red states rule
12-10-2012, 03:05 AM
Folks, you can't make this stuff up. Another brilliant idea from the Obama economic team which will make you laugh like hell. The after a minute, you realize this may be a serious possibility from the "smart" people in DC and you shake your head in disbelief.
Okay, that sounds utterly insane. But ever since last year, some economists and legal scholars have suggested that the “platinum coin option” is one way to defuse a crisis if Congress can’t or won’t lift the debt ceiling soon. At least in theory.
The U.S. government is, after all, facing a real problem. The Treasury Department will hit its $16.4 trillion borrowing limit (http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/09/if-the-u-s-goes-over-the-fiscal-cliff-do-we-still-need-to-raise-the-debt-ceiling/) by next February at the latest. Unless Congress reaches an agreement to raise that borrowing limit, the government will no longer be able to borrow enough money to pay all its bills.
Last year, Republicans in Congress resisted lifting the debt ceiling until the last minute — and then only in exchange for spending cuts. Panic ensued. So what happens if there’s another showdown this year?
Enter the platinum coins. Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.
Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
“I like it,” says Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”
In theory, this is much like having the central bank print money. But, says Gagnon, the U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t create any extra inflation. And if it did cause problems, the Fed could always counteract the effects by winding down some of its other programs to inject money into the economy.
Is the platinum coin option really legal? Apparently so. It was discussed (http://www.cnn.com/2011/OPINION/07/28/balkin.obama.options/index.html?hpt=hp_c1) during the 2011 debt-ceiling crisis by Jack Balkin, a law professor at Yale Law School. Under law, he noted, there’s a limit to how much paper money the United States can circulate at any one time, and there are rules that limit how many gold, silver and copper coins the Treasury can mint.
But there’s no such limit when it comes to platinum coins. It’s right there in the U.S. legal code (http://www.law.cornell.edu/uscode/31/usc_sec_31_00005112----000-.html): “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.” http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/07/could-two-platinum-coins-solve-the-debt-ceiling-crisis/?print=1
Okay, that sounds utterly insane. But ever since last year, some economists and legal scholars have suggested that the “platinum coin option” is one way to defuse a crisis if Congress can’t or won’t lift the debt ceiling soon. At least in theory.
The U.S. government is, after all, facing a real problem. The Treasury Department will hit its $16.4 trillion borrowing limit (http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/09/if-the-u-s-goes-over-the-fiscal-cliff-do-we-still-need-to-raise-the-debt-ceiling/) by next February at the latest. Unless Congress reaches an agreement to raise that borrowing limit, the government will no longer be able to borrow enough money to pay all its bills.
Last year, Republicans in Congress resisted lifting the debt ceiling until the last minute — and then only in exchange for spending cuts. Panic ensued. So what happens if there’s another showdown this year?
Enter the platinum coins. Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.
Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
“I like it,” says Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”
In theory, this is much like having the central bank print money. But, says Gagnon, the U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t create any extra inflation. And if it did cause problems, the Fed could always counteract the effects by winding down some of its other programs to inject money into the economy.
Is the platinum coin option really legal? Apparently so. It was discussed (http://www.cnn.com/2011/OPINION/07/28/balkin.obama.options/index.html?hpt=hp_c1) during the 2011 debt-ceiling crisis by Jack Balkin, a law professor at Yale Law School. Under law, he noted, there’s a limit to how much paper money the United States can circulate at any one time, and there are rules that limit how many gold, silver and copper coins the Treasury can mint.
But there’s no such limit when it comes to platinum coins. It’s right there in the U.S. legal code (http://www.law.cornell.edu/uscode/31/usc_sec_31_00005112----000-.html): “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.” http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/07/could-two-platinum-coins-solve-the-debt-ceiling-crisis/?print=1