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Saturday, January 26, 2013

Baby Got Back-Stabbed


Double shame on the Fox show Glee for ripping off this great Jonathan Coulton cover of the Sir Mix-a-Lot song, Baby Got Back. Just give a dog a bone, or a credit.

reference:
Yahoo TV: Did 'Glee' rip off Jonathan Coulton's cover of 'Baby Got Back'?

update / related:
Cracked:
5 Reasons to Be Thankful When 'Glee' Robs You Blind

Saturday, January 12, 2013

Champagne Wishes and Platinum Dreams: RIP

Obama Administration will not mint the $1 trillion platinum coin
White House: The $1 Trillion Platinum Coin is not going to happen
The dreaming and scheming for the Trillion Dollar Coin (TDC) made of platinum has come to an end. It was fun while it lasted. Anyway, the announcement from the U.S. Treasury, as reported by the Washington Post, followed shortly by a White House statement, as reported by the Huffington Post, confirm that the platinum coin plan is dead.

The administration has put the kibosh on using the $1 trillion platinum coin as a means to loosen the Congressional Republicans' death grip on the debt ceiling.

The Obama administration apparently has some other "Plan B" in the works. Could it be the use of IOU's or coupons to pay the bills? Or by discarding the ace up his sleeve, actually the magic coin in his pocket, this quickly has the President decided to simply stake out the moral high ground? No monkey business with the money, no currency hacking, just stand firm, be the grown-up and expect Congress to do the same, and put on their big boy pants and pay their bills.

So, the soft currency crusaders have been repelled at the walls of the U.S. Treasury. Former Treas. Sec. John Sherman will not be rolling around in his grave, at least temporarily. And the soft currency crusaders, like Paul Krugman are now left asking, "So what will you do, Mr. President?"

Here is the roundup and fallout from champagne wishes and platinum dreams being dashed to pieces today:
-----
Ezra Klein /  Washington Post:
Treasury: We won’t mint a platinum coin to sidestep the debt ceiling  —
The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless. ...
-----
The White House now confirms the Treasury statement that there is no coin strategy going forward.

Sam Stein / Huffington Post:
Platinum Coin Dismissed: White House Ratchets Up Pressure On GOP To Deal With Debt Ceiling — WASHINGTON -- In the wake of news that both the Treasury Department and the Federal Reserve rejected the minting of a trillion dollar coin as a solution to help raise the debt ceiling, the White House issued the following statement to The Huffington Post.
"There are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default," said Press Secretary Jay Carney. "When Congressional Republicans played politics with this issue last time putting us at the edge of default, it was a blow to our economic recovery, causing our nation to be downgraded. The President and the American people won't tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy. Congress needs to do its job."
 -----
discussion:
Paul Krugman:
So What Will You Do, Mr. President?  —
If I’d spent the past five years living in a monastery or something, I would take the Treasury Department’s declaration that the coin option is out as a sign that there’s some other plan ready to go. Maybe 14th Amendment, maybe moral obligation coupons or some other form of scrip, something.

And maybe there is a plan.

But as we all know, the last debt ceiling confrontation crept up on the White House because Obama refused to believe that Republicans would actually threaten to provoke default. Is the WH being realistic this time, or does it still rely on the sanity of crazies? ...
Joe Weisenthal / Business Insider:
COINMAGEDDON: White House Rules Out Using Trillion 
With this, the White House has now ruled out the two best options for preventing a default in the event that the House GOP refused to life the debt ceiling. The White House has been quite adamant that the other alternative (invoking the 14th Amendment) is not acceptable.
So now the stakes are high, as The White House has refused to negotiate with the GOP on a debt ceiling hike.

What bargaining chips does The White House hold? Unclear.

Klein adds another incredibly salient point about the comment he receives:
The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.
The good news? ...
-----
Was it Ben Bernanke who killed the coin?

Bruce Krasting / Zero Hedge:
Ben B. Nixed The Coin - What Does That Mean?
In the past 24-hours I've been reading the postmortems on the Coin; I just watched the Sunday morning shows. In my opinion, the Press is missing the story.  
The key sentence from the White House that killed the Coin for good:
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit”
I think the line "Treasury nor the Fed", is baloney. It was the Fed, in a message delivered by Bernanke, that caused Obama to back off on any consideration of the Coin. There might have been wiggle room in existing law to print a Coin, but there is nothing that says that the Fed had to take it. And Bernanke said, "No". When Obama ditched the Coin, he did it because it was no longer an option. Bernanke took the option off the table. The WH statement makes it sound as it it was their decision, that's just smoke and mirrors...
-----
James Fallows / The Atlantic Online:    
  1. Raising the debt ceiling does not authorize one single penny in additional public spending.
  2. For Congress to "decide whether" to raise the debt ceiling, for programs and tax rates it has already voted into law, makes exactly as much sense as it would for a family to "decide whether" to pay a credit-card bill for goods it has already bought.
 ----
Rachel Weiner / Post Politics:   ‘Platinum coin’ now a campaign attack
-----
Jonathan Chait / NY Magazine:
 IOUs vs. Platinum Coin: Pick Your Hostage Rescue — Enthusiasts of minting platinum coins to forestall economic apocalypse have taken over the Internet, but a different crisis-aversion plan seems far more likely: Just have the Treasury Department issue coupons to its vendors. Paul Krugman suggested the idea a few days ago, and law professor Edward Kleinbard fleshes it out in today’s New York Times "Op-ed" page....
-----
Final words from Georgia attorney Carlos Mucha , also known as "Beowulf," the mastermind behind the platinum coin strategy:

I wanted to come out of retirement (started studying military history and may blog on it some day) long enough to make a point about today’s Tsy announcement that neither Tsy nor the Fed was interested in the trillion dollar coin.

