Monetary Realism

Understanding The Modern Monetary System…

Coin of Destiny

People are starting to write about the Trillion Dollar Coin again, which can only mean one thing… Tsy is fast approaching the debt ceiling. Doing some quick math, i doubt Obama is going to make it Election Day without the debt ceiling being raised, ignored or sidestepped (you’d think when the White House was negotiating the debt ceiling hike last year, November 2012 might have crossed their minds as an important date to push the debt ceiling past).

Obama could cite the 14th Amendment to blow past the debt ceiling, Geithner could mint platinum coins, Bernanke could order the Fed to buy $2 trillion in postage stamps (I hope they’re Forever stamps so they’re hedged against inflation) or Obama could stick to form– stand firm for 15 minutes and then act like General Hull at the Battle of Detroit (“General Hull’s own forces still outnumbered those of the approaching enemy, but he did not know this. Feeling the situation within in the fort hopeless, he ran up a white flag and quickly agreed to surrender”).

I think its likely that Mitch McConnell will renew his proposal to give the President unilateral authority to raise the debt ceiling. Romney (and Senate Republicans) would surely want this outcome– 1. It avoids making the Republicans look like a gang of arsonists just prior to Election Day and 2. It’d mean that a President Romney would never have to worry about a debt ceiling vote. The problem here is I don’t think the House Republicans can be trusted to come in out of the rain, much less vote for something (McConnell’s plan) that both avoids a financial crisis and advances their own political interests.

I’ll put it to the floor, how do you think the debt ceiling issue will shake out this year?
UPDATE: Joe Firestone wrote in to point out Tsy has more headroom than I thought. Joe thinks (and I would have to agree) that Tsy can push this past Election Day, especially if they go into robbing Peter to pay Paul mode. So in the lameduck session we’ll have Congress simultaneously striving for tighter fiscal policy(vis a vis the debt ceiling) and looser fiscal policy(to avoid the fiscal cliff).


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72 Responses

  1. Robert Rice says

    So, I was watching CNN this morning as I do rather frequently, and one of the hosts, Fareed Zakaria, had a panel of folks on discussing the SCOTUS ruling on health care as well as the economy in general. On the panel was Peter Schiff as well as three others, and during their conversation on the economy, Fareed pointed out to Schiff countries which can print their own money aren’t having any problems with borrowing money to fund their commitments. In other words, bankruptcy isn’t a problem for them. He adds countries like those found in the EU are exhibiting concerns with bankruptcy because they cannot directly create money. Now, this is more or less a recognition and elucidation of the distinction between currency issuer and currency users, which is encouraging. However, in response and in predictable fashion, Schiff claims exactly what I argued above people along his lines will argue in response to the suggestion money printing is our savior: he indicated money creation is only going to lead to U.S. creditors terminating their lending to the government because such a policy leads to an ever falling value of the dollar (aka, inflation). He also indicated in this conversation one of the most irresponsible comments I’ve heard come from him, and that is: the Federal government does not have money it has not first taken from the non-government. No kidding, he actually said that virtually verbatim. Totally baseless, but a belief held by many.

    We can all be dismissive of Schiff as some fringe loon as well as those along similar lines, but he certainly isn’t be regarding as a nut. He is testifying before Congress, he’s running for Senate, a significant portion of the electorate shares his views, he’s regularly on the TV, etc. Those are facts people advocating for money creation shouldn’t ignore. It would also be to our own peril to ignore the fact that the arguments against money creation boil down to arguments against inflation.

    The dirty little underlying economic secret is that everyone just assumes the quantity theory of money is true. They don’t know it by name typically, but conceptually its the belief of the “heartland”. It’s why any suggestion of money creation is rarely coming out of anyone’s mouth, and when it does, it is immediately “rebutted” with claims of dollar devaluation/inflation. I was actually surprised and encouraged to hear Fareed even suggest money creation as a policy choice, but once Schiff responded, there was no rebuttal to Schiff’s “rebuttal”.

    If we want debt reduction and government deficit funding by means of money creation, we’d be better off not counting on “fate” and “destiny” (which equates to fairy tale luck) but on the recognition of facts and our collective repudiation of unsound arguments. If you want coining to happen, get to rebutting false beliefs on inflation. Otherwise articles like this sound more like an exercise in self-flattery and seeking hero-worship than it does in getting the policy actually implemented for the good of us all. There is no such thing as destiny, providence, or the sky fairies which bring them about. It’s up to you, to us to get’r done. Til then, you’re just a gambling man.

    • Tom Hickey says

      Robert Rice: “the Federal government does not have money it has not first taken from the non-government. No kidding, he actually said that virtually verbatim. Totally baseless, but a belief held by many.”

      Right. And the strange thing is that most people think that most of the money comes from the govt, and they also think that govt has to get money. Huge contradiction there.

      That’s the naive view. The “sophisticated” view is that money is created by the Fed, which is a private bank and the govt has to pay “the bankers” to obtain its own currency.

      It’s obvious that most people have not thought through what they believe, so one can tell them just about anything that fits into some belief that they hold. They just don’t see the contradiction in holding contradictory beliefs. Must be the result of their religious training.

      • Robert Rice says

        Exactly, Tom. There’s a good opportunity here to educate, to point out the contradiction, to get people to wrestle with their views, and to persuade them of what’s true.

    • Joe Firestone (LetsGetitDone) says

      I’ve been doing a lot of rebutting of false beliefs about inflation in a variety of posts. Cullen had a pretty good paper on hyperinflation sometime ago as I recall. Bill Mitchell, Randy Wray, and Scott Fullwiler have written a lot on inflation and hyperinflation, and Rob Parenteau, Marshall Auerback, John Harvey, and Eric Tymoigne have all made important blog contributions. I’d provide links; but I’d be picked by the spam filter here.

      If you just google the names above, coupled with inflation, you’ll be able to retrieve copious writing on the causes of inflation/hyperinflation from an MMT viewpoint. There are also at least two posts dealing a good bit with coin seigniorage and inflation by Scott and myself.

      Schiff’s views on this have been amply refuted many times before and will be again. But it will take years to change minds on this subject in the absence of a demonstration by the President that even a huge quantity of money created won’t be inflationary, provided: it’s not spent, spent only to pay off debt subject to the limit, or “deficit spent” only up to the point the output gap is closed.

      • Robert Rice says

        Joe, I wasn’t suggesting there’s never been a rebuttal offered from this side of the aisle directed at the fearmongering claims of inflation in relation to money creation as a prescription. What I meant to express was more an inquiry as to why, if we all have decided money creation is ultimately the means to the glorious end of economic vibrance, little to nothing is being written about it four months before a rather important election, particularly given almost no one agrees with us? We should supplement articles like the above. If Obama made the argument, I agree it would help a lot, but why don’t we do more on our end to help the President out? He can’t do it all, and he shouldn’t have to. Our republic is a team sport.

