The most romantic solution would indeed be for O to have Treasury mint the trillion dollar coin. He can take the reins again and dare Congress to prevent it. He’d come out ahead just as with work permits for undocumenteds.

The scolds, who don’t like O anyway, will just continue doing so. So what?

We can debate what the coin should look like, but for poetic justice I think it should be a laminated thing just like today’s dime and quarter but maybe the size of a dinner plate.

I still say the coin should look exactly like a fresh pile of bull excrement to remind us of the “dire” sky is falling crap spewed from all the Harvard educated finance genius’ at Goldman and the Treasury (or is it the Treasury and Goldman).

Hostage Taking 101. So where did the @ $427 billions dollars of economic value wasted out the American tailpipe, this year, go to? Santa Claus? (Speaking of taxing situations?)

When America finally acknowledges and Congress addresses America’s servitude to powerful interests in energy, can we call it progress.

Until then and only then, will the year, after year, after years, of economic value America squanders on an daily and yearly basis, be calculated into an equation. It is worse than being a drunk, with all the negative consequences. At least a drunk can get sober if he chooses so. Few Americans’s have a “life” without overpriced, inefficiently utilized potential energy, for transportation?

Cash cows, sacred cows, and golden cows, idols to “false gods,” like Mammon, come to mind…..

Servitude is bought……….

As I said in my my.fdl article yesterday, debt-limit showdowns are the fault of Geithner and Obama. Congress has given them everything they need to pay the nation’s bills. They are simply petulant crybabies, stamping their feet, and refusing to pay the bills unless they can pay them with “borrowed money” like their predecessors used to in the good old days of the gold standard.

What a fucking farce!

… and poor Obama will be very disappointed if the lame ducks don’t force entitlement cuts on him. Next term, Congress will contain still few of his fellow blue dogs, and it will be that much harder to cut “strengthen” entitlements.

I’ve heard about that trillion dollar coin. Do you think he would have the political courage to do it? If so, why not do a hundred trillion dollar coin and forget about the debt for the next hundred years or so.

It still seems like the Republicans have the advantage here unless Obama finds a way around the debt limit.

Servitude is bought…

Heh, but at least it’s fairly cheap. With 245M Americans over the age of 16, $427B averages out to $33 per week. I’ll be a slave to my truck for that.

Obama is on the side of the .01%ers and that is all. Postulating what a real Democrat or Progressive would do if they were President is just pie in the sky at this point. Watch for the second recession after January’s “fun-filled” inauguration is over.

Unfortunately, you could be right about a recession no matter who wins this fiscal cliff nonsense. We will be the losers no matter who “wins” it.

As long as the defense budget is off limits nothing changes. As retired Gen. Tony McPeak pointed out,” if we can’t defend this country on $300 billion dollars a year it is time to get some new generals. ” No kidding, Tony! Additionally, we absolutely need to pass an infrastructure and transportation bill and other short term stimulus. I’d say much more. Finally, we need to push very hard for rent credits, for energy saving residential programs, capital gains to Reagan era history ( 28% ) and sensible estate tax rates of 40-45% after the first 1.5 million per individual. Whoever it was who said that the gov’t doesn’t create jobs is a liar if they don’t acknowledge the DOD budget, the Homeland Security Dept. and the Security State apparatus. No kidding!

They aren’t arguing about whether or not to go over a fiscal cliff. The Grand Bargain IS a fiscal cliff, but one with entitlement cuts. Other than that they are simply quibbling about a $500 billion deficit cut vs a $400 billion deficit cut. Either way they are making the same mistake FDR made at the beginning of his second term in 1937; per the Wikipedia:

By 1936, the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high at 11%, although this was considerably lower than the 25% unemployment rate seen in 1933. In the spring of 1937, American industrial production exceeded that of 1929 and remained level until June 1937. In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.[87] The American economy then took a sharp downturn, lasting for 13 months through most of 1938. Industrial production fell almost 30 per cent within a few months and production of durable goods fell even faster. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938.[88] Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.[89]

Re: Trillion Dollar Coin

Do you people really think wealth can be created, and debt be reduced, by assigning an arbitrary value to a hunk of metal ? Such a coin would only have value if it was accepted as payment which I don’t think the Chinese, Japanese, or our oil suppliers in Canada, Mexico, and the Middle East would do. The mere attempt of such a ridiculous move would destroy the US dollar as the world’s reserve currency which would mean the US would actually have to provide something in return for all the stuff we buy from the rest of the world, other than worthless pieces of paper with George Washington’s picture on them or their digital equivalent. Unreal ! Keynesian/Krugmanian nuttery at its’ extreme.