To throw away the high ground in a fight; to climb in the water to fight the shark is just irrational when you can stay in a boat and throw sticks of dynamite. It reminded me of General MacArthur dooming American troops to being starved out of Bataan by the Japanese Army by him neglecting to secure his food depots.

“One depot alone, at Cabanatuan on the central Luzon plain, held fifty million bushels of rice—enough to feed U.S. and Filipino troops for over four years.”
American Caesar: Douglas MacArthur 1880 – 1964

However, its also possible that the New York Fed has a Manhattan Project or two up their sleeve. Time will tell.
********
Here is the short history of the $1 Trillion Platinum Coin as followed at The Johnsville News:

January 12, 2013
Magic Money / Magic Coin

January 11, 2013:
Champagne Wishes and Platinum Dreams: Do all roads in D.C. lead to the U.S. Mint? (roundup)

January 11, 2013
Soft Currency Crusaders and the Trillion Dollar Coin (roundup)

January 10, 2013
The Trillion Dollar Coin (TDC) is Left on the Bargaining Table (roundup)

January 9, 2013:
More Champagne Wishes and Platinum Dreams (roundup)

January 8, 2013:
Champagne Wishes and Platinum Dreams versus Tea Party Steel. (roundup)

January 4, 2013:
Hammering Away at the Platinum Coin Gambit — with the tax question settled Washington turns to the debt ceiling and PCS (Platinum Coin Seigniorage) roars into the New Year, roundup.

December 15, 2012
Neutering Option for Ben Bernanke and the Federal Reserve — Thinking Big: Give the US Government a $60 Trillion Blank Check [mega-sizing the platinum coin to neutralize the Fed]

July 29, 2011:
Debt Watch / Coin Trick: the Trillion Dollar Coin — First roundup of how the trillion dollar coin idea germinated and spread on the internet leading up to the debt ceiling debate during the summer of 2011.

Background, the use of PCS has its roots in MMT (Modern Monetary Theory), discussed here: June 29, 2011, Modern Monetary Theory (MMT) in a Nutshell

Magic Money / Magic Coin

The UP with Chris Hayes Show on MSNBC discussed the TDC (trillion dollar coin) on Saturday (1/12/13) morning. Hayes does one of the most concise and accurate summaries of the TDC issue that has been done on network television.

Here is the "The Magic Coin" clip from the UP show. It does not show the subsequent discussion of the issue, which included MMT economist, Stephanie Kelton, Associate Professor and Economics Department Chair at the University of Missouri-Kansas City and contributor to the New Economic Perspectives website.


UP with Chris Hayes / MSNBC:
The Magic Coin [transcript]
Odds are by now you’ve heard at least something about the “Trillion Dollar Coin” idea that, thanks in part to Up regulars Joe Weisenthal and Josh Barro, has managed to catapult from the margins of the internet to the center of Beltway conversation. The idea, first proposed back in 2010 by a Georgia lawyer commenting on a blog under the screen name Beowulf, has now received endorsements from Nobel Laureate Paul Krugman, former director of the U.S. Mint Philip Diehl and a number of members of Congress. … 
Economist John Kenneth Galbraith once said: “The process by which banks create money is so simple that the mind is repelled.” And the same can be said of how our government creates money. The simple truth is it creates money simply out of thin air. Someone at the Federal Reserve punches in a number on a spreedsheet and–voila!–more money. At moments of profound crisis it was precisely this kind of monetary magic that helped the U.S. avoid catastrophe–Abraham Lincoln printed greenbacks to fund the union and his opponents mocked him mercilessly for doing so — which this cartoon from the time, depicting a machine spewing bills, shows. And FDR ditched the gold standard to get us out of the Great Depression. Both those ideas were, at the time, probably about as ridiculous as a trillion dollar coin. While there are rules that guide legal tender, at base, what makes money valuable is simply social convention, a norm. We all agree it’s valuable, so it’s valuable. The genius of the trillion dollar coin isn’t just that it provides some much needed leverage against a foe unencumbered by any sense of propriety, it also 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?
-----
 related:

Abraham Lincoln running the greenback printing press to finance the Civil War...

Anti-Lincoln, anti-greenbacks cartoon from the Civil War
Running the "Machine" - Give us more greenbacks
-----

Economic Policy Journal: Ben "Spanky" Bernanke as a child

Zero Hedge: Hyperinflation In Action: Beer For Bag Of Cash
-----
discussion:

Friday, January 11, 2013

Champagne Wishes and Platinum Dreams: Do all roads in D.C. lead to the U.S. Mint?

Do all roads in Washington lead to the US Mint? And the trillion dollar coin (TDC)?
Step-by-step the Obama administration and the Republican House of Representatives continue going down the road leading to the U.S. Mint. And the minting of the Trillion Dollar Platinum (TDC) coin.

