This all too serious joke has steadily gained traction among the self anointed cognoscenti.
Probably one reason they think “Hope®” it will work is because it is “legal”.
We don’t make the loopholes. We just find them. The Treasury can’t print money on its own, because the money supply is supposed to be the strict purview of the Federal Reserve … but that might not be quite so strict after all, thanks to a coin-sized exception. Congress passed a law in 1997, later amended in 2000, that gives the Secretary of the Treasury the authority to mint platinum coins, and only platinum coins, in whatever denomination and quantity he or she wants. That could be $100, or $1,000, or … $1 trillion.
And we know that Congress has the power “to coin money and regulate the value thereof”, right? The Constitution says so, right?
This is why I obsess about the meaning of “regulate”. Regulate does not mean dictate or direct, it means to make regular, to standardize.
This is what regulating the value of coin looks like. (my bold)
On April 2, 1792, U.S. Secretary of the TreasuryAlexander Hamilton reported to Congress the precise amount of silver found in Spanish milled dollar coins in common use in the States. As a result, the United States dollar was defined[12] as a unit of weight equaling 371 4/16th grains (24.057 grams) of pure silver, or 416 grains of standard silver (standard silver being defined as 1,485 parts fine silver to 179 parts alloy).[13] It was specified that the “money of account” of the United States should be expressed in those same “dollars” or parts thereof.
Contrary to the quoted link from Atlantic, it is the Constitution, not the Federal Reserve System, that prevents the Treasury from printing money. After their experience with the Continental Dollar, in the Constitution of 1787 they deliberately gave Congress only the power to coin money.
“Some think that the rebel bills depreciated because people lost confidence in them or because they were not backed by tangible assets,” writes financial historian Robert E. Wright. “Not so. There were simply too many of them.”[12] Congress and the states lacked the will or the means to retire the bills from circulation through taxation or the sale of bonds.[13]
Sound familiar? Unable to find buyers for all of the bonds the Treasury is exchanging for spending money, the Fed System has purchased $1.676 trillion of them with newly created dollars. Once again we cannot retire ‘paper’ money from circulation by either taxation or selling bonds. There were too many Continental dollars because they were not backed by tangible assets. The post 1787 dollar was a unit of weight, not an arbitrary number. Regulating the value meant making all coins the same weight of metal per dollar of value.
The trillion dollar coin idea will not fit the Constitution but with the judicial consensus being that “regulate”, instead of “to make regular”, means “exercise dictatorial control over”, then why not “regulate” that the coin is worth a trillion?
A trillion dollar coin. Is this what he meant by “Hope® and Change”. Got to admit, sometimes this collapse is entertaining. If you like dark comedy.
paper is cheaper and can say..
worth 1 trillion..
This deal is just like the secession flap a few weeks ago—a loony idea that has zero chance of ever happening, but makes for breathless, faux-excited/indignant headlines that people who want to get worked up can get exercised about.
It’s baloney.
The fact that this idea is enthusiasticlly endorsed by the feculent Paul Krugman should be sufficient to convince any sane person of its inherent idiocy (anything appearing under his byline is weapons-grade excrement), but if anyone is interested in an actual analysis of its economic fallacies you can do no better than to read Detlev Schlichter’s latest post. He’s in rare form.
Still, in one respect the idea is interesting. Certainly minting a faux trillion dollar coin is no different than typing 12 zeroes into the Fed’s computer, which is what we do now (with the Fed monetizing something like 70% of its new issuings). But why go to that trouble and expense? The express purpose of this coin is to use it as a marker for the government’s “debt” to the Social Security Trust Fund. But that’s not really a debt at all. The government long ago spent the money, and simply gave itself its own IOU. Uncle Sam’s left pocket “owes” his right pocket several trillion dollars, but that’s meaningless. I’ve long felt that the government should drop the charade of a “lockbox” (that’s nothing but a cruel hoax perpetrated on the gulllible) and simply eliminate the “debt”. Just wipe it off the books. I suppose the trillion dollar coin is one way of accomplishing that, but it’s really unnecessary.
The Supreme Court long ago ruled (in Flemming v. Nestor) that there is no contractual right to Social Security payments; Congress is free to change the law any time it wants to, including reducing or even eliminating such benefits. So maintaining the fig leaf of a “lockbox” is just silly. But I suppose replacing it with a coin is no more silly.
Laird: anything appearing under [Krugman’s] byline is weapons-grade excrement
Not always. For example, I heartily agree with his statement that he would be a very bad Secretary of the Treasury.