        There is an order of information dissemination in this country along the following lines: Theorists/academics argue amongst themselves, some end up with followers within the media who disseminates it to a broader audience (or the academics might make the effort themselves with books written to a more popular readership; I hope, for example, Randy’s new book is successful in reaching such), the populace listens and makes its own judgment, voting accordingly. Anyone who spends any time listening to news organizations knows Fareed’s comments are rare. Most don’t even make the money creation suggestion in response to austerians. Well, why? Democrats have largely accepted the Republican, anti-Keynesian argument which states we supposedly have a debt problem and that money creation is no way out since it will cause inflation. The fact is, if we were to evaluate based on numbers who’s been more successful in spreading their views, we’ve been much less so.

        It’s the “will be refuted again” you wrote about I was hoping to encourage. Saying we once upon a time wrote something on inflation that no one knows about is a great start, but why’ve we stopped if the idea is to beat the drum on money creation? I realize it might be “old hat” and “boring” at this point to write about why money creation doesn’t inherently cause inflation, but repetition and timing are key to get’n’r implemented. Instead we’re too busy watching Cullen/MMRers and the MMTers fuss because they can’t share the dump truck while playing together in the sand box. I’m half teasing, but really, if we all agree some pump priming would be useful, let’s at least get that done. We can argue about the JG later, with a much healthier economy and lower unemployment in the meantime. Maybe we can all put our differences, i.e. egos, aside for a bit and focus on what matters.

        Realistically, Cullen’s comments are the only one’s which may have reached any sort of significant numbers, and that’s maybe.

        There’s two problems all of the above listed names face:

        Problem 1) Reaching a non-academic, more popular audience. This means utilizing more common language so that the concepts can be the focus, not the reader’s frustration over new vocabulary (although I understand some new vocab is likely unavoidable; it can be minimized and not be an exercise in showing off, as it often is). Writing for other academics has its place, but you’re getting nowhere fast politically if you don’t use more common language, which is often left to the media who again don’t share our views. In addition, I would emphasize we all need to dispose of incorrect descriptions like taxes are equal to money destruction if we have any hope of being heard more broadly. Inaccurate framing is a self-imposed hurdle.

        Problem 2) Getting the arguments in front of the average voter with enough time for them to evaluate such. This is only going to happen via the media.

        And to add two more:

        Problem 3) Trying to hold one’s contempt for those of different views in check, as Randy for example seems to have difficulty doing at times. Value judgments about your “opponents” are of little utility–stick to rebutting arguments.

        Problem 4) Making it about the success of the idea not about the success of the individual promoting the idea. We need less heros, more just doing what’s right and letting the chips fall where they may. The boys who eliminated bin Laden aren’t out seeking your approval, so stop seeking theirs. We’re all heros if we all just do what’s right.

        Look, I realize an effort is being made, but I also notice MMT, MMR, or anything remotely similar is generally absent from MSNBC, CNN, Fox News (yeah, right), ABC, CBS, NBC, PBS, CSPAN, Comedy Central, etc., etc., etc. True, some are on TV occasionally. I saw Auerback’s recent appearance, for example. But wouldn’t it be useful to get Randy on Jon Stewart’s show for an interview related to his new book? He can make the argument to a more popular audience in a sympathetic context. All he has to do is just talk to the people respectfully, using straight forward language anyone can understand. MMT isn’t so complicated the elements we are talking about can’t be explained simply to people. We have the answers on paper, and collectively we have the people to get this done. By means of persuasive, passionate, but polite arguments, let’s appeal to our fellow countrymen for them to recognize that there really is a simple answer that really actually won’t hurt us.

        • Joe Firestone (LetsGetitDone) says

          I’m all for this, Robert. In fact, It would take me awhile to count all the pieces I’ve written advocating for deficit spending and paying down the national debt since beo made his first comment on the subject in late 2010. In fact, I think beo will agree that I’ve done most of the promoting of the idea since then. Many people have now written about the idea, and MMTers clearly have supported it as well as Cullen.

          But, you know, it’s hard to get everyone blogging about the same thing, and even when MMT bloggers start blogging about the coming crisis, they’ve preferred to emphasize the faux nature of the crisis, rather than how easily it can be solved by minting a very big coin. And even when people agree that PPCS can be effective in alleviating the crisis, there’s a wide range of political disagreement about how the politics of the kind should or would be likely to work out. Again, you can get a better understand of the political currents on this by googling for some of the posts I mentioned above.

        • Cullen Roche says

          I actually never endorsed the coin idea because I don’t think a politicians will ever put his name behind it since the public would likely view it as a political ploy to circumvent the current rules….

        • Joe Firestone (LetsGetitDone) says

          I know but thanks for publishing the piece anyway. We can certainly disagree on how the politics would work out.

  2. Cullen Roche says

    The fact that Schiff’s followers are an unruly bunch should have no bearing on how MMTers behave. Personally, I am seeing you guys veer more and more towards that sort of outlandish Austrian style rhetoric that discredits the thinking. Don’t attack fire with fire. And yes, the website is YOUR house. People can’t come into your house and spit in your face just because they’re jerks. If you think it’s “censorship” to ban or moderate people who can’t act like adults then that’s your perspective. But if MMT is interested in harvesting an environment that is conducive to learning and educating the public then some students must be told to stop talking in class and perhaps even kicked out of class.

    But again, it’s not my job to tell you guys how to run your websites. But I see a negative trend becoming worse in some MMT circles and it starts at the top. Reasonable people won’t engage you on any of this because the attacks are not worth dealing with.

  3. Joe Firestone (LetsGetitDone) says

    I just posted a piece talking to some of the above issues at

  4. Unforgiven says

    “in amounts the Secretary decides are necessary to meet the needs of the United States”

    Hmmm. “…. th Secretary decides…… needs of the United States;”

    • Clonal Antibody says

      Remember the coin just determines the available money supply, Congress determines how to spend the money. If the Congress decide not to spend, then the money just sits in the Treasury account.

      All this does is do away with the myth “The Federal Government can’t afford it.” How to spend the money wisely and how much to spend is up to the Congress, and ultimately to the people that elect them. If you or I choose to elect them, then it is us – if we let the elites determine who gets elected, it is them.

      • Joe Firestone (LetsGetitDone) says

        Exactly, I like to say that it fills the public purse; but Congress still has to open the purse strings for the money to be spent.

        • Tom Hickey says

          The Constitution gives the purse strings to Congress in UC Const. Art. 1, sec 8, including as interpreted by the courts, as I understand it.

          All the kerfuffle is the result of Congress not trusting itself with those purse strings.

          So it has imposed restraints on itself, like the debt ceiling.

          And delegated much of its power away to a board of unelected interested technocrats.

          In its infinite pusillanimity, Congress with the approval of the president handed a few bureaucrats command power over monetary policy to micromanage the economy using monetary policy to achieve its mandate involving production, employment and price stability.