When the currency is involved you can bet that the name calling will get much more intense - 'mess with my money and I'll mess with your mama'. Right now the debate is in the crazy clown phase.

Somewhere during these next couple of months of debate leading up to the debt ceiling deadline expect that some crazy person will strip naked, paint themselves platinum and dance in front of the Treasury building to protest the coin. That will just be the halftime show...

Here is the latest roundup:
----- 
Paul Krugman / New York Times:
Coins Against Crazies — So, have you heard the one about the trillion-dollar coin? It may sound like a joke. But if we aren't ready to mint that coin or take some equivalent action, the joke will be on us — and a very sick joke it will be, too. — Let's talk for a minute …

just consider the vileness of that G.O.P. threat. If we were to hit the debt ceiling, the U.S. government would end up defaulting on many of its obligations. This would have disastrous effects on financial markets, the economy, and our standing in the world. Yet Republicans are threatening to trigger this disaster unless they get spending cuts that they weren’t able to enact through normal, Constitutional means.

Republicans go wild at this analogy, but it’s unavoidable. This is exactly like someone walking into a crowded room, announcing that he has a bomb strapped to his chest, and threatening to set that bomb off unless his demands are met.

Which brings us to the coin … it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!
discussion:
ntroducing 'The Krugmanerrand' - fundamentally unserious currency
The Krugmanerrand
Smitty / The Other McCain:   
NYT Has Bum Strapped To Column, Plus, Introducing: ‘The Krugmanerrand’ — The only way in which Krugman could seem to be rational is if one were to accept that the Progressive Project has affected some kind of Article V re-write of our Constitution …

the pretzel logic of our Ruling Class, then, sure: the idiocy of Krugman and the rest of the Beltway Clown Car comes into focus.

We’re a fundamentally unserious people with a fundamentally unserious government, advised by fundamentally unserious ‘eclownomists’: we deserve a fundamentally unserious currency.
----
Clay Waters / NewsBusters.org:   Krugman Coins Another Insult: GOP Acting Like Someone With ‘Bomb Strapped to His Chest’
Henry Blodget / Business Insider:   If The Republicans Seriously Threaten To Default, They Will Surrender Any Claim To ‘Economic Prudence And Conservatism’ The Republican Party of my parents--the party of fiscal prudence and conservatism--appears to be an ancient memory.

-----
Mohamed El-Erian / Fortune:    
How the platinum coin could work (or backfire) — The unusual move of minting a large platinum coin might shock politicians into cleaning up the fiscal mess. But the rest of the world may see it as inflationary …
The best way forward for everyone is for Congress to change the way it is currently handling its important economic responsibilities. Should this fail to occur, options such as the platinum coin will garner lots of attention in the months and years ahead.
-----
Some random speculation....
 
Brad Plumer / Washington Post:
Would the platinum coin freak out financial markets?   Out of morbid curiosity, we asked a number of analysts what they thought would happen. Predictions fell into a couple of broad camps:
  • The platinum coin might trigger a panic!
  • The platinum coin might be fine.
  • The platinum coin might be legally risky.
  • It all depends on how the platinum coin is used. …But, El-Erian adds, the government couldn’t rely on platinum coins forever — eventually Congress would need to lift the debt ceiling so that the government could get rid of the coin and go back to normal. “If the coin approach were to prove an end in itself, the consequences would be quite different, …
-----
Ezra Klein / Washington Post:
A lot can go wrong with a platinum coin  Mohamend El-Erian of PIMCO argues that whatever its downsides, the platinum coin beats blowing past the debt ceiling
Minting the coin would interrupt [the process of shaming the Republicans to raising the debt ceiling], uniting Republicans — and many voters and business groups — against what they would see as an unsettling, illegal and inflationary power grab from the executive. And if you think the press spreads blame too equally over the debt ceiling, wait till you see the coverage if the White House decides to respond by creating a trillion-dollar coin out of nothing. You can explain the basic logic of fiat currency until you’re blue in the face, but it’s not going to matter. That coin would drive our country’s increasingly deranged politics, which are really at the heart of this crisis, to the edge. …
-----
Zero Hedge:Trillion Dollar Platinum Coin Is "Not The Solution" - PIMCO's Gross — PIMCO founder and co chief investment officer Bill Gross gives no credence to the trillion dollar platinum coin scheme. …
----
via Donkey Hotey: Trillion Dollar Coin adapted from Statue of Liberty Coin designed by Don Everhart from the Presidential Coin Series at the US Mint.
Greg Ip / The Economist:
Platinomics — The economics of the platinum coin option

In the many years I’ve spent scrutinizing monetary policy, I had never devoted more than a thought to coins. In the scheme of all things monetary, they seemed, well, pocket change.

