Krugman Supports the $1 Trillion Coin; I Support the $1 Quadrillion Coin


By Mish   Follow   Mon, 7 Jan 2013, 9:36pm   740 views   12 comments
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Krugman Supports the $1 Trillion Coin; Why Stop There? I Support the $1 Quadrillion Coin
http://globaleconomicanalysis.blogspot.com/2013/01/krugman-supports-1-trillion-coin-why.html
Mish

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  1. marcus


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    1   6:51am Tue 8 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)  

    Yes, the one trillion dollar coin is insane.

    But why does Mish never weigh in on the insanity of defaulting, or threatening to default ?

    I have heard him seem to be lamenting that maybe congressional (nutjob)
    republicans will "wave the white flag," that is not threaten defaulting on paying back money that has already been spent.

    Here's what I get as the summary of the MIsh view:

    I'm for the most insane tactic threatening default, maybe defaulting, maybe costing us hundereds of billions by lowering our creditworthyness.

    I'm against silly almost as insane tactics that could be used to prevent such an outcome.

  2. marcus


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    2   7:01am Tue 8 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)  

    AN observation:

    Mish qutoes three paragrapghs from Krugman. But between the second and third paragrphs that Mish quotes, is this one he conveniently omits.

    And Republicans are openly threatening to use that potential for catastrophe to blackmail the president into implementing policies they can’t pass through normal constitutional processes.

    At least Mish did link the full editorial.

    I'm thinking Mish didn't like that way of describing exactly what the republicans in congress are doing.

    (yeah, I guess that paragraph wasn't so relevant to why Krugman advocated to trillion dollar coin)

  3. uomo_senza_nome


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    3   9:05am Tue 8 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike  

    Marcus -

    I get the idea that you have to give back ridicule for ridicule. However a Nobel Laureate talking about minting the coin is insane.

    Here's why:

    http://jessescrossroadscafe.blogspot.com/2013/01/why-paul-krugman-should-not-be-treasury.html

    While I feel his pain and frustration at the current political climate in Washington, this is not some minor league blogger spinning their latest fantasy, but a Nobel prize winning economist writing in the NY Times who is using his bully pulpit to endorse extreme economic nonsense.

    For him to say that it is 'silly but benign' to threaten to take the step of overtly monetizing the nation's debt without market involvement to evade the debt ceiling, and to institutionalize the notion that the currency is nothing more than the squeaky toy of the Treasury, is almost as incredible as it is reckless and immature.

    Ever wonder why Krugman never talks about rent seeking in both public and private sector, cronyism, handouts to bankers etc.?

  4. Peter P


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    4   9:50am Tue 8 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike   Protected  

    Nobel prize is a joke nowadays. They used to be great when Milton Friedman was awarded.

  5. CaptainShuddup


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    5   10:39am Tue 8 Jan 2013   Share   Quote   Permalink   Like (3)   Dislike  

    Why a coin? It sure seems symbolic to me, why not just a, nod-nod and a wink-wink?

  6. rdm


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    6   12:06pm Tue 8 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    I don't see how tanking the economy and lowering the USA treasury bond ratings cuts spending. If anything these will increase borrowing as less revenue is brought in and we pay higher rates on financing the deficit/debt. I am not in favor of the "coin" except as a last resort before default. I don't think the Wall Street overlords will let their Republican lap dogs go down the debt ceiling default road. More likely the fight will be over the sequester. Below is a post from a former mint director explaining how the coin "trick" would work.

    I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.

    * In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8). What is unusual in this case is that the law gives the Secretary discretion regarding all specifications of the coin, including denominations.

    * The accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

    * Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

    * There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

    * This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

    * This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

    * Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

    * Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.

    Philip N. Diehl
    35th Director
    United States Mint

  7. TechGromit


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    7   6:48pm Tue 8 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    Why platinum? If the coin is never intended for circulation, and be melted down anyway, why not make it of aluminum? It's not like making it of platinum is going to make it any more valuable to be worth a trillion dollars. How about rhodium, it's at $2,400 and ounce. My point is if your attempting to mint a coin that has as much value as the the face value, then your coin would weight more than 13,000 tons. (assuming a rhodium coin)

  8. futuresmc


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    8   9:52pm Tue 8 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    TechGromit says

    Why platinum? If the coin is never intended for circulation, and be melted down anyway, why not make it of aluminum? It's not like making it of platinum is going to make it any more valuable to be worth a trillion dollars. How about rhodium, it's at $2,400 and ounce. My point is if your attempting to mint a coin that has as much value as the the face value, then your coin would weight more than 13,000 tons. (assuming a rhodium coin)

    The point of the exercise is to shame the conservatives who would threaten default or downgrade, kicking and screaming like toddlers if they don't get everything they want. Most people know platinum is a more precious metal than gold. Few people know rhodium. The whole coin idea would be symbolic and a symbol that most Americans won't understand is worthless.

  9. Bellingham Bill


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    9   10:45pm Tue 8 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    TechGromit says

    Why platinum?

    31 USC 5112 (k) says "The Secretary may mint and issue platinum bullion coins and proof platinum coins . . ."

    I believe the UST was given a similar "mint and issue" power with Palladium bullion coins, too.

    Normally, the mint chooses denominations much lower than the bullion value, this (almost) eliminates the counterfeiting possibility, something Japan ran into with their gold bullion coins:

    http://www.nytimes.com/1990/02/08/business/fake-coins-embarrass-the-japanese.html

  10. marcus


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    10   7:06am Wed 9 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    uomo_senza_nome says

    Ever wonder why Krugman never talks about rent seeking in both public and private sector, cronyism, handouts to bankers etc.?

    Krugman may not be perfect, but I like him and a lot of what he says, as I do Robert Reich. I wish more congresspeople read and respected what both of those guys have to say about economics and our federal budget.

    AS for exactly how foolish it is for him to advocate minting the trillion dollar coin ? THat can't really be discussed in a vacuum, separate from what it is a response to,...something far more foolish, which was his point.

  11. Bellingham Bill


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    11   8:37am Wed 9 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    I think if someone has standing to sue they can stop this with the argument that Congress didn't delegate its power of the mint clearly enough

    http://en.wikipedia.org/wiki/Nondelegation_doctrine

    The law should have defined bullion coins as coins with face value well under the metal content.

  12. uomo_senza_nome


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    12   8:44am Wed 9 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    marcus says

    Krugman may not be perfect, but I like him and a lot of what he says, as I do Robert Reich

    My point is that he is entrenched in the similar mess that Republicans are in, except that it is more subtle. Economics as a profession has been captured by rentier capitalism.

    marcus says

    THat can't really be discussed in a vacuum, separate from what it is a response to,...something far more foolish, which was his point.

    I see the POV behind the coin discussion, but it can seriously backfire. Democrats would be better off calling Republicans bluff if they threaten against raising the debt ceiling again. Politically, I see the coin solution has far more negative effects than the positive effects of getting Republicans to agree to a "grand bargain".

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