Platinum Coin Killed By Federal Reserve
Buzzfeed’s Zeke Miller reports that the Platinum Coin idea died largely because the Federal Reserve came to the determination that it could not legally accept the coin for deposit:
WASHINGTON — The Federal Reserve was responsible for killing a controversial proposal to circumvent the debt limit, a senior administration official told BuzzFeed Sunday.
On Saturday the Treasury Department released a statement ruling out the only remaining alternative to Congress raising the nation’s borrowing limit, which would utilize a loophole in federal law to mint a $1 trillion coin to be deposited in the Federal Reserve and ensure the federal government could pay all bills and debt obligations.
“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,” said Treasury spokesman Anthony Coley.
But it was the Federal Reserve that killed the proposal, the official told BuzzFeed, denying a purely political rationale for the announcement, saying the independent central bank would not have credited the Treasury’s accounts for the vast sum for depositing the coin.
Whoever did it, I’m glad the whole silly idea is dead.
Not silly; dangerous to the conventional wisdom. What do you think would have happened when the government openly created a trillion dollars, spent it, and no monetary inflation occurred? It would call into question every monetary and fiscal policy we’ve been strangling ourselves with over the past five years, and there’s no way in hell the Very Serious People want that realization in the heads of the American people.
Yes.
Now we can move on to killing the whole silly idea that Congress can both require the Executive to make expenditures and simultaneously prohibit the Executive from making the same expenditures.
@Ben Wolf: Minting the coin wouldn’t have created spending authority, merely allow the administration to spend what Congress already required them to spend.
Does the Fed routinely refuse to accept commemorative coins that are legal tender, or is this a new policy?
@SKI: Yes, but the conventional narrative is that the U.S. “borrows” to fund its deficits. If the coin were used instead people would rightly ask why we need to issue Treasurys at all. The wealthy and powerful don’t want that question being asked because Treasurys are effectively a form of corporate welfare, a massive subsidy to their doing business.
@Ben Wolf: Following that logic, why collect taxes. Let’s stop both, print however much money we need and everbody will be happy.
@Scot:
Actually no, that doesn’t logically follow and it’s clear you haven’t given this much thought. Nor does your comment address anything previously written in this thread.
Next step for Doug–start advocating what he would like to see removed from the budget that totals a trillion dollars.
What’s really scary is that Geithner’s Treasury and especially Bernanke’s Fed — not bastions of sound judgment or even cogent thought processes — had to play the adult roles in this farce of a debate. Although even in that context they didn’t completely cover their banners with glory; in addition to pointing out that this stunt would not legally be sound they also should have taken the opportunity to educate the spaced out chattering-politico-academic-media classes about the negative long-term ripple effects on the bond and currency markets and upon the inflation rate.
In any case, at least we won’t become a banana republic this January. So I guess there’s that. Whether we can avoid banana republic status in the years and decades to come remains to be seen. It’s tough to be optimistic.