Needless to say, the prospect of the Treasury issuing a $1 trillion platinum coin to circumvent the debt ceiling changes that. I won’t repeat the details; you can get up to speed by reading Matthew O’Brien of The Atlantic here and my colleague here. If nothing else, unpicking the consequences is a fun exercise. I’ve concluded the economics are more complicated and more benign than appreciated, but the political consequences are graver.

while the platinum coin option expands the Fed’s balance sheet and, ultimately, the monetary base, it has no implications for inflation, even if the Treasury never buys back the coin. …
Buying a coin solely to finance the deficit is monetizing the debt, precisely the sort of thing central bank independence was meant to prevent.
-----
David Weigel / Slate:
Would #MintTheCoin Bring About Another Downgrade of America's Credit Rating? — So how would the ratings agency react if the next crisis -- set for the end of February -- was averted by the minting of a $1 trillion platinum coin? I asked John Piecuch, director of communications at Standard & Poor's, whether. He cautioned that the agency wouldn't go into too much detail gaming out a hypothetical. But he didn't exactly ring the bells of doom. …
----
Atrios / Eschaton:  
Unilaterally  — I know all the serious people hate the coin idea, but the more I think about it the more convinced I am it's actually the only legal/constitutional path forward. … All that's left is the coin.
-----
Rep. Jerrold Nadler / Economy and Budget:
The debt ceiling must go  —  Here is a stubbornly well-kept secret: the debt ceiling is arbitrary, doesn't affect the deficit, and serves no real function in keeping spending down.  In addition, it has recently become a cudgel which extremist Republican legislators use to beat the rest of us into submitting to political blackmail. …

Repealing the debt ceiling would ensure that Republican radicals can no longer play a dangerous game of chicken with the full faith and credit of the United States.
----- 
UP with Chris Hayes / MSNBC:
Saturday’s guests (Jan. 12): The phenomenon of the trillion dollar coin...  — On Saturday’s Up w/ Chris Hayes, we’ll discuss the origins and merits of a novel proposal making its a way around the Beltway: the trillion-dollar coin. Serious observers — from Nobel laureate Paul Krugman to former U.S. Mint director Philip Diehl — are calling on the federal government to use its authority under a little-known statute to mint a platinum coin worth $1 trillion and deposit it into the Treasury Department’s bank account, as a way of eluding a brewing fight with Congressional Republicans … 
-----
Reuters:
Reid to Obama: OK to skip Congress on debt ceiling  Senate Majority Leader Harry Reid and other top Democrats are putting new pressure on the White House to circumvent Congress to boost the nation’s debt ceiling if no bipartisan agreement can be reached.

In a strongly worded letter to President Barack Obama obtained by POLITICO, Reid and his leadership team argue that failing to raise the $16.4 trillion debt ceiling would threaten the full faith and credit of the United States. … 
-----
Jonathan Alter / Bloomberg:
The Platinum Coin Wouldn't Have Been Goofy to FDR — I love the trillion-dollar platinum coin solution to the debt-ceiling blackmail threat, though lots of people find it too gimmicky. They say that a serious government can't pull stunts like that to bolster the financial system.

Oh, really? Ask Franklin D. Roosevelt.

Roosevelt took the oath of office on March 4, 1933, at the bottom of the Great Depression...

After staying up all night playing his guitar, [Treasury Secretary] William Woodin hatched his own idea for printing more money without setting off inflation. Every dollar bill had (and has) a line at the top reading: “Federal Reserve Note.” Woodin decided to temporarily change the line to “Federal Reserve Bank Note.” The difference was that this new paper currency would be backed not by gold but by the collateral of all banks associated with the Federal Reserve. “It won’t frighten people. It won’t look like stage money. It will be money that looks like money,” Woodin said.

FDR approved Woodin’s proposal to change the wording on paper currency and -- with the help of other provisions of the bank rescue plan -- the crisis passed. Banks reopened and the country breathed a sigh of relief.

Was that any less gimmicky than the platinum-coin solution?
-----
Federal Reserve Bank Note - issued in denominations under $100 by FDR
FDR funny money: under $100 Federal Reserve Bank Notes
----- 
Brian Beutler / Talking Points Memo:
The Wild Origins Of The Trillion Dollar Platinum Coin — Political elites won't shut up about the trillion dollar platinum coin. — For over a week now, pundits and power brokers — including members of Congress, a Nobel Prize-winning economist, a former director of the Congressional Budget Office …
discussion:

Soft Currency Crusaders and the Trillion Dollar Coin

Here is your daily dose of champagne wishes and platinum dreams.

Starting off with the international man of mystery behind the trillion dollar coin (TDC) idea.

-----
Beowulf AKA Carlos Mucha mastermind behind the $1 trillion platinum coinRyan Tate / Wired:
Meet the Genius Behind the Trillion-Dollar Coin and the Plot to Breach the Debt Ceiling — It was a December 2009 Wall Street Journal article that ultimately inspired the Georgia lawyer known online as “Beowulf” to invent the trillion-dollar coin.

The article, “Miles for Nothing,” detailed how clever travelers were buying commemorative coins from the U.S. Mint via credit cards that award frequent flier miles. The Mint would ship the coins for free and the travelers would deposit them at the bank, pay off their cards, and accumulate free miles...

Ever the lawyer, Beowulf dived into Title 31 of the U.S. Code: “Money and Finance.” That Journal article was still rattling around in his head. He was also inspired by ideas from attorney-turned-finance-author Ellen Brown, who in her 2008 book Web of Debt quoted a 1980s-era director of Treasury’s Bureau of Engraving and Printing as saying the government could solve its debt problems by printing large coins. He wasn’t talking about circumventing the debt ceiling, which hadn’t yet become a political football, but he may have been on to something....

The coin hack even surprised and impressed former U.S. Mint director Philip Diehl, who co-authored the law that enabled the platinum loophole in the first place.

