Courtesy of Mish.
There is a lot of crazy talk out there regarding the minting of a $1 trillion coin to get around the debt ceiling.
Today Paul Krugman hopped on the $1 trillion bandwagon in his New York Times article Be Ready To Mint That Coin.
Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious.
For those new to this, here’s the story. First of all, we have the weird and destructive institution of the debt ceiling; this lets Congress approve tax and spending bills that imply a large budget deficit — tax and spending bills the president is legally required to implement — and then lets Congress refuse to grant the president authority to borrow, preventing him from carrying out his legal duties and provoking a possibly catastrophic default.
Enter the platinum coin. There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.
So why not?
$1 Trillion Not Enough
Krugman asks “why not?” The answer should be obvious. It’s crazy to think $1 trillion would be enough. A year or two from now, the Treasury would have to mint another coin, with the same silly debate we are having right now about whether the process is legal.
Question of Legality
I do not accept the idea that the proposed process would be legal. Others side with me as well. Here are a few examples:
- Sorry Folks, The $1 Trillion Coin Is Unconstitutional
- No, a $1 Trillion Platinum Coin is Not Legal
- If the $1 trillion coin is illegal, isn’t the Fed illegal too?
Nonetheless Tut! Tut! I say to Krugman detractors.
Does any president care what is legal? Roosevelt didn’t. Nixon didn’t. Bush didn’t. Obama didn’t.
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