          The US is running a command economy at the top because Congress unwilling to assume its constitutionally established role.

          What a bunch of wimps and losers.

        • Joe Firestone (LetsGetitDone) says

          Bought wimps and losers!

        • Clonal Antibody says

          Both the Debt Ceiling Law and the limitation on the issuance of US Notes came as a response to being on the gold standard. In 1862 when Lincoln issued the greenbacks and then in 1917 when Liberty Bonds were issued, the dollar could be exchanged for gold. So the concern on the part of the Congress was that there be sufficient availability of gold to cover the issuance of US Notes and Liberty Bonds. Hence in 1862, there was a limit of $250,000,000 placed on the issuance of US Notes, and then in 1917, the limit on the issuance of debt was placed. The 250.000,000 limit was later in 1863 raised to $450,000,000. It was not raised after that, and with the passage of the Federal Reserve Act, became moot, until the politicians started playing political football with the Debt Ceiling, and mislabeling the Public Debt as “Leaving the Future Generations in Debt” This of course coming from a deep misunderstanding of what money and debt are.

  5. Clonal Antibody says


    The wording of 31 USC § 5111 is

    (a) The Secretary of the Treasury—
    (1) shall mint and issue coins described in section 5112 of this title in amounts the Secretary decides are necessary to meet the needs of the United States;

    It says “shall” and not “may” or “can”

    Section 5112 gives the various coinage options available to the Secretary among them

    (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

    The platinum coins are the only coins, where the denomination is at the Secretary’s discretion (and is specifically stated as such)

    Coining standard coins to retire the debt could be done, but it is prohibitively expensive. The Treasury could issue US Notes – but it is prohibited from so doing because of Civil War era laws the First, Second, and Third Legal Tender Acts of 1862-1863 which ultimately limited the issuance of US Notes to no more than $450,000,000. This was done when the US notes could be exchanged for gold – after 1933, this was no longer possible.

    Therefore, the only unquestionably legal option to pay off the National Debt is the platinum coin option.

    I am not adding links to the statutes as this causes the comment to go into never never land. This links can be seen at the discussions at

    • Robert Rice says


      Thank you for the references. A few things:

      1. The question of whether the Fed can forgive debt remains open. I do not know whether it is legal for the Fed to do so. Your references don’t speak to this (which, to be clear, I recognize was not your intent). The question seems a reasonable one worthy of an answer. I do however understand and appreciate your point that we at least do know coining is legal, perhaps even mandatory.

      2. The problem with coining is a political constraint, not a legal one. Sure, the government could coin, but it won’t have the opportunity to do that if the populace votes all those politicians out of office for fear of their “inflation causing” proposed policies. And while the Treasury Secretary is not an elected official, he/she is appointed by one and confirmed by others. At a minimum, I wouldn’t think the politicians would pursue the policy in opposition to the electorate anyway. Remember, we are talking about the success of this policy proposal in relation to an important election shortly thereafter. If the electorate is worried about coining causing inflation, the politicians will never pursue it, unless they muster some courage from the Wizard of Oz or something.

      3. I’m not an attorney, so I do not know whether “shall” means “must” in legaleez. Assuming it does, the language certainly wasn’t compelling enough to coerce Geithner to coin previously. I wouldn’t count on it this time. You never know for sure, but if the past is any indication of the present, what’s more likely?

      • Dan Lynch says

        “If the electorate is worried about coining causing inflation, the politicians will never pursue it,”

        So the Fed would never ever pursue QE, even though all the right wing pundits have been screaming that QE would cause hyperinflation ? That the deficit would cause hyperinflation ? That hyperinflation is right around the corner ?

        The inflation-hawks on this forum reflect the forum’s right wing leanings. Poll after poll show that people don’t care about the deficit or about inflation, they care about JOBS JOBS JOBS.

        Sorry about my previous incomplete post, I have yet to figure out how to delete it.

        • Tom Hickey says

          IIRC, polls show that people overwhelming say that they are concerned with the deficit and also show that it is not a high priority as far as being an issue that say would influence their vote. As Dan says, the major voting issue is employment and the economy.

          It seems that people are not concerned with the deficit producing inflation but because they think high deficits either are an obstacle to job creation or destroy jobs by hampering investment, as they are being told.

        • beowulf says

          I think its simpler than that. Budget surpluses (or in this age of chronic trade deficits, relatively small budget deficits) coincide with full employment; and then during a recession the higher unemployment goes, the higher the deficit goes (as the automatic stabilizers kick in— income security spending goes up and tax receipts go down).

          The problem is is that many (most?) people have cause and effect backwards, they think a high deficit causes high unemployment instead of vice versa.

        • Tom Hickey says

          Agree. It’s based on the govt as household analogy which seems self-evident to naive commonsense, and it is also constantly reinforced by “experts.”

        • beowulf says

          Forum’s right-wing leanings? Considering that we (Cullen, Mike and myself) were early adopters of the Trillion Dollar Coin, not sure what your point is.

        • Cullen Roche says

          Not to mention we’ve all been inflation doves in recent years.

        • Michael Sankowski says

          Well I did shoot my hunting partner and force him to apologize on national TV to me, and then was part of Team B, so I can see why some might consider me to be right wing, despite my support for the TDC and 16% deficits.

        • Robert Rice says

          So the Fed would never ever pursue QE, even though all the right wing pundits have been screaming that QE would cause hyperinflation ? That the deficit would cause hyperinflation ? That hyperinflation is right around the corner ?

          What happened in the congressional and senatorial elections subsequent to QE1? I think the Democrats are still licking their wounds. Routed and ran out of town. I would regard this as fairly compelling evidence of my claim. We haven’t had an election since QE2 (which of course will be this coming election; interestingly, QE2 began in November 2010, about the time of the election You don’t think Obama, Geithner, and the Bernanke are worried about being thrown under the bus because of their economic policies? Sure, I suppose O/B/G could choose to become a trinity of martyrs and decide to coin, but again what’s more likely? It seems to me fair to assume the Obama administration actually wants to win re-election and will propose policy accordingly. So no, the Democrats don’t want “Inflation is Coming” in the headlines. A headline like “Obama Administration Proposes Money Printing: Economists Worry About Inflationary Fall Out,” would hand Romney the greatest campaign issue he could hope for right before the election. I’ll be entirely surprised if the Democrats fight that battle head on. They’ve had the occasion to fight it for years and haven’t. Why now?

          The inflation-hawks on this forum reflect the forum’s right wing leanings. Poll after poll show that people don’t care about the deficit or about inflation, they care about JOBS JOBS JOBS.

          There is no inflation, so there’s nothing to care about except the fear of future inflation, which the above headline would create and which the Democrats want to avoid creating.