“When I first heard about the idea to mint a trillion-dollar coin, I was very surprised,” says Diehl. “But because I know that law backwards and forwards, I knew immediately that the guy who came up with the idea was right.

“It’s an ingenious use of the law to avoid a ridiculous and irresponsible situation, in which the country would be driven to default.”
discussion:
Mosler Economics: Meet the Genius...
Mike Norman Economics: Meet the Genius...
****
Other articles by Carlos Mucha AKA "Beowulf" the hero of the Geats "soft currency crusaders"1 and the slayer of Grendel the debt monster:

Beowulf is a primary contributor at Monetary Realism
AKA letsgetitdone at Firedoglake
Beowulf / letsgetitdone at the Daily Kos
Carlos Mucha at Corrente
----
note 1Warren Mosler's 1994 paper "Soft Currency Economics" is the seminal work for Modern Monetary Theory (MMT).
-----
Carlos Mucha / Beowulf  / Letsgetitdone's latest post at the Daily Kos:
Wake Up Progressives: the Trillion Dollar Coin Can Be Game-Changing! — Well, not really. But if you view the Trillion Dollar Coin (TDC) meme, as I do, as a short-hand for the more general idea of using Platinum Coin Seigniorage (PCS), then yes, it can change the whole political game for progressives if President Obama dares to use it.

Literal TDC proposals would solve the debt-ceiling, but they won't solve the larger problem of defeating the austerity politics that is so close to getting the cuts to social safety net and important discretionary government programs that austerians have long sought. PCS game-changer proposals are the ones calling for, or analyzing the impact of, PCS options aimed at paying off the national debt and covering anticipated federal deficit spending for some years...

Some bloggers have advocated minting a $quadrillion coin, and that is another option for how to proceed with game-changing PCS. I'm not really opposed to that. But I've proposed the $60 T coin, because I think a game-changing PCS solution is a transitional stage preceding the reorganization of the Federal Reserve and its placement under the supervision of the Treasury Department. Since the $60 T coin will cover debt repayment and debt-free deficit spending for 15 - 25 years; it provides enough time to educate people politically about the desirability  of such a change, while providing the Executive Branch with the power to fill the public purse while retaining Congressional control over the purse things themselves, as the Constitution requires...
-----
How can Republicans say no to a $1 Trillion Dollar Platinum Ronny?

How about a $1 Trillion Platinum Ronald Reagan coin, AKA the Ronny?

Jon Perr / PERRspectives:
Introducing the $1 Trillion Ronald Reagan Platinum Coin  — As part of their never-ending campaign to canonize President Ronald Reagan, conservatives three years ago proposed replacing Ulysses S. Grant on the 50 dollar bill with the likeness of the Gipper. But while his hagiographers mercifully failed in that quest, a new and altogether fitting denomination has emerged to memorialize Reagan. The much-discussed one trillion dollar platinum coin, the unfortunate gimmick that may be needed to circumvent the Republicans' dangerously real gimmick on the debt ceiling, would be a perfect home for Reagan's image. After all, President Reagan didn't merely triple the national debt in his eight years in the White House and establish budget-busting tax cuts as a permanent fixture in Republican politics. As it turns out, Reagan excoriated those in Congress who would jeopardize the full faith and credit of the United States by refusing to increase the nation's debt limit.
discussion:
Terrance Heath / Campaign for America's Future:   Why Ronald Reagan Should Be on the $1 Trillion Platinum Coin
Mike Norman Economics: Introducing the $1 Trillion Ronald Reagan Platinum Coin
-----
Has trillion dollar platinum coin talk goosed the precious metals markets?
Has all this talk about trillion dollar platinum coins goosed the precious metals and FX markets? These were very large moves on Thursday (1/10/2012):
  • Gold up $16.80 +1.01% to $1675.30
  • Silver up $0.50 +1.65% to $30.91
  • Platinum up $35.00 +2.20% to $1633
  • Euro up  $0.0202 +1.546% to $1.3265 USD/EUR

-----
Maybe it's the Fox News viewers who are putting in a bid for platinum? After all the government will need 17,773.995 tons of it in order to mint a Trillion Dollar Coin (TDC). Crazier things have happened.

Fox News is clueless about what the $1 Trillion Platinum Coin really is
Fox News - clueless

Matthew Yglesias / Slate:
Fox News Doesn't Understand How Coins Work  — Here's Fox News confusing the idea of a coin-shaped pile of platinum worth $1 trillion and a $1 trillion coin that happens to be made out of platinum and can be of any size. We saw earlier this week that the National Republican Campaign Committee also doesn't understand how coins work, so perhaps I can try again to explain...
discussion:
------ 
Mark Memmott / NPR.org:
Crazy Or Canny? Talk Grows About $1 Trillion Platinum Coin — We're pretty sure this won't happen. But ...

You practically can't visit a news site these days without seeing a story about why President Obama should or should not order the Treasury Department to strike a platinum coin "worth" $1 trillion and deposit it with the Federal Reserve.

And why would Obama want to do that? Because, as we've said, the next big political battle in Washington comes in mid-February when the federal government again hits its "debt ceiling" and won't be able to borrow any more money. Republicans are saying they won't go along with an increase of the debt ceiling unless Democrats agree to some serious spending cuts. President Obama has said he's not going to go through another battle like the one in 2011 when much of the government almost had to shut down.

