No amount of rednecks can derail it, because on the motion on the previous question or on the rule regarding amendments to be voted on, Boehner can rely on Dems as well as on the final passage.

What Boehner will do is keep his powder dry and focus on the Continuing Resolution to keep the government paying its bills later on in the spring. Obama is perfectly willing to negotiate on that--the power of the purse is traditionally in the hands of the House and he will not be able to argue that a potential collapse will occur.

The GOP will allow the vote on the debt ceiling. The issue is an incredible loser--it has the ability to wound Obama--yes, but the GOP majority would take a popularity blow that would threaten its existence.

Obama's hand is getting stronger by the minute on this and this is why you're seeing GOP senators and National Review saying run from the issue. And these defections matter because they are attempts to provide cover for bringing the bill to the floor. Usually a Senator from either party would keep their mouths shut for precisely the reasons mentioned above--taking a stance on an issue that could cost them is of no personal benefit and they can't vote on it. Instead, GOPers are trying to give Boehner the cover he needs to move the bill to the floor.
posted by Ironmouth at 9:45 PM on January 15, 2013


The last time congress refused to raise the debt ceiling in a timely fashion, the US had it's credit rating downgraded.

...and US Treasuries soared.

Except for the destruction of the world economy?

I think that's excessive. Even if the debt ceiling isn't raised, the government still takes in enough in taxes every month to more than cover their interest payments so they won't be defaulting on the debt. I think Obama is more likely to go over that cliff than he is to mint a coin. If that happens, there would need to be cuts to government spending of about 40% and there are automatic cuts due to go through anyway due to sequestration (which, it's anyone's guess what they're going to do on that). Plus, as the cuts go through, we'll fall back below the debt ceiling. Any major government spending cuts will no doubt impact on social security and medicare payments and we all know which party's constituents would be most affected by this. This is another talking point that Obama has been hammering on. If seniors see any of their SS payments cut, they'll be calling for the heads of even their most favorite and dedicated tea party reps. Plus, everyone knows how badly strict austerity measures have hurt Europe's recovery and while the GOP reps may not be clever enough to grasp this, the higher ups in the GOP do. The GOP is going to act like they're playing hardball on this but my money has always been on them raising the debt ceiling, even if at the last minute. I also think that we'll get downgraded again by at least one if not both Moody's and Fitch's because of this posturing and brinkmanship.
posted by young sister beacon at 9:46 PM on January 15, 2013


GOP reps may not be clever enough to grasp this, the higher ups in the GOP do.

Wall Street does. And they are gonna make calls, calls that GOP reps and John Boehner have to take.
posted by Ironmouth at 9:49 PM on January 15, 2013


Ironmouth: "Both times, it was on signature bills advanced by their own sitting President, George W. Bush. "

Negative on that, Houston. One was McCain Feingold, but the other was on a stem cell research bill that Bush vetoed.
posted by tonycpsu at 10:17 PM on January 15, 2013


Ironmouth: "Instead, it was brought to the floor due to naked fear of American voters."

I don't think you can compare opposition to Hurricane Sandy relief, which is just cartoonishly evil, to an abstract debate about spending priorities. You'll get the 171 Ds, but I don't see why you'd necessarily get the number of Rs you're talking about. The National Review is a paleocon rag that I doubt Eric Cantor or Michele Bachmann spend a lot of time worrying about.

I do agree that the public is starting to see the extortionists for what they are, but I don't think it's a foregone conclusion that there are 38-45 GOP votes to do the right thing (leaving aside that 171D+45R still doesn't get us across the goal line.) I share your optimism that things are getting better, but I'm not as sanguine about the GOP's middle-right flank siding with the Boehner wing and against the Cantor wing. The median GOP voter needed for passage is probably someone like Paul Ryan. Where's his incentive to do the right thing?
posted by tonycpsu at 10:27 PM on January 15, 2013


opposition to Hurricane Sandy relief, which is just cartoonishly evil, to an abstract debate about spending priorities.

The GOP did not oppose Sandy relief. They opposed Sandy relief without offsetting cuts elsewhere.

Also McCain Feingold was passed in 2002. Hastert announced the rule in 2004: http://www.washingtonpost.com/wp-dyn/articles/A15423-2004Nov26.html
posted by Ironmouth at 11:08 PM on January 15, 2013


Michael Gerson, Washington Post: Obama's Bankrupt Fiscal Plan
Given this weak Republican position, Obama must be tempted by a shiny political object: the destruction of the congressional GOP. He knows that Republicans are forced by the momentum of their ideology to take positions on spending that he can easily demagogue. He is in a good position to humiliate them again — to expose their internal divisions and unpopular policy views. It may even be a chance to discredit and then overturn the House Republican majority, finally reversing his own humiliation in the 2010 midterms.
Read the whole thing, it's ... well, amazing. I'm amazed.

Jonathan Chait, New York Magazine, replies: Bush Speechwriter Michael Gerson Exposes Obama’s Sinister Being-Reasonable Ploy
The topic is the fiscal showdown between Obama and the House Republicans. Gerson argues that the House cannot responsibly threaten not to lift the debt ceiling and that the reasonable compromise would be to reform the tax code in a way that raises revenue while also trimming spending on retirement programs. (He endorsed the latter view more fully a week ago.) That is also Obama’s position, but Republicans in the House reject it.

Gerson sees this standoff as confirmation of Obama’s cynicism. Obama, he writes, “knows that Republicans are forced by the momentum of their ideology to take positions on spending that he can easily demagogue.” They’re forced by ideology. There’s nothing they can do about it! The ideology has momentum. Republicans are merely along for the ride.
Both via Kevin Drum, Mother Jones: Michael Gerson Pens a Modern Masterpiece
So there you have it. Obama refused to negotiate over the fiscal cliff. His only goal is humiliation and unconditional surrender. The Republican position on taxes should be viewed as a law of nature, so it's unfair to expect them to back off their fanatic position by even a dime. And the end result of all this will be to turn the United States into another Greece.

