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priceman's picture

President Obama Gave Speaker Boehner the Debt Ceiling to Play With in 2010

Disclaimer: This forum rules like the moderator. I'm talking about a different one that tends to skew towards Obots in an orange way.

And here we are again! It started in 2010. The Bush tax cuts were about to expire. There was leverage to negotiate a debt ceiling raise or to just let them expire. How do I know there was leverage? I know Republicans like tax cuts for the rich, and there was a deal for the purpose of extending them with Republican votes. It passed with those Republican votes, which led to this whole thing because there was no debt ceiling raise included.

Maybe others are unaware of this? I don't know. It doesn't matter though; the uninformed shouldn't dictate fantasy as reality in a reality based community. This is the actual reality and why we are worried about a global financial calamity with regard to a possible political default on the public debt, which is a choice and otherwise impossible for a sovereign currency issuer.

Obama on the Debt Limit — December 2010

Q Mr. President, thank you. How do these negotiations affect negotiations or talks with Republicans about raising the debt limit? Because it would seem that they have a significant amount of leverage over the White House now, going in. Was there ever any attempt by the White House to include raising the debt limit as a part of this package?

THE PRESIDENT: When you say it would seem they’ll have a significant amount of leverage over the White House, what do you mean?

Q Just in the sense that they’ll say essentially we’re not going to raise the — we’re not going to agree to it unless the White House is able to or willing to agree to significant spending cuts across the board that probably go deeper and further than what you’re willing to do. I mean, what leverage would you have –

THE PRESIDENT: [silence].... Look, here’s my expectation — and I’ll take John Boehner at his word — that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen. And so I think that there will be significant discussions about the debt limit vote. That’s something that nobody ever likes to vote on. But once John Boehner is sworn in as Speaker, then he’s going to have responsibilities to govern. You can’t just stand on the sidelines and be a bomb thrower.

You know, we on the left knew what this would lead to. You don't trust John Boehner with the full faith in credit of the United States unless one is completely clueless or an economic nihilist. The resulting signs we are starting to see of a financial panic in response to the prospects of a default on top of the ongoing depression, the jobs crisis, the continuing climate and ecological crisis all converging into one huge Epochal crisis, point to a special kind of disdain for the public that all our elected leaders have for us. I mean, we have enough problems without adding to them through a self induced global financial then economic crisis caused by the President's pursuit of a deficit terrorist grand bargain whether through incompetence or outright corruption. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: A Working Document

Jack Foster proposed a framing document for High Value Platinum Coin Seigniorage, in a recent comment he made on one of my posts. In response, I posted a six-part blog series to accommodate readers who prefer the blog format. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: Part Six, More Political/Economic Objections

This series provides a framing document for Platinum Coin Seigniorage (PCS). In the five previous parts of the series, I pointed out that there are three classes of opponents of High Value Platinum Coin Seigniorage (HVPCS, $30 T and above). The first and largest group opposes all Platinum Coin Seigniorage (PCS) of whatever type. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: Part Five, Institutional Objections

This series provides a framing document for Platinum Coin Seigniorage (PCS). In the four previous parts of the series, I pointed out that there are three classes of opponents of High Value Platinum Coin Seigniorage (HVPCS, $30 T and above). The first and largest group opposes all Platinum Coin Seigniorage (PCS) of whatever type. The second, opposes HVPCS, but favors using the Trillion Dollar Coin (TDC) for the limited purpose of avoiding the debt ceiling. The third, opposes HVPCS, and doesn't really favor using the TDC either, except, perhaps, as a last resort to avoid the debt ceiling. It favors an incremental approach to PCS beginning perhaps in the millions or billions in face value, and over a long period of time, after giving people years to adjust to Treasury using platinum coins with unusual, and unprecedented, face values, eventually building up to a TDC.

Parts two, three, and four, and this post (Part Five), and the remaining post in this series considers further objections to HVPCS brought forward by people in one or more of these categories, and my replies to them. As you're seeing, if you're following the series, the opponents of HVPCS are throwing everything but the proverbial kitchen sink at it. In this post, I'll consider some objections to PCS and HVPCS based on their predicted institutional impact. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: Part Four, Political/Economic Objections

This series provides a framing document for Platinum Coin Seigniorage (PCS). In the three previous parts of the series, I pointed out that there are three classes of opponents of High Value Platinum Coin Seigniorage (HVPCS, $30 T and above). The first and largest group opposes all Platinum Coin Seigniorage (PCS) of whatever type. The second, opposes HVPCS, but favors using the Trillion Dollar Coin (TDC) for the limited purpose of avoiding the debt ceiling. The third, opposes HVPCS, and doesn't really favor using the TDC either, except, perhaps, as a last resort to avoid the debt ceiling. It favors an incremental approach to PCS beginning perhaps in the millions or billions in face value, and over a long period of time, after giving people years to adjust to Treasury using platinum coins with unusual, and unprecedented, face values, eventually building up to a TDC.

Parts two, and three, this post (Part Four), and the two remaining posts in this series consider still more objections brought forward by people in one or more of these categories, and my replies to them. As you're seeing, if you're following the series, the opponents of HVPCS are throwing everything but the proverbial kitchen sink at it. In this post, I'll consider some political/economic objections to PCS. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: Part Three, Political Objections

As I pointed out in Part Two of this series, there are three classes of opponents of High Value Platinum Coin Seigniorage (HVPCS, $30 T and above). The first and largest group opposes all Platinum Coin Seigniorage (PCS) of whatever type. The second, opposes HVPCS, but favors using the Trillion Dollar Coin (TDC) for the limited purpose of avoiding the debt ceiling. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: Part Two, Legal Objections

There are three classes of opponents of High Value Platinum Coin Seigniorage (HVPCS, $30 T and above). The first and largest group opposes all PCS of whatever type. The second, opposes HVPCS, but favors using the Trillion Dollar Coin (TDC) for the limited purpose of avoiding the debt ceiling. The third, opposes HVPCS, and doesn't really favor using the TDC either, except, perhaps, as a last resort.