Call me old-fashioned AND a dimwit, but I don’t get it. A trillion-$ coin made out of platinum would have to contain $ 1,000,000,000,000’s worth of platinum–at the market price when the platinum was purchased–no? So where is that $ 1 trillion going to come from? We must have it stashed away in a sock somewhere…. ????
veryretired: Actually, this one has a real chance. So far as anyone’s been able to determine, it’s literally the only legal solution to a debt ceiling impasse. Nobody wants to do it, but if the debt ceiling doesn’t get raised at some point, the President will have a legal obligation to spend money that he can neither raise by taxation, nor borrow, nor print in usual ways. Printing it in unusual ways is the only way to leave the government following its own laws if Congress doesn’t want to play along.
Julie: Nope. Collectable coins routinely have face value wildly different from bullion values. Usually the face value is lower than bullion value, but the reverse is legal.
Alsadius, actually, no it doesn’t, any more than one or more states seceding, which was one of the other BS deals that the media and a few idiots came up with lately.
There is an obvious, and legal as well as feasible, method for the various state governments and the federal government to retire their debts—it is selling their massive assets in land across the country, esp. in the west and Alaska.
There are ample precedents in law and custom in the US to justify such a sale, and the legitimate value of the land would greatly surpass the debts in question, especially as the new methods for producing valuable resources become more and more available.
There is no legitimate reason for the government at any level to own millions of acres of land anyway. It should be available for purchase or settlement by citizens through a reasonable method of distribution.
I doubt we have to re-create the Oklahoma land rush, but I’ve heard worse ideas, including this idiotic coin, or some other phony, make-believe “solution”.
@veryretired: I believe the US Federal government owns about 650 million acres of land. If they can average $1000/acre for that they’d raise about $650bn which would reduce the current US deficit by half for one year only. If they got $10000/acre average (highly unlikely I’d say) that would fund the deficit for 5-6 years. Then what? And who would (or would be allowed to) buy it? Presumably not foreigners, so only US citizens/corporations then. Which would reduce the price achievable drastically.
Face it, the US is broke. Its running European style spending rates but the population is only prepared to pay traditional lower US taxation rates. Something has to give. Either the spending gets cut back to what the tax revenue can support, or the tax revenue has to be increased by about 50%. You can start paying for petrol at $9-10/gallon like we do here in the UK, and 20% purchase tax on virtually all purchases, or you can cut spending by 30-40%, or a combination of both. There is no get out of jail free card by selling off Federal and State owned assets.
As I understand it, the coin trick cannot actually work. The authorization is to produce “bullion” coins (and proofs thereof). A “bullion” coin is one whose value is determined by the the material it is made of, i.e., it’s value reflects the value of gold, or silver or platinum. In order to mint a $1 trillion platinum coin, one would first need to buy $1 trillion of platinum. This kind of defeats the purpose.
At the same time, the fact that people would even consider such a move shows how utterly clueless they are. Debts are debts, printing money to inflate your way out of them is short sighted at best and catastrophic at worst.
selling the US land..
nice try
where would they get the money??
from banks??
they are already fully lent out on their deposits..
embutler:
I doubt that’s a real problem. If money is owed, it is owed to someone. Basically obligations would be paid off in land.
To a first approximation, imagine people buying the land with Tbills. (or accepting it in lieu of government entitlement spending… “Well, the farm subsidy bill says the fed owes you $50,000 in price support payments, well we’ll give you deed to 50 acres of land instead….” ) I’m sure it would actually be done with cash sales instead, and knowing the folks in DC, with a huge complex set of rules supporting crony access, but in the end the money isn’t the issue it is the value.
Having said that, Jim has something, especially in the sense that it is a one time fix. A lot of that land is pretty worthless, but some of it is *very* pricey real estate. I’d be afraid to try to guess how much it would average, but certainly once it is sold, it is gone. You only get one chance at this particular solution. OTOH, kicking the can down the road is a traditional pass time in DC, so who knows…
I may well be missing something, but IIUC, many US corporations are sitting on trillions of USDs, and are already using some of that money to purchase real estate in some parts of the country. (I had the links, but they are never quite on hand when you need them…).
Also, if I understood correctly VR’s suggestion, it was not about reducing the budget deficit, but about eliminating/reducing the existing debt. The former obviously cannot be solved through the sale of land, and has to be dealt with by reducing government spending. Whether there is enough Federal land that is valuable enough to make VR’s suggestion feasible, I have no idea.
Is it just me, or does this whole thing have a feel of economic/financial policy (to be slightly generous) being discussed and/or composed by lawyers?