          And people do care about the deficit. Why do you think austerity is so popular around the world? Watch the news. The entire lot of right wing radioshow hosts talk to their audiences about this regularly. “We have too much debt, we need austerity. We need to budget like any household.” Anyone who propose money creation as a mechanism to remove debt is automatically considered a fool amongst these groups because the policy will “debase the dollar, aka cause inflation”. “You’re just a Keynesian,” is what you’ll hear. Dismissed as not part of the gang. Try going over to Schiff’s Youtube videos and arguing with them if you want a taste of this first hand.

          Look, I agree coining money will work, I agree it won’t be inflationary in not done in excess, I agree if we could actually get it done, we should. We all just happen to live amongst a lot more people who don’t currently share our views. So the question is, politically, what’s going to work? If you want to print money to fund deficit spending and take inflation allegations head on, everyone better get on that bandwagon right now and beat that drum until election day. MMTers, MMRers, Keynesians in general–the whole gang needs to talk to all their neighbors, brothers, sisters, friends and enemies, and persuasively convince people they are wrong and to change their mind. We have about 130 days to convince enough people the government needs to create money. Considering human nature and the tendency to be intellectually dishonest, I’m not terribly optimistic. I suppose if people become worried enough, they might be more open-minded, i.e. learning the hard way tends to broaden one’s perspective. Is it bad enough, yet? If not, people are going to think the poison (austerity) is the antidote until they drink it and realize they goofed. The idea is to not have to goof first.

        • Joe Firestone (LetsGetitDone) says

          Robert, the President should not announce it; he should just do it — a fait accompli. Also, he may be able to do it only once because the Rs will immediately try to get a bill passed limiting the coining power. So, to make sure he solves the political problems caused by the debt and the ceiling, he needs to do a large enough coin so he takes the spending issues off the table. That’s the objective, not just getting around the debt ceiling.

          On the politics, I agree he shouldn’t do it just before the election. He needs time to educate after he does it. So, it must be done; or it must be done after the election. As I said above, he won’t have to confront the ceiling until after the election, and if he does it then, he’ll have plenty of time to SHOW people that there’s no inflation problem.

        • Robert Rice says

          Agreed, if he can put it off until after the election, we should be good to go.

        • Tom Hickey says

          “What happened in the congressional and senatorial elections subsequent to QE1? I think the Democrats are still licking their wounds. Routed and ran out of town. I would regard this as fairly compelling evidence of my claim.”

          Politically irrelevant as far as I can see. That was not one of the driving issues that resulted in high intensity on the right and low intensity on the left. The TP were whipped into an anti-Dem (and anti- GOP Establishment) frenzy by many issues much more significant to them like the Wal Street bailout (GOP Establishment was held to account for this, too) and “socialization” of health care by the Dem controlled administration and Congress. Progressive Dems sent a message to the president and establishment Dems, who they felt had punked them.

          The same dynamic is still in largely in play. Now the establishments of both parties are trying to bring their respective wings in line. Neither of the wings is satisfied with their candidate, presuming Mitt to get the nomination.

        • Robert Rice says

          I realize correlation does not equal causation, but to regard QE as insignificant and therefore non-causally related to the Democrats’ route in 2010 I believe is a poor evaluation of the political environment at the time. Here’s why:

          The entire world has been concerned about “excess debt” since the ’08 economic collapse. Ignoring default, there are three paths to dealing with this “excess”. We can:

          1. Print money to pay down the debt (or at least enough so the debt doesn’t increase).
          2. Cancel the debt (debt forgiveness, not default; I’ll be responding to beowulf above shortly on the legalities).
          3. Stop creating the debt to begin by reducing government spending commitments.

          The entire world has moved in the direction of 3, aka austerity, and they have done so because elected officials were voted into office who reflected the electorate’s opinion on this matter. Now, why has the world chosen path 1? Why is the entire world not pursuing direct money creation to fund its commitments? Is the Obama administration ignorant of path 1? Is the entire world ignorant of the ability of governments to print money? Of course not. The problem is a sacred cow, and that glorified pig is the idea that money creation causes inflation. It’s why we need the gold standard, supposedly, blah, blah, blah, you get the idea. Everyone’s considered path 1, and the majority reject it. Now, if you accept my argument thus far, let me ask: Do these same people not regard QE as money creation? Then how can QE have been irrelevant in 2010 elections, given they all viewed this as a money creative, eventually “inflation causing” economic time bomb?

          I agree QE alone may not have been a sufficient condition for a Democratic route, but add it to the other issues you mentioned, and it under the guise of inflationary money creation, was a significant concern and remains such. One of many straws that broke the camel’s back, if you will. If you want to see this opposition get even louder, convince the Obama administration to pursue route 1 instead of route 3, and we’ll see how little of a concern inflation was and remains when people vote in November. Maybe we can convince them of the truth between now and then, but in 2010, there’s no doubt in my mind QE as a money creative, supposedly inflation causing event was a concern.

          I should add, the opposition to health care and other government policies proposed by the Obama administration are opposed largely because, “We can’t afford it.” People like us respond by saying hog wash, we can afford it by creating the money out of thin air (or platinum). They respond by saying that’s idiotic, that’s Keynesian tripe, it’ll cause inflation. As long as they also consider QE as money creative, they oppose the policy and vote accordingly. They regard themselves as protectors of the value of the dollar and personal wealth, saviors of the people. I wouldn’t underestimate this.

        • Joe Firestone (LetsGetitDone) says

          I see the political argument continues. I’ve answered it in my reply above. It’s not an immediate problem; not even with a $60 T coin, and it won’t become a political problem later, provided that there is no serious inflation in the Spring of 2013, which is very unlikely because the lame duck session won’t provide stimulus anywhere near sufficient to do this, and the new Congress, even if it is highly democratic, which is very unlikely would have time to provide it before it was clear that the big coin didn’t create inflation.

        • Robert Rice says

          Your argument is predicated on the debt ceiling not arising as an election issue. I, beowulf, and others here find that unlikely. If it doesn’t come up, that’s fantastic. In the more likely event it does arise, invoking money creation is undoubtedly going to be met with the opposition I’ve detailed throughout this correspondence. It’ll throw fuel on a burning fire. Underestimating that opposition would be strategically foolish.

        • Joe Firestone (LetsGetitDone) says

          It may come up, Robert, but Obama doesn’t have to do anything about it until he’s near the ceiling. he doesn’t have to talk about it or say what he’ll do about it. He has enough money (my latest calculation is that he has $800 B of headroom) to avoid it until at least after the election.

          I wish he’d do the $60 T coin now. If he did, he could prove there’s no inflation problem by October, but the longer he waits, the less feasible it is to do it until after the election for the reasons you’ve mentioned

        • beowulf says

          I take Joe’s point that Tsy should be able to push the event horizon past Election Day. However, it will certainly be a campaign issue.
          What the Administration should do is steal a march on the Republicans and deposit the coins now, sure it will drive the gold bugs and the like crazy with inflation fears, but when inflation is no higher between now and November, the critics will just look stupid.
          I’m still counting on Obama to go back to the well with his Please. Don’t. Hurt. Me. approach.

