Ohio Chatter DEV

BoatShoes

Speaking of what I was talking about in the fiscal cliff thread...it seems people are really starting to talk about the treasury minting a $1 trillion platinum coin to ward off the debt ceiling LOL. Now that's change you can believe in!

This is a silly gimmick but a law that says the president can't pay our bills is silly too. I wasn't aware of this because Congress has delegated the power to create traditional bills to the Federal Reserve but it appears that congress gave the Secretary of the Treasury broad coinage authority.

31 USC 5112(k) reads in plain language:

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.

Joe Weisenthal at Business Insider is up on the scoop (and also handles why just depositing the coin at the FED wouldn't be inflationary).

The hottest idea to save the economy from another debt ceiling fight (and a potential default) is the Trillion Dollar Platinum Coin.In order to understand how it works, we first need a very quick lesson in how the government spends money.
This is a super-crude version of it, but here's the gist:
The Treasury Department has a bank account at The Federal Reserve, specifically the New York branch of the Federal Reserve. When the Treasury writes a check to a company (say a defense contracted owed $100 million) that check is "cashed" at the Fed. When the Treasury needs money (which is all the time) it sells bonds in an auction. The proceeds of those bonds go into the account.
Okay, now there's this thing called the debt ceiling, which sets a maximum cap on the amount of debt that the US can carry at one time. Every time we come close to hitting it, the US has to ask Congress to raise the limit. In recent years, since the rise of the Tea Party, what used to be a mildly frustrating event has grown into a systemic economic threat.
So where does the Trillion Dollar Platinum Coin fit in?
In the section of the law which specifically relates to the Treasuries ability to create money (coins and bills) section K says this:
(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.
In other words, when it comes to platinum coins, the Secretary (who is currently Tim Geithner) has discretion on the designs, specifications, quantities, and denominations of platinum coinage.
So let's say, Tim Geithner decided to stamp out a $1 trillion coin. What does that accomplish?
The idea is that after it was created, Geithner could walk it over to the Federal Reserve, and deposit it in the Treasury's bank account. Then the Treasury, rather than having to issue new debt (because remember, Congress hasn't raised the limit) can make sure its checks clear against this money.
Voila, crisis averted!
Now, that sounds all nice, but people have all kinds of objections upon hearing this idea. So we'll address them here.
MYTH #1: This will cause massive hyperinflation.
This is an understandable fear, because the idea of creating new money out of thin air to pay our debts brings to mind countries like Weimar and Zimbabwe, and trillion dollar bills being tossed about it in the streets.
But this is not about using the coin to pay back our debts, it's staying within the law, while avoiding the technically nonsensical debt ceiling.
Think about the mechanics, the trillion dollar coin goes to the Fed, but in terms of the real economy, government spending takes place exactly as normal. Now it is true that the Treasury might not be doing bond purchases at this time, and that this could leave more money in the system, that could heat up and cause inflation, but this is easily remedied, because the Fed has a gigantic pile of Treasuries it's sitting on that it could sell back into the open market to "sterilize" the government spending.
The bottom line is: Because this trillion dollar coin isn't being used as "helicopter money" (money dropped directly into the economy) you don't get the inflationary effects you're used to seeing when you hear about governments creating money in large denominations.
This is purely a technical fix for a bad situation.
MYTH #2: The trillion dollar coin will destroy the dollar!
This is pretty much the same as the first argument. What would destroy the dollar is if the government just started printing $1 trillion bills, declared them legal tender, and then dropped them from a helicopter onto cities. Soon, the buying power of a single dollar bill would be zilch. But alas, because the coin isn't a direct injection into the economy, but rather a stopgap that lets the government continue to spend on various services, you don't have that destructive effect.
MYTH #3: If this idea is so great, then minting a $16 trillion dollar coin could just solve our debt problem!
This line of reasoning ignores the point completely. People who say this (or say we should print a $100 trillion coin) are mistakenly thinking that the point of this exercise is to pay off our debts and get out of the whole.
That's not it. Our debts are plenty manageable at current levels, and with interest rates the way the are. The point is to stay within the law, while getting around the technical problem of the debt ceiling. So there's no point to the $16 trillion coin or the $100 trillion coin, or anything else so absurd. This is not about having money to spend. This is about avoiding a legal crisis where the government had obligations to much (such as on its debt) but didn't have the authority to borrow and spend money.
BOTTOM LINE: This won't create hyperinflation, and it's not the solution to all of our economic problems. It's just a way to stay within the law, while avoiding the debt ceiling nonsense.
Is it silly? Of course it is. But what's sillier is a rich nation having a debate on whether it will pay what it owes, which is what the debt ceiling fight is all about. So in the face of such silliness, this unfortunately may be required.

