January 14, 2013

“The Democrats’ magic-coin fantasy”

Marc Thiessen, Washington Post:

If there were any doubt that leverage had shifted to Republicans in the debt-limit standoff, it was dispelled when Obama supporters urged the president to create $1 trillion out of thin air by minting a magic coin. Seriously.

On Saturday, the Treasury Department finally put a halt to the magic-coin insanity, declaring, “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.”

No kidding.

Well, speak for yourself.  On some legal fronts, the admission that the Treasury or Federal Reserve doesn’t believe the law can be used to create magic coins is likely to cause heartbreak.  But I digress.

What is so sad is that, until Treasury issued that statement, supposedly serious people were advocating doing just that. On Friday, White House spokesman Jay Carney refused to rule out the idea (as he had previously ruled out resorting to the 14th Amendment to ignore the debt limit). In a letter to Obama last week, Senate Majority Leader Harry Reid, Majority Whip Dick Durbin, vice chairman of the Democratic Caucus Chuck Schumer and the incoming Budget Committee chairwoman, Patty Murray, urged the president “to take any lawful steps to ensure that America does not break its promises and trigger a global crisis — without congressional approval, if necessary.” Since the 14th Amendment was off the table, the only step he could take “without congressional approval” was minting a platinum coin.

In a town that specializes in stupid ideas, this one reached a new level of stupid. Think about it: If the president could really create a trillion dollars out of the ether simply by minting a single $1 trillion coin, why would we stop at one? We could mint 17 of these puppies and eliminate the national debt! Heck, we could mint 18 and have a trillion-dollar surplus!

Imagine all the problems in Washington that could have been solved with this one fiscal-policy innovation. There would be no need for more fights over whether we should cut spending or raise taxes. Just mint more trillion-dollar coins. Want another trillion-dollar stimulus spending bill? Mint a coin! Make Medicare and Social Security solvent without cutting benefits? More coins!

Like King Midas, Obama could have turned anything he wanted into gold .?.?. or platinum, at least.

Maybe I’m misremembering, but isn’t a cow, a giant, a Dickensian limey child, and a goose squatting out platinum eggs required for this to work…?  I mean, if we’re going to follow certain tropes, let’s at least acknowledge the referents.

This could have been the solution to the euro-zone crisis. No need for austerity measures, mes amis. Just mint a trillion-euro coin! Imagine for a moment how we would have responded if Greece had announced that, instead of cutting spending to reduce its debt, Athens was withdrawing from the euro and minting a trillion-drachma coin. (Okay, it would have to be a few hundred trillion drachmas to match our $1 trillion coin, but you get the picture.) We’d all laugh hysterically.

Well that’s what the world and — more importantly — the markets, would have done if Obama followed the advice of those pushing this insane idea.

The fact that so many Obama sympathizers were seriously advocating an idea that may have originated with an episode of “The Simpsons” shows that the GOP holds all the cards as the deadline to raise the debt limit approaches. Before Jan. 1, Obama was more than willing to risk a recession in order to get his way on tax hikes. He won the “fiscal cliff” showdown. Congratulations, Mr. President.

Now the tide has turned — and Democrats know it. Obama might have been willing to go over the cliff, but he cannot default. He needs Republicans to raise the debt limit, which is why the left is squirming for a way — any way — to extricate him from this conundrum. But there is no way out. For all Obama’s bluster about not negotiating on the debt limit, the fact is he is bluffing. He has to negotiate. He has to compromise. He has to make concessions. He has no choice.

Unfortunately, here’s where I break with Mr Thiessen, his optimism and faith in the GOP leadership outshining my own, if only for the purposes of reminding them of the power they have.  But John Boehner has shown an uncanny knack for snatching defeat from the jaws of victory, then claiming victory once he’s secured defeat.  It is surreal to watch, in fact.   To borrow from the wicked but grounded Hans Gruber, who manages to open the impenetrable safe at Nakatomi Plaza by recognizing the predictability of his “establishment” opponents, “the circuits that cannnot be cut are cut automatically in response to a terrorist incident. You asked for miracles, Theo, I give you the F.B.I.”

Let’s just hope Boehner isn’t the Agents Johnson.


If the magic-coin episode teaches Republicans anything, it’s that Democrats know the president is cornered. So if Republicans blow this opportunity — if they buy Obama’s bluff and capitulate as they did on the fiscal cliff — they’ll need more than a magic coin to save their political hides.

I guess we’ll see. But Rove and his group right now are working to “reform” the primary system to keep TEA Party interlopers out, Boehner and his crew spend more time fighting and demonizing conservatives than they do Marxist Democrats, and the House just gave Boehner a vote of confidence by re-electing him speaker, largely on the strength of his sting of epic surrenders.

So sanguine I’m not.

Sure, we’ll get “cuts,” but they’ll be promised cuts in the rate of spending, and they won’t amount to a thing.  This is yet more political theater.  DC plods on as usual, with phantom money and empty promises and corrupted, self-interested leadership — all of them aware that a collapse is inevitable.

They’re just also aware that they’ll be taken care of.

The rest is a pose to create a perception.  And though no one really believes the pose any more, we still accept it — and in some ways continue to root for it — because honestly:  what the hell else choice do we have?  Save civil revolt?



Posted by Jeff G. @ 11:58am

Comments (31)

  1. We are about to very publicly pass a Sandy bill so laden with pork that Chris Christie might not be able to finish eating it in one go.

    And I’m to believe that the GOP are the adults in the room. Please.