So, the idea has been raised of putting a $1 trillion coin in the Fed's vaults — which in theory, at least, would mean the government has more money available to borrow against and won't bump up against its debt ceiling.
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Ezra Klein / Washington Post:
Mr. President, don’t mint that platinum coin! — Much political commentary has, in recent days, revolved around a most unusual question: Should the Treasury Department mint a trillion-dollar platinum coin that can be used to pay off our debts in the event House Republicans refuse to raise the debt ceiling?

The short answer is: No, it shouldn’t. The long answer is also: No, it shouldn’t....
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Eric Posner / Slate:
The Danger Lurking Behind the Platinum Coin — This way lies the risk of impeachment.

The idea that President Obama could evade the debt limit by ordering the Treasury Department to mint a $1 trillion platinum coin started off as a joke, or a quasi-joke, but now, thanks in part to Paul Krugman as well as to many other influential commentators (even the former head of the U.S. Mint), is being taken seriously. And if serious people take it seriously, then the coin loses its fairy-tale quality, and why not go through with it? The answer is that the legal case for the platinum coin is not as strong as people think, and if the president gets this wrong, the consequences could be severe...
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Thursday, January 10, 2013

The Trillion Dollar Coin (TDC) is Left on the Bargaining Table

The trillion dollar coin (TDC) debate has forced many folks to look up that old Anglo-French word, seigniorage. Which simply means making money by making money. However, not everyone has had the energy to do a simple Google search, like the National Republican Congressional Committee (NRCC) and a few others. Never let the facts get in the way of a good meme.

Meanwhile, the White House has left the TDC on the bargaining table with Congress. This TDC idea does not look like it will die until Congress raises the debt ceiling without any onerous strings attached. The fist fighting will begin shortly in Johnsville and elsewhere.

So here is the latest daily dose of rants, pants, slights and slants from the minters and melters opining upon the trillion dollar platinum coin, enjoy:

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Justin Sink / The Hill:
White House declines to rule out the minting of a ‘platinum coin’  —  The White House on Wednesday declined to rule out minting a “platinum coin” to avoid default if Congress fails to raise the debt ceiling.  —  Press secretary Jay Carney on Wednesday said there is “no substitute” for Congress raising the borrowing limit but declined to explicitly rule out issuing new currency to pay the government's debts.

"The option here is for Congress to do its job and pay the bill," Carney said. "There is no Plan B, there is no backup plan. There is Congress's responsibility." ...

"You can speculate about lots of things," Carney said. "Nothing needs to come to these kinds of speculative notions about a problem that can be resolved by Congress doing its job."
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Donald Marron / Forbes:
  1. A legal loophole gives the Treasury Secretary apparently unlimited authority to mint platinum coins.
  2. Most observers think this is a terrible idea, but the legal arguments against it are weak at best.
  3. The economic arguments against the coin are stronger but manageable.
  4. The best arguments against the platinum coin involve image and politics.
  5. Nonetheless the platinum coin strategy might be better than the alternatives if we reach the brink of default.
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Annie Lowrey / NY Times:
A Trillion-Dollar Coin Brings a Jackpot of Jests — Thus, some members of the liberal intelligentsia and a number of prominent economics commentators — most notably Joe Weisenthal of Business Insider, who is also a prolific user of Twitter, and Josh Barro of Bloomberg View — resurrected the trillion-dollar coin idea.

This time, they went on a vigorous public relations campaign as well. The hashtag #mintthecoin has drummed up hundreds of social media responses, and a petition on the White House Web site has more than 7,000 signatures. The idea also won apparent support from some heavy hitters, like the Nobel laureate and New York Times columnist Paul Krugman and Donald Marron, the Republican economist who heads the Tax Policy Center. (Mr. Marron, to be fair, suggests minting a $25 billion coin, not a $1 trillion one.).…
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Matthew Yglesias / Slate:
The Biggest Myth About The Platinum Coin Option  —  The biggest and weirdest myth out there about the $1 trillion platinum coin is the idea that it would require a large quantity of platinum to make one.  The National Republican Campaign Committee, for example, is out there warning that "The amount of platinum needed to mint a coin worth $1 trillion would sink the Titanic."
 
NRCC.org 

National Republican Congressional Committee: Tell Obama Spending is the problem

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Warren Mosler / Mosler Economics:
Japan should buy the platinum coin? — note that the purchase of a US Treasury $1 trillion platinum coin would weaken the yen and put off the US debt ceiling issue…