Read more: http://www.businessinsider.com/3-huge-myths-about-the-plan-to-save-the-economy-with-a-trillion-dollar-platinum-coin-2013-1#ixzz2Gyp8TnSj

Can't starve the beast when the beast can mint trillion dollar platinum coins at will :laugh:change you can believe in!

believer

ccrunner609;1357926 wrote:you are a fool

More like extremely delusional.

BoatShoes

Solid responses ITT :thumbup:

believer

BoatShoes;1358344 wrote:Solid responses ITT :thumbup:

Want us to post a graph to impress you perhaps?

gut

Technically it might be possible. And this sort of end around Congress is right in Obama's wheelhouse.

If they were real genius they should look at restructuring all the intergovt debt. Nearly half of the $16T is just intergovt debt, and almost 2/3 now of the deficit might be financed by more intergovt debt (just treasury printing money and the govt giving them an IOU). It's essentially a check-hiking scheme.

ts1227

BoatShoes;1358344 wrote:Solid responses ITT :thumbup:

There never has been one in this political forum. Someone around here would have to think for themselves and not spew party line bullshit otherwise.

No one has for 3 years, why start now?

believer

ts1227;1358467 wrote:There never has been one in this political forum. Someone around here would have to think for themselves and not spew party line bullshit otherwise.

No one has for 3 years, why start now?

thanks for your contribution

tk421

if the treasury can mint all the coins it wants to pay the bills and Obama can do whatever he wants with EO, what's the point of having a Congress anymore?

BGFalcons82

tk421;1358564 wrote:if the treasury can mint all the coins it wants to pay the bills and Obama can do whatever he wants with EO, what's the point of having a Congress anymore?

Reps. Our Supreme Being is our ruler and king. Why bother objecting?

gut

BGFalcons82;1358575 wrote:Reps. Our Supreme Being is our ruler and king. Why bother objecting?

The left wants so desperately for him to succeed it's amazing the lengths they've gone to ignore shit they would be raging against a Repub for.

BoatShoes

tk421;1358564 wrote:if the treasury can mint all the coins it wants to pay the bills and Obama can do whatever he wants with EO, what's the point of having a Congress anymore?

Well, even in this highly unlikely scenario, the executive branch wouldn't be able to "do anything they want" with the funds. They could only deposit them at the FED and use the funds to pay things Congress has already authorized with appropriations...i.e. put money in the purse and spend it as Congress has already said they could spend it.. Congress still controls the purse strings.

jhay78

Got a few lulz from this part of the article:

Our debts are plenty manageable at current levels

If my math is correct, one would need about 20,000 tons of platinum to equal $1 Trillion US dollars.

gut

The debts are manageable at 0% interest rates, and with the fed printing endless money. That latter is sustainable so long as reflation remains benign, but that's really anyone's guess as to how powerful and how persistent global deflationary forces remain.

The intergovt debt (@ 50% of total debt) theoretically never has to be repaid. And whether you pay the SS directly, or pay the bonds we've borrowed from the SS trust, the net result is the same. So from that perspective the deficit that represents "real" money might be less than $500B.

The way it's all working now is, in effect, a sales tax. If we weren't printing money that's offsetting deflation, then prices would be falling. So basically the printing of money is an "invisible" tax on goods and services (much like a sales tax would work). So basically everyone is being hit by this tax, difference is it creates some weird accounting liabilities.

jhay78

By the way, the Treasury takes in plenty each month to cover principal and interest on our debt, as well as pensions and SS. Those are real debts the US government is obligated to pay under the Constitution. Not paying regular administrative costs of the bureaucratic Leviathan does not mean "default" on our obligations (not saying there's zero impact, but it's not "default").

So when Obama and the liberals say "Give me what I want or we're going to default, the economy is going to tank!", they're really being disingenuous (aka, liars) by claiming there won't be enough money coming in to cover debts, when in fact there will be more than enough ($200 Billion or so).

So really it's Obama holding the debt ceiling negotiations hostage by threatening a default that would never occur unless Timmy Geithner purposely refuses to make payments to the real debts that we owe. Republicans refusing to raise the debt limit for purposes of reductions in future spending levels are not holding anything hostage- they're being adults.

gut

Right. Govt spending doesn't just stop, it just means they can only spend what they take in.

I'm not sure what the logic was with the debt ceiling requirement, but I suspect it was seen as the best alternative being unable to pass a balanced budget amendment because without raising the debt limit you'd have to operate on a balanced budget.

Jughead

I simply ask, "What debt?"

