Economics, Pethokoukis

Treasury and Fed kill the trillion-dollar platinum coin. But other goofy ideas await to evade debt ceiling

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Tim Geithner and Ben Bernanke have put the kibosh on the whimsical/embarrassing idea of having the Treasury Department mint a trillion-dollar platinum coin to get around the debt ceiling. And even if Treasury did, it looks like the Federal Reserve wouldn’t accept it. This from opinion columnist Ezra Klein at The Washington Post:

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. ”Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

As Klein adds, the Obama White House has already ruled out a possible end run on the debt ceiling. Back in December, Press Secretary Jay Carney said, “This administration does not believe the 14th Amendment gives the president the power to ignore the debt ceiling — period.”

The sudden end of the Mint the Coin movement isn’t really surprising. The move would have forced the Fed to react to Treasury’s coin minting, threatening the central bank’s independence. As the WaPo’s Neil Irwin tweeted, “Fed would have faced both a threat to its primacy over monetary policy and been at the center of a constitutional showdown, all at once.”

Financial absurdities aside, it would have been a political loser for Team Obama, making the president look desperate for any option to avoid cutting spending in return for a congressional debt limit hike. It would have been Obama, not House Republicans, seeming unreasonable as the debt ceiling approaches.

Unfortunately there are still plenty of goofy ideas on the table, such as issuing Monopoly money in lieu of actual new greenbacks. As law professor Edward Kleinbard wrote in The New York Times earlier in the week:

[President Obama] should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.As He should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.

But that’s not all. Economist Stephen Williamson has cooked up another couple of options for Team Obama:

1) The off-balance-sheet option: Fannie Mae became a private institution, and Freddie Mac was established, as part of a Johnson administration move to take the mortgage market activities of Fannie Mae off the federal government’s balance sheet. Suppose that Fannie Mae were to issue agency securities and use the proceeds to pay salaries at the Pentagon, or Pentagon employees were to temporarily become employees of Fannie Mae. Currently under government “conservatorship” Fannie Mae has to do what the federal government tells it to do, but its agency securities are not part of the government debt for accounting purposes.

2) The playing-card or clearinghouse certificate option: Federal government departments could issue their employees certificates promising payment in the future, in lieu of salary. I’m not sure what makes a government debt obligation fall under the debt-ceiling limit, but the idea would be to design the IOUs so that they don’t meet those criteria. Like the playing cards and clearinghouse certificates mentioned above, there’s nothing to stop people accepting these IOUs in exchange.

Better to just raise the debt ceiling and come to an agreement on at least some entitlement reform and other spending cuts.

7 thoughts on “Treasury and Fed kill the trillion-dollar platinum coin. But other goofy ideas await to evade debt ceiling

  1. That one was a non-starter from the get go. What lender would make a loan based upon “the full faith and credit of Barack Obama”? Methinks the Marxist thieves, albeit they control the money already in circulation, have no control over future money, Yet. They will have to go back to the scheming board to figure out how to enslave the population with more future debt without participation of the House of Representatives. As we all know, the “full faith and credit of Barack Obama” won’t get you a Latte at Starbucks.

  2. Also, if you think about it, the platinum coin scheme would have been a flat tax devaluing everyone’s dollar equally. The Dems would prefer an ongoing debt scheme that is paid back via the progressive income tax scheme in an attempt to only devalue the wealth and income of the upper income groups.

  3. Better to just raise the debt ceiling and come to an agreement on at least some entitlement. reform.

    No it isn’t. The current mess was created by cowards who refused to deal with the spending problem. If you can’t start dealing with it now when do you think that Washington will be motivated to start?

    Quit being a big government Republican Jimmy. All you do is provide cover for the rest of them. It is time to take an axe to spending and let the markets liquidate unsustainable trends.

  4. Platinum?
    Why settle for less?
    What’s wrong with Rhodium?
    Haircuts are coming!!! Haircuts are coming!!!
    Hey what do you know,
    A 50% HAIRCUT ON THE DEBT LOOKS MORE AND MORE…GREAT!!!
    The Merchants of America (aka banksters) are going to have theirs soon.

  5. OOOPS,
    What is going on?
    The “thought police” is engaged here?
    Deleting comments?
    AEI’s First Amendment is probably only for their drones…

  6. Better to just raise the debt ceiling and come to an agreement on at least some entitlement reform and other spending cuts.

    No offense, but there is no reason to think that would work. The “fiscal cliff” was the answer the last time Congress tried that plan, and all that got us was higher taxes.

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