[Japan would sell yen/buy dollars in the ‘marketplace’ to pay for it. Probably would want to do maybe $20 billion at a clip…]
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Monetary Realsism:
Treasury and the Federal Reserve – Platinum/QE Integration — This platinum coin strategy has obviously been the subject of much recent public comment and debate. The platinum strategy more broadly is not the primary question for consideration in this post. The topic here is the potential for the specific operational integration of a platinum strategy with overall Federal Reserve balance sheet management...
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Alexandra Petri / Washington Post:
One nation, under the Platinum Trillion-Dollar Coin  — In fact, I am frankly disappointed with how serious this idea has become. We ought to embrace the inherent bizarreness of this solution, insisting that the coin be at least eighteen yards in diameter and that we should get to suspend it over the Capitol by a tiny thread, with a soothsayer standing next to it muttering ominous things. It should have a giant portrait of Honey Boo Boo on it. The president should mint it, and then he should stand in front of this embarrassing large platinum coin and say, “Seriously, America? Seriously, Congress? Surely this has gone far enough.”
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Tom Maguire / JustOneMinute:
He's Ready For The Clown Suit — Paul Krugman explained that as long as we can get comfortable with the idea of our Treasury Secretary briefly donning a clown suit to save the country, we should be ducky with the idea of the Trillion Dollar Platinum Coin. — Well, the reported … 
discussion:
Ann Althouse / Althouse:   Hope and change... into a clown costume.
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Firedog Lake:
The Small Ball Trillion Dollar Coin Seigniorage Exception  —  In short, there’s no way that PCS in itself can have an inflationary impact, no matter how high the value of the platinum coin is. That’s because repayment of already held debt is less inflationary than continuous rollover of and gradual increase of debt, repayment of debt to government agencies including the Fed doesn’t enter the economy, and using PCS-generated funds to cover deficits is not in itself inflationary unless deficit spending is so large that it continues past full employment.

So, that’s the true narrative about PCS and inflation. Not, ZOMG “Weimar, Zimbabwe.” That’s nonsense! Let’s hope that Joe Wiesenthal, and other MSM bloggers who have jumped into the PCS pool in the past few weeks read it and cease to spread “the silly idea” that PCS, in whatever denomination greater than say a few Trillion Dollars may be used, is inherently inflationary...
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Ross Douthat / NY Times:
The Politics of the Platinum Coin — I would just ask platinum coin proponents, is this generally how politics works of late? One party behaves irresponsibly, the other side counters with a wave of irresponsibility of its own (because that’s the only way to make those crazies see reason …), and then the first party recognizes the error of its ways and everyone returns to behaving reasonably? Does that pattern describe the polarized Washington that we’ve come to know and love? ...
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Neil Irwin / Washington Post:
The platinum coin idea is idiotic. That is the point.  — I’ll lay out this econo-pundit’s conclusion upfront: I hate the platinum coin idea. But if there is no resolution of the debt ceiling through the legislative process, I hate some of the alternatives more...
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Maura Pennington / Forbes:
Platinum Coin? Grow Up. — We tell children to dream, yes, but we also tell them to have common sense. If someone is able to advocate publicly for a trillion-dollar platinum coin, their parents and teachers only did half their job. Who can type the words “platinum coin” and “solve problem” and not wonder if maybe that would be a good idea for a screenplay? Fiction is not the statesman’s milieu, though, so our legislators (and sideline commentators) can stop posing...
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Dan Kois and Andrew Morgan / Slate:
Design the New $1 Trillion Coin! — Who should be on the front? Reagan? MLK? Harry Truman giving the thumbs-up?

 
Design proposal for the $1 Trillion Platinum Coin (TPC)
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The latest count has 7,268 people signing the White House Petition to make the TDC:
 
White House Petition: Direct mint to make trillion dollar platinum coin

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Related: Here is the coverage of Platinum Coin Seigniorage (PCS) by The Johnsville News since 2011:

July 29, 2011:
Debt Watch / Coin Trick: the Trillion Dollar Coin — First roundup of how the trillion dollar coin idea germinated and spread on the internet leading up to the debt ceiling debate during the summer of 2011.

December 15, 2012
Neutering Option for Ben Bernanke and the Federal Reserve — Thinking Big: Give the US Government a $60 Trillion Blank Check [mega sizing the platinum coin to neutralize the Fed]

January 4, 2013:
Hammering Away at the Platinum Coin Gambit — with the tax question settled Washington turns to the debt ceiling and PCS roars into the New Year, roundup.

January 8, 2013:
Champagne Wishes and Platinum Dreams versus Tea Party Steel. (roundup)

January 9, 2013:
More Champagne Wishes and Platinum Dreams (roundup)

Background, the use of PCS has its roots in MMT (Modern Monetary Theory), discussed here: June 29, 2011, Modern Monetary Theory (MMT) in a Nutshell

Wednesday, January 9, 2013

More Champagne Wishes and Platinum Dreams

Just following the platinum brick road to the Emerald City as it passes through Johnsville.

Today's round-up of trillion dollar platinum coin dreams:

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Is trillion dollar platinum coin debate the most important fiscal policy debate in our lifetime?
Joe Weisenthal / Business Insider:
Why The Fight Over The $1 Trillion Coin Is The Most Important Fiscal Policy Debate You'll Ever See In Your Life — The campaign to circumvent the debt ceiling by having the Treasury mint a trillion dollar platinum coin continues to infiltrate the minds of elite thinkers in Washington.

Paul Krugman has come out in favor of it. Congressman Jerry Nadler is in favor of it. Pretty much every major news organization is discussing it. Even Stephen Colbert talked about it last night.

As Jonathan Chait at NYMag observes, what's interesting is that there are very few good arguments, legal or economic, against minting the coin...
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discussion:

Talking Points Memo:
9 Faces For The $1 Trillion Platinum Coin  — America is once more on a collision course with the debt ceiling, threatening the economy’s fragile recovery with an entirely avoidable crisis of Congress’ own making. But there may be a way to avoid the whole mess: President Obama can legally mint a commemorative coin worth $1 trillion to guarantee the nation’s creditworthiness. That creates its own crisis, however — namely, who do you put on the platinum coin? Fortunately, we rounded up some options...