BoatShoes

jhay78;1360023 wrote:By the way, the Treasury takes in plenty each month to cover principal and interest on our debt, as well as pensions and SS. Those are real debts the US government is obligated to pay under the Constitution. Not paying regular administrative costs of the bureaucratic Leviathan does not mean "default" on our obligations (not saying there's zero impact, but it's not "default").

So when Obama and the liberals say "Give me what I want or we're going to default, the economy is going to tank!", they're really being disingenuous (aka, liars) by claiming there won't be enough money coming in to cover debts, when in fact there will be more than enough ($200 Billion or so).

So really it's Obama holding the debt ceiling negotiations hostage by threatening a default that would never occur unless Timmy Geithner purposely refuses to make payments to the real debts that we owe. Republicans refusing to raise the debt limit for purposes of reductions in future spending levels are not holding anything hostage- they're being adults.

It's called a contract. Contractual obligations are just as much a debt as any debt. I am sorry this is an uncomfortable realization but the spending has already been appropriated and authorized. Period. The fact that this cannot be grasped by the right wing who continues to repeat the meme that these types of obligations aren't "real debts" really removes the veil of how ugly the right wing monster has become.

If Lockheed Martin engaged in a contract that creates in the federal government an obligation to pay them in exchange for their building an F-22 and LM sends the treasury an invoice in April and the treasury has no money to pay them with...that debt is just as much as a debt as the interest payment owed a bondholder and having no money to pay that obligation is just as much a default the likes of which nobody ever thought would happen to the United States government as an inability to pay interest to a bondholder and would be equally catastrophic.

You think if Lockheed Martin or public employees or the property manager of military housing isn't going to demand payment if the treasury has no money to pay them...that they're not properly "owed" this money??? :laugh:

"Oh well, guess I'll just chalk that up as a loss"

It is not "future spending." It's like joining a gym in August for a year. You agreed to pay the gym to use it the following July. If you don't pay them that following July you're going to owe them money. If you think spending is too lavish or what have you then perhaps it's like renting an apartment you can't afford. When that bill comes due a year from now, you still owe the money at that day and it's just as much a debt as a credit card payment.

We get it...you're mad you got into that contract for the lavish apartment...but you're still contractually obligated to pay for it.

Same thing as...you don't like paying for old people's medical care...then you get rid of that obligation in the future...you're still obligated to pay for it now when the bill comes due...just like you have to pay your cable bill, gas bill, etc.

Imagine if you called up your landlord and said "I have imposed a debt ceiling on myself and have no money to pay for the rent I owe because my money is covering my credit card bills." "Oh well, no big deal...it's not a "real debt" to owe me your landlord money." :laugh::laugh:

This is not a hard concept to understand. But maybe it is to Republicans who aren't being adults by any reasonable measure when they can't understand this.

BoatShoes

jhay78;1359820 wrote:Got a few lulz from this part of the article:

If my math is correct, one would need about 20,000 tons of platinum to equal $1 Trillion US dollars.

Well it is correct that we can manage our debts at current levels. At full employment there's a relatively small fiscal imbalance. It's worrisome though because the medicare explosion is on the horizon (good thing medicare costs have gone down in the last three years!)

It's funny the statute indicates that the treasury can mint a 1 oz platinum coin of any denomination...so you could have a 1 oz platinum coin worth $100 trillion and deposit it at the fed. So you don't need all that platinum anyway haha. Pretty crazy...especially considering that Antonin Scalia style statutory interpretation is what leads to that conclusion being iron clad.

I say the mint it with Dick Cheney's face on one side, Reagan's face on the other and the words "Deficits Don't Matter" encircling their heads. :laugh:

Would be the ultimate poetic justice if gold bug inspired brinksmanship over the debt ceiling inspired our conversion to full fledged sovereign fiat currency usage.

BoatShoes

Jughead;1360336 wrote:I simply ask, "What debt?"

Kind of funny, you deposit a $20 trillion coin at the fed and suddenly, what you say is true! :laugh:

Footwedge

Balanced budgets? LMAO. Pay as you go? LMAO. For just the military behemoth alone, that is a yearly stipend of 3.5K per person. I think jmog has what? 5 kids? That's 7 heads==24,500 per year. And we haven't even touched the welfare state. Anti up jmog.

jhay78

BoatShoes;1361133 wrote:It's called a contract. Contractual obligations are just as much a debt as any debt. I am sorry this is an uncomfortable realization but the spending has already been appropriated and authorized. Period. The fact that this cannot be grasped by the right wing who continues to repeat the meme that these types of obligations aren't "real debts" really removes the veil of how ugly the right wing monster has become.