        • Robert Rice says

          As I noted above with Joe, it won’t matter if the coining isn’t operationally capable of causing inflation or whether in four months inflation is empirically absent; the pro-austerity crowd will sell it as part of a package of economic policies which they will claim are debasing the value of the dollar (they might not call it inflation, because there won’t be any as you noted, although they might sell it as impending future inflation). I can hear the fearmongering now, “Just you wait and see. The President is pouring fuel on the fire of the coming economic collapse by destroying the value of the dollar with his unbridled money creation policies. Oh my god, we’re all going to die from spontaneous combustion if we don’t get this wreckless President out of office.”

          The bottom line is, strategically this doesn’t seem clean to me. There’s other ways to skin a cat. Is this our best route? It might be better for Obama to get into office first and then do something like the coin proposal when his reelection is irrelevant and there are two years before the next congressional election, and hence time to really show this worked. Save it for a trick up his sleave if you will. We’ll need a pro-government spending President in six months.

        • Tom Hickey says

          I think that there are two voting blocs that are in play that the Dems are taking into consideration, or had better be. One is the independent voters and the other the progressive wing. Moreover, different voters of both blocs have different priorities regarding jobs and the deficit. The Dems have to make the case that jobs and the economy are the issue and the deficit advances this objective short term and can be dealt with longer term.

          What they should say is that growth promotes the economy and jobs, thereby reducing automatic stabilization and increasing revenue, shrinking the deficit. But they won’t.

        • Tom Hickey says

          Obama is already in serious trouble because the race is close but the intensity is on the right. The GOP is fired up to beat Obama and the Dems are luke warm about re-electing him. So the “even” poll numbers may be deceiving. It’s not even when intensity is added in but rather sharply tipped anti-Obama (not necessarily pro-Mitt though).

        • Robert Rice says

          Adding fuel to a burning fire isn’t good politics. That’s my point. Coining is one way to do the right thing, but the Obama administration is not likely to actually invoke coining and provoke his political opposition, not unless after floating the idea polls suggest there’s majority support for it (which I highly doubt for the aforementioned reason). Given austerity reigns around the world, I think we have a pretty good idea opposition to money creation as a means of reducing public debt is the better part of anathema to the majority.

        • Joe Firestone (LetsGetitDone) says

          I agree he’s not likely to do it. That’s one of the reasons why he’s such a terrible President. Good president’s lead the polls. They don’t follow them!

        • Cullen Roche says

          Nice to see you guys really cracking down on the insult-laced rants at your various sites. You do know these commenters are detracting from MMT, right? Having people call me moronic and doofus all over yours sites doesn’t help the MMT appearance. FYI.

        • Tom Hickey says

          Mike sets the tone there, and our boundary conditions are loose. No threatening the president.

        • Tom Hickey says

          FDO15, what are you talking about specifically. I was just over at that thread at Warren’s and a search turns up 58 hits on FDO15, with many of those yours, and some replies to you.

          I thought the discussion was more heated than it needed to be, but it got rather nuanced and brought out some good points and I learned some things.

          All of us might get more love and understanding by being less confrontational and abrasive. After all, this is not religion.

        • Tom Hickey says

          This is why we don’t delete stuff at MNE. We would prefer to let people come to their own conclusions. Warren makes the calls at his site though, and he sets different boundaries.

        • FDO15 says

          You are liars and hypocrites. I just had a series of comments censored and deleted from Mosler’s website for pointing out operational facts that MMT misunderstands. Not only do you all contradict yourselves all over the place, but you’re liars and hypocrites.

        • Cullen Roche says

          FDO, your comments could use some of the same advice. You’re not always exactly cordial with everyone (including me). And given your adoption of some of the MMR ideas it would be nice if you made an effort to express those ideas in the same manner that I’ve mentioned to Tom here. Thanks.

        • Tom Hickey says

          Again, that’s your view. The position at MNE is different.

          If someone calls you a flaming asshole — such invective is regularly hurled at Mike by the goldbugs’ followers — and you object, delete their comments, or ban them, then you charged with being a pussy that can’t take criticism and are in denial about your position. Mike has chosen to let it stand and shrug it off in the interests of open comments, including the anonymous option, with no censorship.

        • Tom Hickey says

          I appreciate your position, Cullen, and respect your reasoning and decision about how to position this venue. There’s a lot to be said for taking the high road.

          However, the other side of the argument is making the web censorship free and letting users do the censoring themselves. I don’t read every comment at MNE, for example, since I don’t have time to waste on things that I regard as other than high priority. Those who engage in invective and personal attacks are not worth paying attention to anywhere. I might step into an exchange if I think that the heat is getting to be over the top though, just to get things back on track rather than to come down on anyone. So far we have had no real nut jobs show up that we have had to ban for being way out of bounds, thank goodness.

        • Cullen Roche says

          People are like banks. They don’t regulate themselves. And if there’s no one there to regulate them they’ll screw you over. :-)

        • Cullen Roche says

          I’m not going to tell you how to engage with your audience, but I can assure you that those of us who have criticized MMT from the MMR position (its original 4 founders) are not bad people and are not out “to get” MMT. We’ve criticized MMT from an operational perspective that we believe is not entirely accurate. Our intent is actually incredibly honest and done with good intentions (to provide the world with a more accurate description of the monetary system). But for some reason we keep getting attacked by your audience for no reason other than the fact that we disagree with some of your positions. So your side is intent on attacking perfectly reasonable and well intentioned people with persistent ad hominems and unreasonable responses. MMT has a public perception problem because MMT’s founders and primary advocates allow that to persist on their websites. In fact, many of the founders engage in this behavior themselves. I’m not the beacon of responsibility and virtue (and at times have had moments of weakness that I regret), but I do try very hard on my various sites to keep the tone and rhetoric mature and generally positive. I’ve even banned some of the people who spend time criticizing MMT in unreasonable ways (such as FDO who has been banned from Pragcap). I don’t expect you guys to follow our lead, but the MMR site is virtually free of this sort of immature and petty behavior and I think that adds credibility to our work and generally makes the environment more conducive to learning and understanding. MMT might try to adhere to the same level of moderation of its users while also understanding that everyone who ever criticizes the MMT position is not an idiot or a moron just because they disagree. It is not helping your cause to engage people in such a way and in fact, with the exception of you and a few other MMTers, I totally refuse to engage MMTers on other sites or even here and I know a lot of other reasonable people adhere to the same approach now. You’re totally isolating yourselves by acting like this and allowing this “loose” talk on your sites. It’s really hurting your cause just because you guys can’t engage in reasonable and mature conversation. I’d work harder on this public perception and start cracking down on some users who clearly can’t control themselves. But that’s just my humble opinion.

        • Tom Hickey says

          That should be Schiff’s followers. Not implying Schiff himself or that he sent them, of course.