Excuse me? What did the treasury create by printing trillions of dollars and giving it to the Banks? The Federal(not) Reserve (not) creates wealth every frickin day out of thin air.

That would be true if we had the 25 million manufacturing jobs still in this economy. We don’t. What moves the economy is more efficient delivery of people, products and services. And, freeing up the middle and lower classes to have the time to pursue opportunity. The MIC has been studied to death and it is an absolutely dreadful vehicle for creating jobs and innovation for the economy and, thus, the masses. There is an absolute need to redistribute wealth downward, and soon, to revive this country’s fortune. Telling the politicians what they should already know ( through the vote ) seems to be a bigger drag on the economy than anything I’ve seen in since the 1930s.

There is another possibility. Congress sets revenues and spending, which establishes whether the debt ceiling will be exceeded. And then it postures by setting the debt limit at a lower value. President Obama could blow by the debt ceiling as long as the outlays were within those authorized, calling out the debt ceiling as the political bullshit that it is.

It’s not just Treasury that will affect when the deficit hits the debt ceiling. Most civil service managers are past masters at timing most of their expenditures in the third or fourth quarter of the fiscal year, which is April through September. And most have official or unofficial “contingency funds” that allow them to ride out Congressional turbulence. A lot of federal contract might be postponed until the summer.

Penny wise and pound foolish? Akin, to them slave-owners? Aye!

It is all the time. Just look at the gold market. Arbitrary values.

The trillion dollar “coin” would be placed with the Federal Reserve to buy back a trillion of US debt. The Federal Reserve would call in that amount of Treasury securities, likely by purchasing them on the open market by generating the money the same way it bailed out the banks.

In principle, when the US ran a trillion dollar surplus, it could purchase the “coin” back and destroy it.

For the past forty years, there has been no gold backing the dollar. The only place that it gets intrinsic value is the fact that the federal government requires that American taxes be paid in dollars.

A trillion dollar coin would not increase the supply of dollars, it would simply be “vault cash,” sitting in a vault at the Federal Reserve. Of course the balance in the Treasury’s account at the Fed would go up by $100T, but none of that money can be spent until and unless Congress appropriates it. If Congress doesn’t appropriate more spending then the money supply remains as it would have otherwise. The only difference would be that the Treasury would no longer have to borrow to pay the government’s congressionally appropriated expenses.

Well, the cliff is something of a choice: they can do nothing at all and we will see spending cuts and tax increases, including payroll taxes, or they can modify those cuts and tax increases. Beyond that they face the problem of the debt limit and what sort of hostage taking there will be surrounding that or whether Obama escapes it.

On the Bush tax cuts, I am somewhat ambivalent. Personally, I think the distribution of income is far too great and something needs to be done about it as well as the estate tax so we do not become a society of nobles and serfs. ( on the tax rates for the wealthy, I don’t see that as an economy buster.)

The Rs could easily stand pat and do nothing. But that makes them the bad guys. So it does seem their best bet is to extend the middle class tax cuts (absent payroll tax) and then use the debt limit to argue for more spending cuts and restoration of the Bush tax rates on the wealthy.

Either way and even if Obama trys something unique to get around the debt limit, I don’t see anything that will necessarily avoid another recession, since there will be automatic spending cuts and payroll tax increases and unemployment compensation expirations.

So I think I will hunker down for awhile. I certainly cannot predict what happens next on this merry go round.

No wealth can be created by a hundred trillion dollar coin IMO. But there are those who say we can use it to avoid the debt limit law and just keep on spending as if there were no such thing.

You are using family finance thinking there. The coin allows the Federal Reserve to buy back a trillion in US debt from the open market and retire it. That action is large enough to affect the market in T-bills. Much more than a trillion could upset that market unless done in a series of moves, evaluating the monetary impact after each move (such as what is done with QE).

In fact, the Fed is already sitting on $1.6T of Treasuries, which still count toward the debt limit. The Treasury could simply mint a $1.6T coin and purchase ownership of those Treasuries from the Fed. Suddenly they’d have another $1.6T of headroom before reaching the current debt limit.

The wealth would be created in the additional spending that the government would be able to do with that amount of debt off its books–just from the savings in interest on the national debt, if nothing else. That spending would cycle through the economy creating additional production of goods and service (i.e. wealth).

Good point.

So it does seem their best bet is to extend the middle class tax cuts (absent payroll tax) and then use the debt limit to argue for more spending cuts and restoration of the Bush tax rates on the wealthy.