Gerson has synthesized every Republican phantasm into a concise 800 words.
posted by the man of twists and turns at 12:41 AM on January 16, 2013 [2 favorites]


Ironmouth: "Also McCain Feingold was passed in 2002. Hastert announced the rule in 2004"

It doesn't matter when Hastert announced it, because it was already a rule the House GOP operated under going all the way back to Gingrich's speakership.

Ironmouth: " The GOP did not oppose Sandy relief. They opposed Sandy relief without offsetting cuts elsewhere."

The cartoonishly evil aspect of opposing relief for hurricane victims doesn't really change that much depending on whether you oppose it because you simply don't care about them or just hate them enough to hold up their aid package to demand a ransom. The point is there is no reason to believe their vote against the debt ceiling would be as hard for them to cast as their votes against Sandy relief.
posted by tonycpsu at 6:17 AM on January 16, 2013


Wow, Koch brothers even against a debt ceiling battle.

My bet is that they again ignore the Hastert rule and then pick their battle on the CR or the sequester or both. One is March 1, the other March 27 (the CR). So GOP votes against raising the debt ceiling and 197-98 dems vote for it. That means only 16 or 17 GOPers have to vote for it. Remember if it comes to the floor it will pass.

The debt ceiling is going to be a fizzle. There will be no hostage situation.
posted by Ironmouth at 12:08 PM on January 16, 2013


The point is there is no reason to believe their vote against the debt ceiling would be as hard for them to cast as their votes against Sandy relief.

That's just it. We only need 16 GOPers to pass it, maybe 17, depending on defections. (2 vacancies.) Its the question of getting it on the floor only. Sandy got to the floor and was passed.
posted by Ironmouth at 12:09 PM on January 16, 2013


Holy crap. Anyone seen the polling on the Congressional Generic ballot? The GOP is in a steep dive.

On 11/4, according to Rasmussen, the parties were tied 46-46
On 1/13, according to Rasmussen, Dems led 43-37.

The graph is telling. A nose dive.

I will say this, in Washington, this week the props holding up the GOP's debt ceiling battle seemed to totally collapse. The feeling here is shifting quite rapidly.
posted by Ironmouth at 1:52 PM on January 16, 2013


Going Platinum
Chris Hayes: “The genius of the trillion dollar … illustrates the uncomfortable foundational reality of modern capitalism. Money is nothing more than a shared illusion. It`s a kind of magic. But is it good magic or bad magic?”

Well, I don’t buy “illusion” for a minute. For one thing, when I write a check to my fuel guy tomorrow, it’s sure not going to feel like an illusion or a magic trick. More seriously, money is about as illusory as, say, a GET under the HTTP request/response protocol which cannot be seen, touched, or weighed, but which builds the web page you are reading now, and not by magic. I’ll close with an obscure blogger (one Jerry Khachoyan) who gets it right where Hayes gets it wrong:
Lots of good links in this one.
posted by the man of twists and turns at 2:14 PM on January 16, 2013 [1 favorite]


Word out on twitter:

Erick Erickson ‏@EWErickson
Several different people have emailed to say the House GOP in Williamsburg has agreed to raise the debt ceiling with no fight.
posted by Ironmouth at 11:24 AM on January 17, 2013 [1 favorite]


And what do you know, they cave. Fever is breaking.
posted by Ironmouth at 9:37 AM on January 18, 2013


It's definitely a good thing that they've backed off of using the debt ceiling as leverage, but to me, it looks like they simply realized that their other leverage points (the sequester cuts and the expiration of the continuing resolution funding the government) have the same upside without the downside of "possibly being blamed for destroying the global economy." To put it another way:
So the terrorist tactic that would rattle the markets -- a default threat -- seems to be off the table. The terrorist tactic that specifically targets ordinary people -- holding massive spending cuts and entitlement reforms in one hand, and a government shutdown in the other, and saying, "Choose one" -- is very much on the table.

So we're still hostages. The fat cats have been released. Forgive me if I'm not dancing.
I recognize that the GOP might be blamed for the shutdown as well, but the public is generally with them on "limited government", so I can imagine a situation where they're arguing for savage cuts to safety net programs but selling it to the public as a fiscally responsible maneuver. Since Obama himself has said repeatedly that he wants a Bowles-Simpson style "grand bargain", it'll be hard for him to push back against whatever snake oil they're selling.
posted by tonycpsu at 10:17 PM on January 19, 2013


Except that the general public hated the '94 shutdown and blamed the Republicans. People are for limited government until it makes their lives harder.
posted by klangklangston at 11:52 AM on January 20, 2013


klangklangston: "Except that the general public hated the '94 shutdown and blamed the Republicans."

Sure, but the Newt era shutdowns (which actually occurred in 1995 and 1996) didn't have a large package of spending cuts looming. I think this creates a different dynamic where there's a lot of pressure on Obama to propose a budget resolution that Democrats are willing to get behind on record, which has been a problem for several years (hence the continuing resolution)
posted by tonycpsu at 3:18 PM on January 20, 2013




It's definitely a good thing that they've backed off of using the debt ceiling as leverage, but to me, it looks like they simply realized that their other leverage points (the sequester cuts and the expiration of the continuing resolution funding the government) have the same upside without the downside of "possibly being blamed for destroying the global economy."

It means they are recognizing that obstructionism comes with a price. Which is critically important to ending obstructionism as a whole. Plus they've given up the ghost on the Hastert rule. All good news.
posted by Ironmouth at 8:29 AM on January 22, 2013


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