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Friday, January 11, 2013

Paul Krugman: Coins Against Crazies

Republican threats over the debt-ceiling can and should be defused:

Coins Against Crazies, by Paul Krugman, Commentary, NY Times: So, have you heard the one about the trillion-dollar coin? It may sound like a joke. But if we aren’t ready to mint that coin or take some equivalent action, the joke will be on us — and a very sick joke it will be, too.
Let’s talk ... about the ... debt-ceiling confrontation. ... It’s crucial to understand ... the vileness of that G.O.P. threat. If we were to hit the debt ceiling, the U.S. government would end up defaulting on many of its obligations. This would have disastrous effects on financial markets, the economy, and our standing in the world. Yet Republicans are threatening to trigger this disaster unless they get spending cuts that they weren’t able to enact through normal, Constitutional means. ...
This is exactly like someone walking into a crowded room, announcing that he has a bomb strapped to his chest, and threatening to set that bomb off unless his demands are met.
Which brings us to the coin.
As it happens, an obscure legal clause grants the secretary of the Treasury the right to mint and issue platinum coins in any quantity or denomination... — and it offers a simple if strange way out of the crisis.
Here’s how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion... This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government’s account. And the government could then write checks against that account, continuing normal operations without issuing new debt. ...
But wouldn’t the coin trick be undignified? Yes, it would — but better to look slightly silly than to let a financial and Constitutional crisis explode.
Now, the platinum coin may not be the only option. Maybe the president can simply declare that as he understands the Constitution, his duty to carry out Congressional mandates on taxes and spending takes priority over the debt ceiling. Or he might be able to finance government operations by issuing coupons that look like debt ... but that, he insists, aren’t debt and, therefore, don’t count against the ceiling.
Or, best of all, there might be enough sane Republicans that the party will blink and stop making destructive threats.
Unless this last possibility materializes, however, it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!

    Posted by on Friday, January 11, 2013 at 12:42 AM in Budget Deficit, Economics, Politics | Permalink  Comments (85)


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