As Midwesterner will recognize from his exposure to Paul Ryan, the following is what Congress should consider immediately:
Legislative Staff
Office of Senator _________
Russell Office Building 172
Washington DC 20510 January 10, 2013
Sirs:
The following is submitted as a suggestion for bringing back responsibility for the increases in the obligations of the United States (increasing the debt) to the direct attention of the legislative process. From the tenor of his statements, I gather that Senator _______ regards the so-called “Debt Ceiling” to be totally artificial and ineffective. The following is a rough attempt to formulate a replacement. Better minds will undoubtedly find better words and ways to achieve greater impact.
Replacing the “Debt Ceiling”
Current indications are that the net (reported and recognized) obligations of the United States have been, and are, increasing at the rate of approximately 60% of each dollar in collected revenues. Thus, for each $100 in collected revenues, the United States government, principally through issuance of evidences of indebtedness by the Treasury Department, increases its net outstanding (recognized) obligations by $60, to provide for expenditures and disbursements of $160. A very simple comparison will reveal that the expenditures and disbursements of $160 require the borrowing (and increase of federal debt) of at least 37.5% (60/160) of what is spent. That is approximately the record of federal expenditures over the past several years, and slightly less than currently.
So-called “Debt Ceilings” have been meaningless limitations. A new approach to matching the increase in the federal debt to the ability of the federal government to extract revenues from the private sector should replace that totally artificial device of the “Debt Ceiling.” The facilities for limiting the rate of increase in the net obligations of the United States should now be linked to the ability of the federal government to extract revenues from the private sector. As an initial approach to establishing that link, consideration should be given to legislation of the following tenor:
“Without application to, and authorizing approval, by Congress, The Treasury of the United States, and the agencies subject to its authority shall not increase the net obligations of the United States of America, within any 4 fiscal months, through the issuance of evidences of indebtedness or otherwise
–
“In excess of the percentages prescribed herein for the specified fiscal years of the greater of: (i) the average of one third of the revenues collected in the preceding 12 fiscal months; or, (ii) the revenues collected in the immediately preceding 4 current fiscal months.
“For the current fiscal year 45 %;
for the next fiscal year 30 %;
for the second following fiscal year 20 %;
for all subsequent fiscal years 5%.
“Any application for authorizing approval by Congress shall specify the disbursements to be made from the proceeds of any excess increase in the net obligations of the United States and shall provide in sufficient detail the accounting for the disbursements of collected revenues and authorized issuances of indebtedness creating the necessity for such an increase in the net obligations of the United States of America.”
The “secession flap” is anything but “loony.”
President Obama’s America is not the same country as Governor Perry’s Texas.
There is no consensus between scrapping term limits, allowing voter fraud to perpetuate a “majority,” gun control, ever-increasing welfare entitlement programs funded by paper money and Enron accounting practices on the one hand, and a relatively free society on the other.
Peaceful secession should prevent a civil war. In the case of Texas it can be agreed amicably, on the pretext that the Republic of Texas was a sovereign nation and therefore enjoys the right of self-determination (or does Obama really propose to pull the USA out of the United Nations!). It would give social democrats a majority in the rest of the USA for as long as their economic policies can hold. If their theories are correct, the Texan economy should collapse into deflation and its people beg for readmission. Or are the social democrats so sure a Texan republic would be a magnet for success?
R R S,
Along with many others who frequent these parts, I’ve completely abandoned any hope of repair or restoration of this iteration of government. I am trying to influence the choices and processes that will replace it. I would like to see us give the original constitution of 1787 and the most of the amendments a try. Even as it sits would be better than the unrestrained legal relativism that currently rules.
There is an energetic and organized campaign to slander the Constitution and to blame it for all of the ills that have in actuality come from abandoning it. Any restoration now is too little, too late, but we can at least defend the concept of limited government by demonstrating that what we have now is anything but.
Michael, yes, it has the marks of lawyer-think all over it. I am being reminded every day how lawyers will take nothing at face value but will take the attitude of “We don’t make the loopholes. We just find them.” Process becomes the purpose.
The meta-problem is the consequence of equating “legal” with “moral”. Moral activists assume the trust of office, abandon their oaths, and their desired outcomes drive the law-making law-enforcing machinery. Instead of enforcing the constitution and using its amendment processes when change is desired, they judge the constitution itself to be immoral and ignore it with their own blessing.
Another consequence is the belief that, as in this case, if a loop hole in a law can be found, then the deed itself becomes morally permissible.
A constitutionally restrained government is only as good as the constitution’s terms. A moralist government is only as good as its least trustworthy members.