        • Tom Hickey says

          BTW, have you seen what Schiff’s and other nutjobs that Mike attacks have had so about him there? The profanity alone would justify taking them down. We don’t censor. Period. The only thing that goes is spam that occasionally gets through the filter and sometime we even miss that.

      • Dan Lynch says

        “If the electorate is worried about coining causing inflation, the politicians will never pursue it,”

  6. Robert Rice says

    Is there any sign of an Obama administration reversal on the 14th amendment as a means of raising the debt ceiling? The administration considered the 14th amendment a year ago after Clinton suggested using it, but they rejected the idea, finding it legally unpersuasive:

    I would have to agree with the Obama administration’s legal assessment of Section 4. I suspect Clinton is approaching his “rule bending” thesis more from a political angle, particularly given he’s demonstrated one can bend rules as President (which I realize is an understatement). What’s Congress going to do, put the first black President in prison because he was trying to spare the country from the fall out of voluntary default? Yeah, right.

    Given a large portion of the country regards any form of money creation as inherently inflationary, coining the billion, trillion, or infinity coin will be fought tooth and nail in the name of preserving the value of the dollar. While this position is of course grossly mistaken, do you really think the Obama administration is going to want an argument a few weeks before the election on whether money creation is inherently inflationary? The debate would be good for the country to have, but politically that’s awfully risky. There are a lot of people who have incorrect beliefs on inflation. I could see a lot of independents making an honest mistake and voting against the money creation crowd (of which I am one) in favor of the Republicans (austerity is winning politically around the world these days). If Obama plans on beating that drum, he’d be wise to start now to give people time to consider his rebuttals against the inflationistas. I don’t see that happening, although stranger and more unlikely things have occurred.

    As an alternative, why can’t the Fed forgive the Treasury’s “Fed debt”? Are there specific legal hurdles? If the Fed were to do this, it would reduce the quantity of total debt dramatically, nullifying any reason to raise the debt ceiling in the immediate term (if ever), while making it difficult for the “money creation is inherently inflationary” crowd to argue hyperinflation is around the corner as a result of this policy, given no money is being created. While this may be construed as some kind of default, that claim seems much easier to rebut and convince people is false versus trying to persuade everyone in short order money creation is not inherently inflationary (which, as evidenced by conversations on this an many other websites, has about a snowball’s chance in hell of success between now and the election; too many of them hold their position as unfalsifiable; maybe enough independents could be persuaded, but this is pretty darn risky and unlikely without at least a very persistent and vigorous effort). Forgiving a debt is not the same as failing to pay a debt. Conceptually, that’s pretty easy to follow. Rebutting analogies would abound–imagine a husband and wife; wifey borrows money from hubby. Hubby forgives wifey’s debt, saying, “Don’t worry about paying me back.” Has wifey defaulted on the debt? Of course not. Forgiveness is not equivalent with failure to pay. The government forgiving itself the debt it owes to itself is not default.

    It seems to me the Republicans would have a difficult time rebutting this versus the Democrats trying to persuade a large enough portion of the population they are wrong about inflation. Most people would say, “Yeah, why can’t the government forgive debt it owes itself?” Most people don’t even realize this is the nature of a significant portion of the debt outstanding, so bring it to people’s attention while the idea is fresh and people are open-minded about it, would at least give the idea a reasonable chance between now and November. In other words, people generally don’t have prior economic commitments preventing them from considering the idea, as they will against direct money creation. I think people will have a bit of a “Duh, why didn’t we think of this sooner,” reaction.

    • Joe Firestone (LetsGetitDone) says

      “Given a large portion of the country regards any form of money creation as inherently inflationary, coining the billion, trillion, or infinity coin will be fought tooth and nail in the name of preserving the value of the dollar. While this position is of course grossly mistaken, do you really think the Obama administration is going to want an argument a few weeks before the election on whether money creation is inherently inflationary?”

      It won’t happen before the election because the President still has $656 B in headroom before the debt ceiling is reached (See Daily Treasury Statement, June 20, 2012). It will happen after the election. My hunch is November, though there’s enough money there to last until the new Congress comes in in January, if Obama wants to continue deficit spending at the rate he has been this fiscal year. In any event, during the lame duck the President could have that debate about money creation being inflationary. Let’s say he creates $60 T and uses it to repay other Government agencies and the Fed on November 15. That will reduce the debt by 6.4 T bringing it down to $9.3 T or so.

      Since none of that money will be spent into the private economy, beyond normal entitlement spending, there won’t be any inflationary impact. The Treasury has been rolling over close to $4 T in debt instruments every month. most of that is probably short-term debt. So by the end of the year our debt subject to the limit will be down to $5 T or so and we will find out by the first quarter of next year whether paying down the debt using seigniorage in inflationary. If it isn’t, as MMT and, I believe MMR, both conjecture, then the fight will be over, we’ll probably be down to about $3 T remaining longer term debt to be paid off as it comes due, and both the debt terrorists and the inflationistas will have to fall silent. Obama will have won the political fight and he will still have more than $45 T left to cover future deficit spending.

      In short, I think the political argument against huge value PPCS falls to the ground, especially since people will love the idea of no more national debt, especially people who, not knowing MMT or MMR, believe that our national debt is fiscally unsustainable and fiscally irresponsible.

      • Robert Rice says

        I should add Joe, as I missed addressing this particular point of yours previously: It appears you were also arguing that even if the debt ceiling arises prior to the election, proposing the trillion dollar coin to pay down debt won’t be as politically problematic as I’m claiming because the coin is simply going to pay the Treasury’s “Fed debt”. The voting public will realize the money isn’t headed into the economy, it’s headed into the Fed’s coffers and nothing more. It therefore cannot cause a rise in prices. The problem with this argument is; while I agree the trillion dollar coin isn’t headed into the economy itself, the coin reduces the Treasury’s aggregate debt which allows the Treasury to borrow more money from the non-government sector (NGS), which is what it will need to do to fund the deficit. And when the Treasury borrow more from the NGS, what’s the Fed do? It comes along and LSAP aka QE asset swaps it. Or to put it another way, when the Treasury borrows from the NGS, the Fed then creates new money and swaps that new money for the treasuries. This means the Treasury owes the Fed again. Now what’s the Treasury do? Sends the Fed another trillion dollar coin. The pro-austerians will bury us with this. This series of events does create money which does end up in the economy by means of asset swaps and eventual government spending. Hence, in their eyes there will be meat to the claim this policy will be inflationary. It won’t be inflationary in reality insofar as the money creation isn’t done to excess (which a single trillion or two is hardly excess, it’s what we need at least), but their quite correct rebuttal to the claim “no money ends up in the economy” will only reinforce their confidence in their worldview.