The Bush tax cuts are cuts to income tax, 40% of which is paid by the top 1%, 70% of which is paid by the top 10%, and 100% of which is paid by the top 53%. The Zandi multiplier for the Bush tax cuts is .29, meaning that the GDP declines 29 cents for every dollar of revenue brought in. That’s extremely low impact. Conversely, the Zandi multiplier for the payroll tax holiday, which affects working folks, is 1.29, meaning that the GDP declines $1.29 for every dollar of revenue brought in by that tax, which is very high.

Obama’s best strategy would be to let the Bush tax cuts expire and try to preserve or restore the payroll tax holiday as a stimulus to prevent the “fiscal cliff” effect.

Yes, if the goal is tied to GDP.

Bush tax cuts go to top earners, not top spenders. Payroll taxes go to workers who are more likely to need to spend the dollars.

But I don’t think the goal is to raise the GDP, but to lower the deficit.

If it was related to GDP Obamas best strategy would be to give teenagers free credit cards. Spending would go through the roof.

The question is: Which deficit-reduction measures cause least harm to the GDP?

The “fiscal cliff” is a situation where $500 billion of deficit reduction measures are projected cause the GDP to contract to the point of “recession.” Ultimately, Obama wants to substitute “entitlement reforms” for some of the cuts currently scheduled to go into effect, and of course he wants the GOP to take the blame, which they don’t want.

But in terms of impact on the GDP, Obama’s cuts are every bit as bad as those currently scheduled and are likely to have the same predicted effect, just like the deficit cuts that FDR enacted at the beginning of his second term — see #11 above.

If it was related to GDP Obamas best strategy would be to give teenagers free credit cards. Spending would go through the roof.

No. That would be inflationary (true, we have a lot of slack productive capacity, which would take up a lot of that, but still…)

The best strategy would be for a 10- or 15- long term infrastructure investment totaling some $4-5 trillion dollars to both fix what’s crumbling and to upgrade and/or modernize what’s lacking. That not only creates demand but lowers the cost of business.

(Of course, this won’t happen, lookie how the deficit scolds cry over a itsy-bitsy $200 billion).

-stewartm

There is no necessary reason the fed has to buy back any treasuries beyond the debt ceiling, in fact most likely not even that. The Treasury is required by law to have an account at the fed to spend. (My best understanding.) This funds that account. They still cannot spend from it without budget or congress spending approvals. Also, buying back Ty’s bonds does not improve the economy or at best has a small impact. The reason is the people or banks who sell the treasuries are simply exchanging one asset for another, a deposit. So a coin does not create wealth, aka real assets.

Ps some say that buying back Ty’s bonds takes money out of the economy in the form of interest.

My comment was the Rs play, not Obama.

We yet don’t know what cuts Obama will agree to. Some cuts may not be effective for several years and some like that 716B are actually favorable by moving it around. I am still hopeful Obama will not lower benefits for SSMM.

Yes, the goal is reduce the deficit. And that could hurt if it comes out of entitlements. Of course, any spending cut is not good. We have some real deficit hawks running our gov on both sides of the aisle.

If your gonna take the coin route, you should go for broke. Mint enough to erase the entire debt and eliminate interest payments at the same time.

We know that Obama:
* is a self-proclaimed blue dog
* claims to consider the deficits a grave peril to the nation
* has claims since five days before his inauguration that he want long-term entitlement reform to be a hallmark of his presidency.

Those are pretty good indications of what he’ll ultimately agree to. And, what’s missing from the scheduled cuts is entitlement reform

Hi mj,

I read the replies to your accurate assessment of the results of minting a trillion dollar coin.

Please do, Mr. President. Mint that trillion dollar coin so this madness we call an economy will meet reality.

Many people do not even know the federal reserve is a private bank that creates money out of nothing and loans it to U.S. at interest.

You mint that coin and make it clear to the world what the dollar really is. If it were made of gold, it would have to weigh 36,764,706 lbs at todays rate. I can’t even imagine how big it would have to be.
Mint it out of nickel or some other material readily available and the dollar *will* become the laughingstock of the world.

I am really looking forward to the minting of this coin.

p.s. gold/silver prices are not arbitrary. Manipulated and suppressed yes, but hardly arbitrary. I can take an ounce of gold or silver anywhere in the world and receive comparable value. I’m laughing out loud at this threat of a trillion dollar coin.

I can take an ounce of gold or silver anywhere in the world and receive comparable value.

When you can, say, eat it or use it to produce most things useful, let us know.

Other than that, the value of all “precious metals” is arbitrary and based on tradition more than its actual utility. Heck, if there’s any metal we can’t afford to lose from a goods-producing standpoint, lowly copper beats gold hands-down.

-stewartm, reality-community inhabitant.

The value of any currency is postulated or notional anyway. You can’t eat it, and heating your house with it would not be thrifty at all.