Regarding secession. I doubt that secession in the form of states leaving the union will happen. What will likely happen is states coalescing along ideological lines and each claiming to be the one “true” government. One will make a moral claim to the title, one a constitutional claim. Since the “moral” group will quickly abandon the last pretense of constitutional restraint, they will have to declare a new government and engage in conquest to gain control of the states who elect to accept and return the terms of the existing constitution.
The trigger will be hyperinflation when transfer payments lose all meaning and incentive. At that point governance will become extremely liquid until new boundaries, both physical and constitutional, are established.
@ Rich Rostrum: OK, I’ll grant you that one exception!
@ Alsadius: “if the debt ceiling doesn’t get raised at some point, the President will have a legal obligation to spend money that he can neither raise by taxation, nor borrow, nor print in usual ways.” Actually, the only legal spending obligation of the Preident is interest on the national debt. That’s a Constitutional requirement (14th Amendment, Section 4). Everything else can only be spent if authorized by Congress, and even if authorized it can be unauthorized by Congress (either directly, or by failing to appropriate the funds, or by delining to raise the debt ceiling and thus prohibiting the government from issuing more debt). Far from being a “legal obligation” of the President, it would in fact be an illegal act.
@ Embutler: “where would they get the money?? from banks?? they are already fully lent out on their deposits.” Not so, not by a long shot. Banks currently have about $1.5 trillion of excess reserves on deposit with the Fed. (These are reserves which they are not legally required to maintain.) They do this because (a) they can’t find enough good loans to make (read the financial news; all banks are complaining about not being able to book quality assets), and (b) because the Fed pays them interest at a rate higher than they could get on equivalent Treasury bills. This was disussed extensively here about 18 months ago (see here). All of that money is available to lend right now. Plus, as Alisa has already noted, major US corporations are sitting on several trillion dollars of cash. They would be likely buyers of prime land, too.
The sale of federal lands is not a panacea; as has been noted there’s not enough to eliminate the debt, and it does nothing to stop the bleeding (the persistent deficit). However, it’s still a good idea, both because it would help somewhat and because it would shrink the reach of the federal government. It’s unconscionable that the federal government owns so much land (I’ve read that it owns 90% of all land in Utah, and large percentages of all the other western states); selling it off (or even simply deeding it over to the states) would reduce the federal government’s power (the BLM, Interior Department, etc.), and that’s always a good thing. And releasing that land for productive use would spark substantial economic growth (and, indirectly, increase federal tax revenues, although certainly that’s not a goal of mine!). Whatever happens with this platinum coin idea, selling of the bulk of federal lands would be beneficial on a number of levels.
“There is an energetic and organized campaign to slander the Constitution and to blame it for all of the ills that have in actuality come from abandoning it.”
Well said, Mid! It’s all a part of the Big Lie: that we live in a “free” society, that “capitalism” is the source of our problems (and that it is synonymous with “free enterprise”), that “deregulation” was the great evil and that government must regulate everything to protect us all.
I see secession as a real possibility, although I have trouble seeing how it could happen peacefully. A negotiated separation would likely entail the proportionate allocation of the existing national debt, which would cripple the states trying to free themselves from federal bondage and thus be unacceptable (unless, of course, the secret plan were to simply repudiate that debt following separation). And while there is a vocal minority pushing the idea today, I don’t think it’s all that large or that the general public, even in states such as Texas, would support it (yet). That may change after Obama pushes through some of his more radical initiatives (draconian gun control, amnesty for illegals, the full effects of Obamacare, greater regulation of our food, more tax increases, etc.). We’ll see.
@ M W & Laird (and others with similar hopes):
Perhaps these following perceptions of US conditions are pessimistic by reason of age as much as by reason of observation:
Large Swathes of of the American public desire and demand governmental organizations (at all three levels, local, state and federal) whose mechanisms they can use for ideological, economic and political objectives, fitting the respective interests of the particular swathes. As a result the bulk of the American public wants governments whose mechanisms they can use in their particular interests.
Concurrently, the earlier commonalities of principles, which served as the basis for the formulation of the constitutions of the several states and commonwealths, as well as the Constitution of the United States, have fragmented and altered, due to 150 years of increasingly intensified urbanization and resulting social restructuring in human interactions and the resulting relationships (including those with the physical nature of our surroundings); due also in part to the impacts of non-assimilated immigration with sustained cultural diversifications.
In this case, Humpty Dumpties did not fall, they have been crowded out and replaced, and we cannot put Humpty Dumpties back again.
It may be possible in some future “New Experiment” that a people will reflect on the value of governments of limited uses for ideological, economic and political objectives. But, for the peoples of our times in Western Civilization that type of experimentation or return to format does not appear likely.