If Lockheed Martin engaged in a contract that creates in the federal government an obligation to pay them in exchange for their building an F-22 and LM sends the treasury an invoice in April and the treasury has no money to pay them with...that debt is just as much as a debt as the interest payment owed a bondholder and having no money to pay that obligation is just as much a default the likes of which nobody ever thought would happen to the United States government as an inability to pay interest to a bondholder and would be equally catastrophic.

You think if Lockheed Martin or public employees or the property manager of military housing isn't going to demand payment if the treasury has no money to pay them...that they're not properly "owed" this money??? :laugh:

"Oh well, guess I'll just chalk that up as a loss"

It is not "future spending." It's like joining a gym in August for a year. You agreed to pay the gym to use it the following July. If you don't pay them that following July you're going to owe them money. If you think spending is too lavish or what have you then perhaps it's like renting an apartment you can't afford. When that bill comes due a year from now, you still owe the money at that day and it's just as much a debt as a credit card payment.

We get it...you're mad you got into that contract for the lavish apartment...but you're still contractually obligated to pay for it.

Same thing as...you don't like paying for old people's medical care...then you get rid of that obligation in the future...you're still obligated to pay for it now when the bill comes due...just like you have to pay your cable bill, gas bill, etc.

Nobody's saying those bills will forever go unpaid. We're saying the world will not end if they go unpaid for a few days or even weeks. In other words, we will not default. Does anyone remember the great economic collapse of '95 when the government shut down for a few days? Me neither.

I mean even you have to laugh at Obama's blaming past Congresses for "bills they've racked up" for the current debt debate. As if his signature isn't on the $800 Billion stimulus from '09. :rolleyes:

gut

BoatShoes;1361146 wrote: At full employment there's a relatively small fiscal imbalance.

If you consider $600B or so small. Historically, that's inexcusable. But that would allow Obama to finally claim he cut [his] deficit in half.

You do realize that the majority of people out of work, if and when they do find a job, won't be paying any income taxes?

believer

gut;1361402 wrote:If you consider $600B or so small. Historically, that's inexcusable. But that would allow Obama to finally claim he cut [his] deficit in half.

You do realize that the majority of people out of work, if and when they do find a job, won't be paying any income taxes?

Gotta love our "progressive" tax system.

BGFalcons82

jhay78;1361341 wrote: I mean even you have to laugh at Obama's blaming past Congresses for "bills they've racked up" for the current debt debate. As if his signature isn't on the $800 Billion stimulus from '09. :rolleyes:

Has anyone looked at that $800,000,000,000 stimulus spending since 2009? If anyone thought it was just a 1-time occurence, check the annual spending in 2010, 2011 and 2012. You'll find that it never went away. In other words, it's been 4 years x $800,000,000,000 or $3,200,000,000,000 since Our Dear Leader signed off on spending our heirs tax money. We still have over 20,000,000 unemployed, a virtually stagnant economy, and record numbers of people on government assistance. Hey Keynes' fans....when exactly do you give up?

BoatShoes

gut;1361402 wrote:If you consider $600B or so small. Historically, that's inexcusable. But that would allow Obama to finally claim he cut [his] deficit in half.

You do realize that the majority of people out of work, if and when they do find a job, won't be paying any income taxes?

This is wrong. The structural budget deficit (not the actual budget deficit sensitive to unemployment) is what matters. The structural budget deficit at full employment, when the output gap is closed, including interest payments was around 2% of GDP even before the "fiscal cliff deal."

Can't get the graph to post but look here. Structural budget deficit for FY 2012 is $325 billion

http://images.google.com/imgres?q=bloomberg+structural+budget+deficit&hl=en&tbo=d&biw=1152&bih=659&tbm=isch&tbnid=gJh28zZjwEEBSM:&imgrefurl=http://www.bloomberg.com/news/2012-12-26/the-deficit-not-as-bad-as-they-want-you-to-think.html&docid=Olbt4Q7W0ooK6M&imgurl=http://www.bloomberg.com/image/iu0OwMVD.ZX4.jpg&w=640&h=369&ei=y3_tUNzMLNGM0QHZ4IHYBw&zoom=1&iact=rc&dur=302&sig=101735636427421024716&page=2&tbnh=130&tbnw=241&start=20&ndsp=22&ved=1t:429,r:23,s:0,i:164&tx=154&ty=54

I'm not sure "small' is the word but you can run a deficit of 2% of gdp into perpetuity (shouldn't but alas).

It shouldn't be that hard to close that. Get healthcare costs under control and it's perpetual budget surpluses.

The actual deficit is all about rising inequality and the unemployed having to rely on the welfare state. Period. We should be paying them compensation for services rendered as opposed to social insurance but not paying them anything would only make things worse.

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