        And it isn’t as though the Fed can promise to end QE. To do so would eventually cripple the NGS’s ability to lend to the Treasury. The NGS as a currency user only has so much money, and that money ultimately has to come from the Fed or the Treasury. Eventually the NGS won’t want to lend to the Treasury as it will have been sucked dry of its monetary holdings.

      • Robert Rice says

        Joe, we already agree the political constraint to coining is based on a false belief. The point was, this false belief will be invoked in opposition to coining, and this opposition is likely to be a real problem in the event it surfaces before the election.

        The scenario changes dramatically if the debt ceiling isn’t an issue prior to the election. I don’t think we’ll be quite so lucky. I hope we are.

    • beowulf says

      “Forgiveness is not equivalent with failure to pay. The government forgiving itself the debt it owes to itself is not default.”
      The Fed governors are granted broad authority by the enumerated powers in the FRA but not unlimited authority. Congress neglected to add the power to give away Fed assets (sure its all part the government, but then so is the Social Security trust fund and SS trustees aren’t authorized to give away Social Security-held T-bonds either) . The Fed governors would leave themselves open for just cause removal by the President (I hear tell there may be a new one this January) as well as criminal prosecution for waste of Federal Reserve assets.

      “Whoever… without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency {the Fed is, after all, a government agency] thereof… Shall be fined under this title or imprisoned not more than ten years, or both.”

      –The platinum coin option is legal under both current law and the Constitution.
      –The 14th Amendment option is illegal under current law, but is legal under the Constitution (which trumps any law.. assuming the courts don’t disagree).
      –The Fed governors intentionally wasting Fed assets is illegal every which way you could imagine, up to and including removal from office and felony convictions (and since there’s no legal authority to dispose of Fed-held T-bonds in this way, there’s no legal authority for Tsy to remove them from public debt subject to limit).

      • beowulf says

        As a legal matter, the Few governors would be maniacs to even consider wasting Fed assets when the platinum coin offers a safe harbor that solves the problem while complying with all laws.

      • Robert Rice says

        “Forgiveness is not equivalent with failure to pay. The government forgiving itself the debt it owes to itself is not default.”

        The Fed governors are granted broad authority by the enumerated powers in the FRA but not unlimited authority. Congress neglected to add the power to give away Fed assets (sure its all part the government, but then so is the Social Security trust fund and SS trustees aren’t authorized to give away Social Security-held T-bonds either) . The Fed governors would leave themselves open for just cause removal by the President (I hear tell there may be a new one this January) as well as criminal prosecution for waste of Federal Reserve assets.

        I don’t want to be too nitpicky as you may have meant what I meant, but for clarity’s sake, I wasn’t suggesting the Fed should give away their assets, rather they might cancel/forgive them. Perhaps that is what you meant. Anyhow, you continued:

        “Whoever… without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency {the Fed is, after all, a government agency] thereof… Shall be fined under this title or imprisoned not more than ten years, or both.”

        –The platinum coin option is legal under both current law and the Constitution.
        –The 14th Amendment option is illegal under current law, but is legal under the Constitution (which trumps any law.. assuming the courts don’t disagree).
        –The Fed governors intentionally wasting Fed assets is illegal every which way you could imagine, up to and including removal from office and felony convictions (and since there’s no legal authority to dispose of Fed-held T-bonds in this way, there’s no legal authority for Tsy to remove them from public debt subject to limit).

        1. Agree with bullet point one.
        2. You’re suggesting then current law and the Constitution are in conflict? Damned if you do, damned if you dont in other words, although following the Constitution is to follow the rule with greater primacy? How does the Constitution grant the President the right to raise the debt limit? He disagrees, and I would have to agree with his legal team on their interpretation of section 4 of the 14th Amendment. Obama would have to argue raising the debt ceiling was needed to fund commitments related to suppressing insurrection and rebellion, which is a stretch it seems to me at best.
        3. If canceling debt is regarded as “disposing” (as in destroying) of government assets, then point granted, debt forgiveness appears to be illegal. Disposing in this context means “throw away” and not “disperse”? If so, as an aside it is ironic MMTers claim tax payments are in reality money destruction… One more nail in the coffin of that as a description. I suppose we should all be in prison.

        Assuming debt cancellation is illegal as per your reference (as it appears it may in fact be), the Fed then cannot forgive the Treasury’s debt until the law is changed. I’m not sure how likely or realistic it would be to change the Fed’s authority to have the option to cancel the debt between now and the election, but it is a possibility which could be elucidated as part of the aggregate policy proposal. I’m not entirely sure what that process would entail.

        Regardless, there is a potential alternative along the same lines of this debt cancellation route but which technically wouldn’t be cancellation. I’ll be curious if you are aware of any legal obstacle. Why couldn’t the Fed, in cahoots with the Treasury, alter the maturity date on some bonds to a much shorter period so that they mature soon, whereupon the Treasury pays off those bonds out of what cashflow the Treasury currently has available, and then upon receipt, the Fed returns the principal as it does with the interest, but in a more timely manner? It’s paying while receiving the payment back after debt satisfaction, a sort of cancelling without technically cancelling. I’m not sure the maturity date would even need to be altered. To my knowledge it would be unorthodox, but I suppose the Treasury might prepay off the bond (perhaps treasuries have an anti-prepayment clause?).

        If nothing I’ve suggested would work out realistically, and if money creation is our only hope, and if then the fear of inflation in relation to money creation must be confronted directly, it’s going to take a persistent, concerted effort to persuade a lot of people they are wrong about inflation in a relatively short period of time. We can all try that and see what happens (as has been going on now for years), I just don’t know how politically realistic that is to achieve before this election. I regard it as more likely people have yet to figure out they have economics butt-backwards, recognizing austerity is a poison not an antidote. We have a serious uphill battle ahead of us.

    • Dan Lynch says

      Poll after poll shows that the #1 concern of voters is jobs. Inflation isn’t even on their radar screen.

      Regarding the legality of the 14th amendment option, who is going to say no ?

      SCOTUS will not hear any case unless the plaintiff has legal “standing.” This requires that the plaintiff has been harmed or is in imminent danger of being harmed. It’s hard to imagine who would be harmed by ignoring the debt ceiling ?

      Even if SCOTUS were to hear the case, and did shoot it down, Obama could still say “hey, I pulled out all the stops to make sure granny got her SS check. ” Obama would look good, conservatives would look bad.

      Impeachment is not going to happen because that takes 2/3 of the senate and the votes are not there. R’s could make noise, could impeach in the House, but it would die in the Senate. Again, R’s would look bad.

      My personal take is that Obama *WANTS* a debt ceiling confrontation after the election, because he wants an excuse to cut social programs. That’s what Neoliberals do.

      • Robert Rice says

        And as far as your argument Obama’s legal evaluation of the 14th amendment is irrelevant to using it nevertheless to accomplish the goal of raising the debt ceiling, frankly, I don’t mind having a President who is unwilling to bend the rules after evaluating that the rule does not actually grant him the authority to raise the debt ceiling. That sounds to me like good stewardship of the law. As President, he should have such a concern, and we should appreciate him for it. It is good he isn’t willing to walk in Clinton’s footsteps.

