Krugman: Rage Against the Coin

[ProSense]

Rage Against the Coin



(From Talking Points Memo).

Well, the trillion-dollar-coin thing — deal with the debt ceiling by exploiting a legal loophole to have the Treasury mint one or more large-denomination coins, deposit them at the Fed, and use the cash in the new account to pay bills — has really taken off...There seem to be two kinds of objections. One is that it would be undignified. Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac — a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit...The other objection is the apparently primordial fear that mocking the monetary gods will bring terrible retribution.

Joe Weisenthal says that the coin debate is the most important fiscal policy debate of our lifetimes; I agree, with two slight quibbles — it’s arguably more of a monetary than a fiscal debate, and it’s really part of the broader debate that has been going on ever since we entered the liquidity trap.

What the hysterics see is a terrible, outrageous attempt to pay the government’s bills out of thin air. This is utterly wrong, and in fact is wrong on two levels.

The first level is that in practice minting the coin would be nothing but an accounting fiction, enabling the government to continue doing exactly what it would have done if the debt limit were raised.

- more -

http://krugman.blogs.nytimes.com/2013/01/08/rage-against-the-coin/

[napi21]

1. I just read the entire article. It's interesting. I respect Kruger and trust his judgement. I

I agree with his analysis...yes it's undignified, but so what? IF it avoids a catastrophy and shuts the Pubs down, I say DO IT!

[Motown_Johnny]

2. How does this head off "Government by Blackmail"?

If this is done, why should Congress ever raise the debt ceiling again? This simply makes it easier for them to continue the blackmail. Not just over the debt ceiling but also over passing a budget, and the sequester, and any other time anything that involves spending comes up.

Are we to continue this "clown suit" solution every few months? It isn't as if that $1 Trillion is going to end our problems forever.

I couldn't help but notice that there was no mention of the possible decline in value of the American dollar. Are we to believe that simply creating a Trillion dollars at a time, whenever needed, won't eventually erode the value of the Dollar against other currencies?


I strongly favor the 14th Amendment route. The debt ceiling is unconstitutional and fighting this battle on any other grounds just doesn't make any sense to me.