Chris Hayes, filling in for Rachel Maddow, ran a story on the Trillion Dollar Coin (h/t Tom Hickey).
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You can’t stop the Coin, you can only hope to contain it
December 5, 2012 By
Comments
Congrats Carlos. Very cool.
Obama: “I will not play that game”
Meaning: Geithner out; Carlos in
P.S. Boehner on the face of the coin was also my original recommendation
superb report by Hayes, btw
Yes, it really got to the point of the Trillion Dollar Coin. It’s a tool to get around the debt ceiling. It’s also a demonstration of the power to create money by the government.
Right now, we give the power to create money (almost) exclusively to the banks. The government then borrows that money in order to spend it. It does not have to be that way, and probably should not exclusively be that way. It’s just the way our current system is setup.
Mike a comment is awaiting a moderator!!!!!
How did you know? Does it show up somehow?
I’ve been on the road all day and just now got back.
Nice comment too, btw
When I wrote it, it said, “Your comment is awaiting moderation” — The second link triggered the moderation!
Awesome!
Ha ha, thanks guys. I was telling JKH last night, the reason we’ve never seen the TDC before is because Congress has never been so stupid before. But beyond that, using the TDC couldn’t really work before the Fed was authorized to pay interest on excess reserves (with costs deducted from Tsy earnings rebate) by 2008 TARP bill.
Tsy (via the Fed) has to pay “interest” on the excess reserves created or maintained by the Coin in the form of IOR payments or the Fed will be unable to keep policy rate north of 0%. IOR rate is 0.25%, which is what 2 year Treasuries yield currently. This is how absurd our situation is, seeing as 3 month T-bills are at 0.10%, it is actually cheaper for our government to borrow money than to just create it out of thin air.
Beo,
I still believe that the law was passed intentionally – at least on the part of a Congressional staffer. At least the language on the statute and Bill would indicate to me that it was indeed that case.
Very much agree. This was intentionally put into the law by someone very smart.
Isn’t the Secretary of the Treasury’s ability to define the denomination of a platinum coin still constrained by the Administrative Procedures Act? That is, notice and comment, publication in the Federal Register, etc.
I believe that the APA does not apply – from the Wiki
Coining a platinum coin, and determining its denomination is not a rule or regulation. Further, the platinum coin act states
“In the Secretary’s discretion, may prescribe from time to time” sounds like standard rulemaking authority. Even price changes go in the federal register: http://www.thefederalregister.com/d.p/2005-04-08-05-7016 What am I missing?
Yes,
The notification has to take place – but only after the action has happened. In other words, notification prior to the action would not be necessary, and there would be no necessity for public input via comments.
And the notification could be something as simple as “Today xx/xx/xx the US Treasury sold coins worth $2 Trillion to the US Federal Reserve Bank”
Also, the Secretary of Treasury would not need Congressional authorization to use the coin to “retire” the “National Debt” – at the very least, retire the “deb” held by the Fed.
The Secretary would have to issue a Notice in the Federal Register for the price of the new coin (he’s also supposed to consult with the citizens coin advisory committee on the design– recycle an old design they’ve approved already).
The phrase that pays is… “Pursuant to the authority that 31 U.S.C. 5111(a) and 5112(k) grant the Secretary of the Treasury to mint and issue platinum coins, and to prepare and distribute numismatic items, the United States Mint mints and issues….”
The lag between new rule issued and new rule published (in FR) seems to run about a week (I imagine they can crash that schedule if necessary). In theory, a Notice is effective on the date of publication, but I’ve seen a Mint pricing Notice that was written December 29, published January 4 but effective January 1.
http://www.gpo.gov/fdsys/pkg/FR-2011-01-04/html/2010-33189.htm
That’s my first take on that. Were I were in govt, I’d call the Mint to confirm there’s no rulemaking issues and find out if anything else (Secretary’s design approval?) should be put in the Notice.
I think young John Hodgman is correct – there is zero chance of a TDC being minted.
It’s not quite zero, but it is low.
The impact of the Coin comes more from the idea than from the execution. JKH has pointed out there is little difference between minting a coin and borrowing money, at least from the point of view of the government.
The coin does at least two things:
1. It provides a “nuclear” solution to the debt ceiling crisis for Obama. He can play hardball knowing he’s got pocket aces.
2. It points out the government can make money out of thin air. We are having a massive national debate about affording something when we are sitting on a pile of cash. We don’t have a viable system setup to use the power today, but it’s entirely possible to “afford” to bring the U.S. economy at least back to the old NGDP trend.
It seems knowing the coin can exist is even more powerful than the coin actually existing. I wouldn’t recommend using the coin – I do think we would have some people absolutely freak out if it was used. But as a tool in pushing the debate, it’s perfect. Understanding the coin is the “riding the bike” of the money creation process. Once you get it, you can’t forget.
Exactly, Russia Roulette suddenly becomes less interesting once everyone realizes the gun isn’t loaded.
It’s entirely possible Obama would be forced to use the Trillion Dollar coin. He’s got to spend the money, and the debt ceiling precludes him from issuing more debt.
He’s got to do something at that point.
You Can’t Stop The Fire. #trilliondollarcoinsongs