Paul Krugman / NY Times:    
Rage Against the Coin — Well, the trillion-dollar-coin thing — deal with the debt ceiling by exploiting a legal loophole to have the Treasury mint one or more large-denomination coins, deposit them at the Fed, and use the cash in the new account to pay bills — has really taken off. Last month I spoke with a senior Fed official who had never heard of the idea; these days it’s all over...

in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised... 
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Steve Randy Waldman / interfluidity
Rebranding the “trillion-dollar coin” — The Treasury won’t and shouldn’t mint a single, one-trillion-dollar platinum coin and deposit it with the Federal Reserve. That’s fun to talk about but dumb to do. It just sounds too crazy. But the Treasury might still plan for coin seigniorage. The Treasury Secretary would announce that he is obliged by law to make certain payments, but that the debt ceiling prevents him from borrowing to meet those obligations. Although current institutional practice makes the Federal Reserve the nation’s primary issuer of currency, Congress in its foresight gave this power to the US Treasury as well. Following a review of the matter, the Secretary would tell us, Treasury lawyers have determined that once the capacity to make expenditures by conventional means has been exhausted, issuing currency will be the only way Treasury can reconcile its legal obligation simultaneously to make payments and respect the debt ceiling. Therefore, Treasury will reluctantly issue currency in large denominations (as it has in the past) in order to pay its bills. In practice, that would mean million-, not trillion-, dollar coins, which would be produced on an “as-needed” basis to meet the government’s expenses until borrowing authority has been restored
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Felix Salmon / Reuters:
Why we won’t mint a platinum coin — Let’s be clear about this: no one’s going to mint a trillion-dollar platinum coin. Nor is anybody going to mint a million million-dollar platinum coins. But it would probably be stupid for anybody in the government to say that they’re not going to do it.
The trillion-dollar coin is the fiscal equivalent of the Flying Spaghetti Monster: a logical reductio ad absurdum designed to emphasize the silliness of an opposing position. For instance, if you don’t believe that churches should be tax-exempt, then you just claim that your entire family are Pastafarian priests...
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Megan McArdle / Daily Beast:
Washington Goes Platinum — Short-term non-solutions to long-term problems.

I hope you'll pardon me while I go off on a rant here. The trillion dollar platinum is an absurdity wrapped in a legislative incongruity inside a farce. It is the logical extension of an utterly illogical legislative process that only becomes more irrational with each passing day. Each partisan battle has become stupider than the last. Silly loopholes are exploited for bargaining power, and the resulting stalemates are generally solved with a temporary patch that solves the immediate problem by creating a bigger one down the road. When the bigger problem arrives, naturally the other side seeks an even sillier loophole, resulting in an even more temporary patch...
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Matthew Yglesias / Slate:
Mint the Coin — The silly but totally legitimate loophole that lets the Obama administration avert the debt-ceiling showdown with a $1 trillion platinum coin...

And this, in many ways, is the best possible reason to mint the coin. It’s so absurd that it’s bound to prompt a backlash. Rep. Greg Walden (R-Ore.) is already talking about a bill that would close the platinum loophole. It’s a perfectly reasonable idea, and the Obama administration should be happy to agree to do it. If, that is, Congress agrees to close the loophole that lets it pass tax and spending bills that make a budget deficit necessary and then refuse to allow the borrowing to finance that deficit. In other words, kill the loophole in exchange for eliminating the statutory debt ceiling. In the future, the government will spend what Congress tells it to spend and collect the taxes Congress tells it to collect and rely on borrowing rather than platinum to fill the gap. That’s how it ought to work, and it’s how it has worked in practice for decades...
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Rebecca Clancy / UK Guardian:
US 'seriously' considering $1 trillion coin to pay off debt — Speaking to the BBC's Today programme, Mr Roche, founder of Orcam Financial Group and blogger at Pragmatic Capitalism, said the idea was being taken "somewhat seriously" in Washington.

"I know it’s been spoken about at the White House and a number of prominent people, including congressman, are talking about it," he said...

Mr Roche also did not expect the Treasury to go ahead and mint a $1trillion coin, but said President Obama could use it as threat...
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Cullen Roche / Pragmatic Capitalism:
Philip Diehl, Former Head of the US Mint Addresses Confusion Over the Platinum Coin Idea — Philip Diehl, former head of the US Mint and co-author of the platinum coin law comments on the recent confusion and discussions over the use of the platinum coin.  This is a must read:
* Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.
* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.
* Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.

Philip N. Diehl
35th Director
United States Mint
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Peter Roff / US News:
Obama's Magic Trillion Dollar Coin Trick — The platinum coin trick does not pass the laugh test; this does not mean, however, that the idea is going nowhere. Unless Congress acts to prohibit the coins from ever being struck it is always possible the president, any president could keep one or two up his sleeve just in case. It's bad policy, bad politics, and bad economics. It should be rejected out of hand and the White House should make clear it has been.
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The Colbert Report / Comedy Central:
The Platinum Debt Ceiling Solution — Minting trillion dollar platinum coins to pay off America's debt is legal in that it is not technically illegal.

Steven Colbert reports on the Trillion Dollar Platinum Coin Option

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