Krugman Calls for President to Mint the Coin

(10 am. – promoted by ek hornbeck)

This past week calls by Republicans to not raise debt ceiling got little push back from the talking heads this Sunday as Senate Minority Leader Mitch McConnell made the morning rounds insinuating that it might not be so bad. Lets get something straight that the MSM village is allowing to happen here. The Republicans are conflating passing a budget bill (future spending) with making the payment on those expenditures (past spending). Those two things are NOT the same. The debt ceiling addresses the later and the consequences of even threatening to not pay US debts would have the same, if not greater, negative results as it did in 2011 when the feral children of the House held it hostage. The result of that debacle was the current sequestration bill and “fiscal cliff” crisis.

The inflation that everyone from the Federal Reserve to Wall St. wants to the one thing that would put the US in the same boat as Greece, facing increasingly higher interest rate payments. In other words the debt ceiling and the budget resolution are NOT the same and should not be treated the same.  The sequester and the budget resolution are negotiable; the debt ceiling is not.

This idea of holding the debt ceiling is in fact so dangerous to the world economy that politicians, economist and pundits are calling for President Barack Obama to act by using possibly the only legal means he may have, mint a Trillion Dollar Platinum Coin. Even New York Times columnist and economist, Paul Krugman has change his mind calling for the president to 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. [..]

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable – if you’ve been living in a cave for the past four years.Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous – far more ridiculous than the notion of the coin.

So if the 14th amendment solution – simply declaring that the debt ceiling is unconstitutional – isn’t workable, go with the coin.

If you think that this possibility isn’t serious, consider the fact that the feral children of the House now do introducing legislation to prevent the president from minting the coin

And now a US Congressman has come out against the coin idea and is proposing a law to ban it (via Matthew O’Brien). Ironically, this action actually legitimizes the coin option. [..]

In the past, hiking the debt ceiling was pretty painless, but some in the GOP are staunchly opposed to doing it, raising the specter that the US will default on its obligations.

It’s because of this that some people are getting more excited about the “Platinum Option,” which refers to a technical loophole in the law that allows the Treasury to create platinum coins in any denomination, theoretically up to a trillion and beyond. [..]

We’ve posted his full press release below, but the key thing here is that the idea is now legitimized, as a GOP Congressman implicitly acknowledges that the coin idea is currently legal.

Note that in his press release, the Congressman uses the flawed analogy of comparing the US government to a small business. Unlike governments, small businesses can’t print money. And small businesses can’t “deficit spend,” the way governments can.

The opponents of this idea are also wrong. Josh Borrow, who writes at Bloomberg‘s The Ticker, enumerates why their arguments are all wrong and concludes:

Minting the platinum coin would be less economically damaging than any of the above options, which is why Obama should announce he will pursue it if the debt ceiling is not raised. Hopefully, inflation hawks will be so alarmed by the president’s intention to use his direct monetary authority that they will choose to cut a deal and we’ll never actually get to the minting stage.

But if Republicans call Obama’s bluff, he should be ready to mint that coin – – and to save the economy by doing so.