Maybe along with O’s trillion dollar coin he should also pull an FDR and curtail individuals from owning gold which is deemed by the gov’t as bullion rather than a small amount of jewelry. Now that would garner attention.

Do you people really think wealth can be created, and debt be reduced, by assigning an arbitrary value to a hunk of metal ?

Well, it all depends, as the “hunk of metal”s value is actually pretty arbitrary and not based on much “real” to begin with other than tradition. I can think of a number of applications where gold is preferred, but com’on now–you can’t explain gold’s *price* because of its actual value in producing goods and services.

… other than worthless pieces of paper with George Washington’s picture on them or their digital equivalent.

Consider that all other currencies are largely based on those “worthless pieces of paper”, why not?

I hate to break it to ya, but the gold standard was abandoned long ago by pretty much everyone. Money is merely a medium of exchange, and its worth depends on its acceptance as such. In the view of classical economists, money is a curtain behind which goods and services are produced and exchanged, and not anything inherently of “worth” itself. It’s a tool towards an end, not a fetish.

-stewartm

So it does seem their best bet is to extend the middle class tax cuts (absent payroll tax) and then use the debt limit to argue for more spending cuts and restoration of the Bush tax rates on the wealthy.

By law [31USC5112(k)] such coins must be minted from platinum, but they can carry whatever denomination the Secretary chooses, and they become legal tender for that value. Specifically, the Fed must honor them, i.e., the Treasury can tender them as a deposit to the Treasury General Account at the Fed, from which checks for congressionally appropriated expenses can then be written.

Note that metalism disappeared from major economies forty years ago.

I will each and every day trade you your ounce of gold for my ounce of copper.

Gold has throughout the history of man been considered a store of value and accepted world wide as such. Many currencies have come and gone, gold/silver… still here.

Your reality is your reality. You wish to revere a piece of paper with a promise printed on it, that is ok with me. You should understand though, when gold was $35.00 an ounce, it was an ounce of gold. Today gold is $1690′ish an ounce and it is still only an ounce of gold. Get the picture?

Let me help. Its not that gold has become more valuable, its the dollar that has lost value. It is still only an ounce of gold.

You work for the fed?

Buy silver, it is 30′ish an ounce and the return will be much greater.

Re: #40

“Buy silver, it is 30′ish an ounce and the return will be much greater.”

Yes, just ask the Hunt Bros.

LOL! My sister bought a silver “brick” for $2k ($40/oz. peak) back then; used it as a doorstop for many years . . .

Gold has throughout the history of man been considered a store of value and accepted world wide as such.

Grand tradition? Slavery fits under that rubric too.

You should understand though, when gold was $35.00 an ounce, it was an ounce of gold.

We could also speak similarly about ordinary things that actually have practical use. A house that once cost $50,000 and now costs $250,000 is still a house. So?

I will each and every day trade you your ounce of gold for my ounce of copper.

That,is, until, you have to actually *do* something useful with it. Then you won’t, at least for most applications.

And if we’re going to wager anything, since you don’t seem to be terribly fond of those “worthless pieces of paper”, I’ll be perfectly happy to let you send all those you have in your wallet to me. We can work out the details offline.

For me, given the current situation, your gold would only be useful insofar as I could get those “worthless pieces of paper” for it. I’d say that’s true of most people. Heh.

Even as currency goes, stamping a piece of metal isn’t as cool as what they do with paper money. You ever look at a $5 bill under a microscope?

-stewartm

I agree with what you say, but don’t see intrinsic value in paper money or gold. Ultimately what counts would be food, potable water, and shelter first. Under certain conditions one or all of those could become out of reach using currency or gold. It would be an awful prospect, but not impossible.

I wonder what it was like living in the Weimar Republic, or in Leningrad under seige. There’s too much wrong with the world right now to even contemplate reading about those nowadays.

This must be a closed club. My replies to the ignorance being spouted by stewartm are being blocked.

Probably not too popular around here, but if you’re going basic, guns and ammo. Turns your food, potable water, and shelter into mine.

My replies to the ignorance being spouted by stewartm are being blocked.

Yet you were able to post this. If you really were being blocked, then why would the blockers allow you to say it?

-stewartm

Probably not too popular around here, but if you’re going basic, guns and ammo. Turns your food, potable water, and shelter into mine.

You and I don’t agree on much, but I at least see the practical value on hoarding what those of the survivalist bent advocate than “b4real’s” pile of shiny elements. The ability to procure and produce food, potable water, clothing, and shelter–the shit you really need out there, to paraphrase a Tractor Supply commercial–is first and foremost.

-stewartm, in fact there’s a school of anthropology based upon that premise.