  2. “a Sandy bill so laden with pork that Chris Christie might not be able to finish eating it in one go”

    It’s tough on the rest of us when you win the thread right out of the blocks like that…

  3. And, I’m stealing that.

  4. A civil revolt is one in which you ask your counterparts whether they prefer their Molotov cocktails with an olive, a pearl onion, or a twist of lemon, and make certain to prepare your cocktails appropriately before serving them up.

    Certainly no need to be uncivil!

  5. If you tell your creditors that are wondering how they will get their money back that they can continue to lend you money because you have a platinum coin with 1 trillion dollars stamped on it on deposit that you made yourself…well…I think they will go out of their way punish you by cutting off credit, demanding immediate repayment of what is already owed, and be VERY public about it.

  6. palaeomerus –

    Agreed – I think they will make Shylock look like the epitome of sweet reasonableness.

  7. Nothing like the solid thump on the porch of ammo being delivered.

    Just saying is all.

  8. [I]f Republicans blow this opportunity — if they buy Obama’s bluff and capitulate as they did on the fiscal cliff — they’ll need more than a magic coin to save their political hides.

    There’s no way that can be true. Either this time is no different from every other time the Republicans blew an opportunity, or it’s already too late to save themselves.

  9. The “Ruble” options.

    Unfortunately there are still plenty of goofy ideas on the table, such as issuing Monopoly money in lieu of actual new greenbacks. As law professor Edward Kleinbard wrote in The New York Times earlier in the week:

    [President Obama] should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.As He should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.

    But that’s not all. Economist Stephen Williamson has cooked up another couple of options for Team Obama:

    1) The off-balance-sheet option: Fannie Mae became a private institution, and Freddie Mac was established, as part of a Johnson administration move to take the mortgage market activities of Fannie Mae off the federal government’s balance sheet. Suppose that Fannie Mae were to issue agency securities and use the proceeds to pay salaries at the Pentagon, or Pentagon employees were to temporarily become employees of Fannie Mae. Currently under government “conservatorship” Fannie Mae has to do what the federal government tells it to do, but its agency securities are not part of the government debt for accounting purposes.

    2) The playing-card or clearinghouse certificate option: Federal government departments could issue their employees certificates promising payment in the future, in lieu of salary. I’m not sure what makes a government debt obligation fall under the debt-ceiling limit, but the idea would be to design the IOUs so that they don’t meet those criteria. Like the playing cards and clearinghouse certificates mentioned above, there’s nothing to stop people accepting these IOUs in exchange.

  10. The GOP knows they have the upper hand and aren’t going to blow this opportunity. That is why they jumped up on their hind legs and mocked and ridiculed these idiot Democrats and showed what clueless fools they are.

    Oh wait…

  11. Trillion dollar coin? Bad idea, dude.

    You just know.. it’s like Murphy’s Law. The first time some dude up at The Mint runs out of coinage for the expired parking meter, and the tow trucks are hovering like sharks, he’s going to grab the coin while no one’s looking and slip it in .. then pretend like he doesn’t know what happened to it.. Sure they’ll catch him when they notice his receipt has 3000 years of prepaid parking on it.. but good luck getting a refund.

  12. My revolt would be decidedly uncivil.

  13. The notion that money can be separated from what it represents, which is labor performed by a person or persons, is quite insane. Then again, I expect that kind of stupid from the left and many of the statists on the right.

  14. Not a fan of the labor theory of value myself.

  15. What is money, then, Ernst? It represents something, right?

  16. I guess I should have said, it represents wealth that is created via labor of some kind. The fact that I make a lot more programming for an hour than someone else does via digging ditches for that same hour must be accounted for.

  17. Value is determined by the interaction of demand with a perception of real or potential scarcity.

    See guns, ammo, 2013.

  18. You know what? Never mind.

  19. Money is a representation of what people mean to buy with it. If there were no goods or services on the market, money would be worthless.

  20. Value adding labor is valuable. Pointless labor is waste or charity badly disguised as productivity.

  21. I guess you might call pointless labor exercise if it is physical.

  22. It’s just that the “labor theory of value” as a fruitful definition of money was Marx’s failed pet project. Because the question is so frigging complex, there’ve been a heap of goes at it along the way, without conclusive certainty any have been finally successful getting their arms around the problem. In any event, some seem much better than others.

  23. If you are doing something that someone wants done and will trade for, then your labor is value adding. If you are doing something that no one wants but are being forced to trade for anyway then you are rent seeking.

  24. That was just an offhand observation. I didn’t intend to shit stir.

    Apologies to cranky.

  25. Money is a representation of what people mean to buy with it. If there were no goods or services on the market, money would be worthless.

    Your pampered backside would disagree with you, if it could.

  26. Money is a unit of measure. Like a pound or a pint.

  27. No one is more sorry than I am, Ernst.

  28. Can’t wipe your ass with an EBT card…

  29. “Money” is, in it’s essence, Trust. You trust that your innately worthless piece of paper will be accepted as legal tender by merchants, etc. They, in turn, also trust that the banks will honor that scrap of paper as “money”.

    The “magic coin” nonsense would have destroyed that trust at a single blow.

    And while it’s true that most “money” is just bits in a computer, we TRUST that nobody is going to go fiddling around with them.

  30. I teach High School Economics. I went out and bought an actual Gold Certificate bank note and a Silver Certificate bank note, along with some silver coins, to use in class when teaching about fiat money. It is troubling to me that they expect a world without, or very very little, physical fiat money let alone a gold or silver based currency.

  31. The far right, beacuse it refuses to work with their Republican colleagues on a compromise, will once again have impelled final legislation that is further to the left than would otherwise be the case.

    Meanwhile, over at Ace of Spades, chain-licker in chief Gabe is butthurt to the nth degree because those of us with principles are showing him and the rest of the RINOs as the spineless sacless jellyfish they are.