Yes. Business as usual until the candy store is giving away empty wrappers, money that Zimbabwe style, can not purchase anything.Those swathes will throw one hellacious and futile temper tantrum.
Without the power of the purse, the PTB will need to resort to other means. Think about what “At that point governance will become extremely liquid until new boundaries, both physical and constitutional, are established.” really means. It may be a dry sentence, but it is a horrifying thought.
That’s certainly true, RRS, even in the states where there is the most vocal advocacy for secession (Texas et al). Which is why I don’t think it could be peaceful; too many people have their snouts too deep in the trough. As Mid says, at that point things will indeed become “extremely liquid”, with much of that liquid being red.
Alsadius: Oh. Collectibles. I see. Thanks for the explanation. :>)
Good post Mid.
From the context it should be obivious (even to people who have not spent a lot of their lives reading 18th century English….such as certain bad speller I could mention), that “regulate” means “make regular” – because the words are in the context of WEIGHTS AND MEASURES.
The words are actually used. But the establishment pretend they can not see them.
As for a platinum coin…..
Two problems…..
Firstly (according to Article One, Section Ten) only “gold or silver” coin can be made “legal tender” in any State.
“No Paul – the States can not make non gold and silver legal tender, but the Feds can…..”
What the ….. but let that pass.
The other “little” problem is that…..
One ounce of platinum is not worth one TRILLION Dollars.
It is more like two THOUSAND Dollars.
Still why let a little difference between “THOUSAND” and “TRILLION” bother us?
By the way – I have not read the thread.
So I aplogise if people have already made the points I have just made.
Let’s hope nobody looses the coin. America would be really stuffed if that happened.
Did they say that the coin would weigh one ounce?
Oh darn. And this sounded like no end of fun. Oh well, I’m sure there are many more entertaining departures of sanity yet it store.
Postscript:
It is doubtful that the evangel of Libertarianism can bring on new experimentation or return to the format of former times with respect to the uses made of the mechanisms of governments. While it is, of course, part of that evangel, it is altogether likely that only the recognition and understanding of the “costs” of those uses, and the impact of those “costs” will blunt those public desires and demands for governmental organizations whose mechanisms can be used for specific objectives in their particular interests. Those “costs” like those objectives fall upon the ideologies, the economics and the social structures impacted by political action. Some of those “costs” are beginning to become more widely apparent, with the displacement of religions, religious practices and religious influences on human conduct and interactions; more currently, the economic factors are being seen for what they are in reality though they may not be fully understood; the changes in social structures resulting from regulation of human relations through political activities have not yet been felt strongly or widely enough.
@Midwesterner: So, in summary, the ‘mint a trillion dollar coin’ idea failed to gain enough currency? 🙂
The penny must have dropped, Admin:-)
I suppose it was their over-inflated thinking, Alisa.
No, that would be their egos – the trend in actual thinking has been rather deflationary.
admin, yes, Hope® will have to carry on without (pocket) Change.
Alisa, have you lost your cents? Or just one of them?
They will attempt many more tricks until we are completely Fed up, you can bank on that. But I doubt any will be as entertaining as this one. The future tactics will be even bolder abrogations of the Constition, but will lack entertainment value and be undisguised blunt thuggery.
Mid, we’re still paying for the expedition that went looking for their marbles.
Weisenthal misunderstands the problem here: the coin damages the Fed’s balance sheet. This coin will be a non-marketable asset in its reserve, limiting its ability to engage in market operations.
For example, the Fed may want to reduce the value of the USD on forex markets in future. Before, it would sell US govt bonds and buy forex bonds to do this. Now, since it no longer has the US bonds, it has to issue its own.
the banks have no reserves..
they are fully invested and even gov reserves are earning interst..
to get that money back, the gov would have to pront new money…they spent what the banks gave them..
embutler, you simply don’t know what you’re talking about.
Alisa – you have got me, I just ASSUMED the platinum coin would be a one ounce coin (as the few have actually been minted are).
It may be that the Progresssives have a secret mine from which they can get enough metal to produce a giant coin………
I doubt it, but I can not prove it is not so.
And it would explain why they “only” suggest a one TRILLION Dollar coin (not a 16 trillion coin to pay off the national debt) – they have enough metal (from their secret mine) to produce a one trillion Dollar coin, but not to produce a 16 trillion Dollar coin.
So I have been unfair to them – and apologise.
Antoine.
Agreed.
Which is why, of course, Texas has asked for the physical return of its gold reserves.
Other States should also make preperations for a post United States situation – just in case.