      • Robert Rice says

        While I think you undestimate the concern of inflation amongst the populace, my argument does not even depend on inflation being on people’s radar screen currently. It depends on people having inflation as a concern if the President suggest money creation as the path around the debt ceiling. That suggestion will put inflation on the radar screen–front and center, and just before the election no less.

        Have you not noticed the virtual agreement amongst Republicans as well as many Democrats for that matter over what will happen if the U.S. prints/coins money? I can hear it now, “The inflation is coming! the inflation is coming! We need austerity! These people spend wrecklessly!” Best of luck overcoming that false belief between now and November. People aren’t generally intellectually honest, particularly amongst that group. Some are, but most aren’t. Don’t get me wrong, the false belief should be rebutted persistently and vigorously, but it seems to me strategically better to catch people off guard with a policy path they haven’t really considered versus trying to rehash whether money creation is a sufficient condition in all circumstances to cause inflation. People already believe it is, so that’s an uphill battle. My suggestion makes it a downhill battle for the Democrats, uphill for the Republicans (assuming no significant legal hurdles). Switch it up on’m for the sake of the country and its economy.

  7. Dan Lynch says

    Does the Fed really have the authority to buy postage stamps ? And how does that help the Treasury ? Are USPS “profits” swept into the Treasury ?

    I enjoy your iconoclastic ideas, Beowolf.

    • beowulf says

      Of course it can buy postage stamps (though I’m sure its mailroomuses a postage meter). How does the Fed buy anything? It would simply credit the bank account of whatever it was buying (its not like it needs to go to Congress for an appropriation). So, it could prepay its postage by, say, $2 trillion.

      The USPS account would then credited with that sum. I believe that Congress must vote to sweep USPS surpluses into TGA (I could be mistaken on this) however, Tsy can BORROW from the USPS at any time and since USPS a govt corporation, its not subject to the debt limit.
      The hole in this plan is that the USPS gets beat up enough by Congress as it is, there’s no way its board would go anywhere near this idea and risk Congressional Jihad.

  8. Detroit Dan says

    Glad to see this and other new posts here at MMR. I’ve learned a lot from you guys. I’m actually beginning to appreciate the law a bit because of the informative posts by Beowulf, not to mention the history of my hometown (Detroit).

    I think McConnell and the other Republican leaders will be successful in dampening the Tea Party revolt. The big money will prevail, although there will be enough noise to make everyone uncomfortable…

    • Tom Hickey says

      “I think McConnell and the other Republican leaders will be successful in dampening the Tea Party revolt. The big money will prevail, although there will be enough noise to make everyone uncomfortable…”

      I think this is likely correct. The GOP Establishment is already pushing back the TP and the Democrats are still ruled by the Establishment. It comes down to the conflicting interests of the money bags. The ultra-right billionaires are baking the TP, but the business establishment really, really doesn’t like social turmoil and deep political division because these are bad for the economy in general.

      One reason that business is not investing is, of course, lagging demand. But business is also uncertain that going all in with investment will result in increased demand in this kind of social and political environment. People are just into chomping at the bit to run out and buy. They are worried, and not only about their finances. Many are seeing the present US and global situation as borderline chaotic. This is not an encouraging environment for increasing firm investment. The financial markets confirm this this, with high value being placed on safe havens.

      So I expect the establishments of both parties to realize than the big donors want to see progress rather than chaos. Putting the US at risk of default to make a political point is perceived by many to be chaotic. Look for a backroom deal that saves face for the counterparties.

      At the same time, I think that President Obama should take President Clinton’s advice and forcefully declare that he will neither stand by let the US default, nor let the threat of default scare him into accepting terms that he deems not in the public interest overall.

      • Tom Hickey says

        Should be “People are just NOT chomping at the bit to run out and buy.”

        But you figured that out already.

  9. Joe Firestone (LetsGetitDone) says

    On the question of whether what will happen this time around, I think that depends on whether we come to the ceiling in October or November. If October, then I think the President may go out of character and use the 14th, or the Trillion Dollar coin, or even your latest consols idea (which he may prefer because it can be seen as a slick merely technical solution taken to maintain the status quo) to avoid giving away stuff on key entitlements. He won’t want old people going to the polls and voting disproportionately for Romney, or progressives staying home, because he gave away SS and Medicare and other important “discretionary” programs like HeadStart and accepted tax cuts for the rich without a fight. He also really doesn’t want a Republican Congress next time even if he wins, because then, they’ll try to impeach him.

    So, he’ll fight this time if it’s in October. If it’s in November, however, then, if he wins the election, I think, he’ll do kabuki, make some BS statements, and do something in the Bowles-Simpson framework, but with more in spending cuts and less in tax increases than the Ds want. Judging from his past behavior, I think he’ll start negotiating from Bowles-Simpson and then end up with a “compromise” that’s much worse from the viewpoint of progressives. He’ll do this especially, if the Rs win control of Congress, but even if the Ds win both Houses, he’ll still do that, because I think is vision has always been to get rid of the New Deal as much as he can, and to implement neoliberalism more fully.

    If Romney wins finally, I still think that Obama will try to broker a deal based on Bowles-Simpson and will probably call Romney in to bring some of the Republicans over. So, given all the possibilities I think it’s November for the crisis and then a settlement using Bowles-Simpson or some variant of it and that the middle and working classes, seniors, and the vulnerable take another big hit from the austerians.

    What Obama should do is to take the whole debt ceiling issue off the table now and for the foreseeable future by minting the $60 T PP coin, and follow by paying down the debt subject to the limit drastically by pressuring the Rs with massive stimulus bills that won’t involve any “deficits” in the sense of a gap between revenue and spending. I’d like to see the Rs oppose massive spending to get the economy going, or Medicare for All, when the money to pay for these is already in the Treasury General Account (TGA). Good luck with that!

    • Detroit Dan says

      Thanks Joe. I’m guessing they (Obama, McConnell) will try to delay the real decisions until after the election…

  10. beowulf says

    “Quite a big issue you got rolling there…”

    I focus on the big issues, I leave it to Pinterest enthusiasts to hash out the small ones. :o)

    The Speech or Debate Clause gives Members of Congress pretty broad immunity for their official actions, so they couldn’t be prosecuted or expelled (impeachment is for Executive or Judicial branch malfeasance) on the basis of how they vote on an issue.

  11. Michael Sankowski says

    I head Sean Hannity raise the 14th amendment issue just yesterday. It has the hard right scared.

    It opens the Hannity/Limbaugh wing up to charges of anti-constitutional behavior. It also opens up anyone who votes for the debt ceiling to impeachment prosecution, because they are a public official questioning the debt of the United States.

    Quite a big issue you got rolling there…