It favors an incremental approach to PCS beginning perhaps in the millions or billions in face value, and over a long period of time eventually building up to a TDC. The remaining posts in this series consider the many objections brought forward by people in one or more of these categories, and my replies to them. As you will see, the opponents of HVPCS have already thrown everything but the proverbial kitchen sink at it. In this post, I'll consider some legal objections. Read below the fold...

letsgetitdone's picture

Framing Platinum Coin Seigniorage: Part One, Basics

How many times have you heard that the Government can only spend money after it raises revenue by either taxing or borrowing? Nearly every time someone talks or writes about the US's public deficit/debt problem? How come nobody asks why, since Congress has the unlimited authority to create coins and currency, it doesn't just create money when it deficit spends? Read below the fold...

letsgetitdone's picture

Disconnect: High Value Platinum Coin Vs. Austerity!

A little disconnect: what President Obama, through Treasury and the Federal Reserve, really said last Saturday:

"We're running out of money because the Republican House may not allow us to float any more debt; so I took the Platinum Coin off the table just to ensure that we would!

Read below the fold...
letsgetitdone's picture

Make 'Em Do It! I Still Choose Using High Value Platinum Coin Seigniorage To End Austerity!

Yesterday, Ezra Klein reported in the Washington Post that:

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

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.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

This statement from Ezra Klein would have us believe that the Federal Reserve is an independent agent in this matter, and that it can refuse to credit the deposit of a newly minted high face value proof platinum coin, if the Treasury makes such a deposit. It also assumes that if the Treasury insisted on the deposit of the coin, that the Fed would be in a position to go Court to contest that; that it has a choice in the matter.

I don't believe that either of these things are true. I also think they are just a rationalization, so the President, who most probably decided this can pretend that this decision isn't on him; or at least can be partially blamed on the Fed. Let's review some critical aspects of the relationship between the Fed and the Treasury. Read below the fold...

letsgetitdone's picture

Ezra Klein Chooses Fear Mongering the Big Coin, I Choose Ending Austerity!

Here's a commentary on Ezra Klein's recent diatribe against Platinum Coin Seigniorage (PCS).

But there’s nothing benign about the platinum coin. It is a breakdown in the American system of governance, a symbol that we have become a banana republic. And perhaps we have. But the platinum coin is not the first cousin of cleanly raising the debt ceiling. It is the first cousin of defaulting on our debts. As with true default, it proves to the financial markets that we can no longer be trusted to manage our economic affairs predictably and rationally. It’s evidence that American politics has transitioned from dysfunctional to broken and that all manner of once-ludicrous outcomes have muscled their way into the realm of possibility. As with default, it will mean our borrowing costs rise and financial markets gradually lose trust in our system, though perhaps not with the disruptive panic that default would bring.

Name calling, labeling, and fear mongering aside, does Ezra understand the first thing about PCS? Does he know that if a $60 T coin were minted, and the Treasury General Account (TGA) filled with $60 T in electronic credits, the US would be able to just say goodbye to the international markets? If we were paying off the national debt as it fell due, we would not only not be defaulting, but would be paying all our creditors on time and in full, and without benefit of further debt instrument issuance. Nor would we care whether the markets trusted us or not; since we would not be borrowing money from them for the foreseeable future. So, how could our borrowing costs rise? Read below the fold...

letsgetitdone's picture

Wake Up Progressives: the Trillion Dollar Coin Can Be Game-Changing!

Well, not really. But if you view the Trillion Dollar Coin (TDC) meme, as I do, as a short-hand for the more general idea of using Platinum Coin Seigniorage (PCS), then yes, it can change the whole political game for progressives if President Obama dares to use it.

Literal TDC proposals would solve the debt-ceiling, but they won't solve the larger problem of defeating the austerity politics that is so close to getting the cuts to social safety net and important discretionary government programs that austerians have long sought. PCS game-changer proposals are the ones calling for, or analyzing the impact of, PCS options aimed at paying off the national debt and covering anticipated federal deficit spending for some years.

PCS options of that kind change the game of fiscal politics by removing the issue of austerity from fiscal policy considerations. With this kind of PCS the national debt and the debt-to-GDP ratio go away as matters of concern. The focus of fiscal policy then becomes the impact of specific policies rather than some overall deficit or debt reducing target. The issue in fiscal policy then becomes public purpose. It becomes what specific impacts, including inflation, and full employment, are anticipated from passing specific legislation, and whether or not those impacts are in line with public purpose. But, when the national debt and the debt-to-GDP ration go away as matters of concern; then the issue of the deficit viewed as something that is draining a limited supply of financial resources goes away, also, because people will understand that using PCS to cover deficits ensures that the US Treasury can never run short of its own fiat currency.

I'm sorry to say that there are few posts of this kind, relatively speaking. I'll list and link to some of those posts later. But first I want to point to what some in the MSM blogosphere are saying right now. Read below the fold...

letsgetitdone's picture

The Small Ball Trillion Dollar Coin Seigniorage Exception

The exception to the general pattern focusing on the Trillion Dollar Coin (TDC) as the solution to the debt ceiling problem I outlined and critiqued in my last post, is in Joe Wiesenthal 's posts here and here. Wiesenthal alone criticizes, rather than ign Read below the fold...

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