Here's why Ben Bernanke killed the platinum coin, and what it means for the debt-ceiling showdown
The coin will not be minted.
At least, not in anything remotely close to 13-digit denominations. As Ezra Klein of the Washington Post reports, the Treasury and Federal Reserve have ruled out creating a trillion-dollar coin, which was a real possibility thanks to a crazy loophole, to stop us from defaulting on our obligations if the debt ceiling isn't raised. It's Congress or bust, when it comes to paying our bills on time.
This was probably the least surprising development in the history of developments. It wasn't just that the trillion-dollar coin would have been a political liability because it sounds silly -- that was the best, and only, argument against it -- but rather that it required the Fed to give up its sole control of monetary policy. The Fed would not do that. Now, the Treasury minting trillion-dollar coins sure sounds different from the Fed buying bonds, but it's not. It's just sterilized quantitative easing (QE), albeit with a platinum tint. Or, in English, it's printing money, buying stuff, and preventing this new money from increasing inflation. The Fed does this when it 1) electronically "prints" money, 2) buys bonds from banks with this new money, and 3) ties up these new bank reserves with operations like reverse repos. The Treasury does the same when it 1) mints the trillion-dollar coin, 2) uses it to pay for the government's existing obligations, and 3) the Fed sells bonds in equal measure to suck the money out.
You might wonder why the Fed would play along if the Treasury turned to coin seigniorage. Answer: the Fed has its inflation target, and it cares very much about hitting it. The Fed would be compelled to counter the Treasury's coin-minting, although, as as Greg Ip of The Economist points out, the Fed might not need to do so for quite awhile, and could resort to raising interest rates on interbank lending and reserves instead of selling long-term bonds. In either case, the Treasury would be dragging the Fed into QE it didn't want, and, as University of Oregon professor Tim Duy put it, effectively blurring the line between fiscal and monetary policy. Fed independence would be a thing of the past ... unless it killed the coin first. Which, of course, it did, as Zeke Miller of Buzzfeed reports. The platinum coin gambit depended on the Fed accepting it as legal currency for the Treasury's account, and the Fed said it would not. RIP, trillion-dollar coin.
Now, the trillion-dollar coin may be dead, but the debt ceiling is not. President Obama continues to insist he will not negotiate over it, but the administration has said it won't use either of the most likely work-arounds -- the 14th amendment or the platinum coin -- if it comes to that. That leaves the president with (at least) four more outlandish-ish options if House Republicans refuse to pay the bills they authorized, and one actual option. Here they are, from least likely to most likely.
-- The Treasury could repo Mount Rushmore to the Fed. As Karl Smith of Modeled Behavior argues, the Treasury could theoretically sell anything valuable enough, like offshore oil rights, to the Fed, and agree to buy it back later. This kind of repurchase (repo) agreement would give the Treasury cash flow if it's running so low that it can't pay the interest on our debt, but there are two big problems. First, repo agreements are not, economically-speaking, sales, but rather loans, so it would almost certainly violate the debt ceiling. And second, there's no way the Fed would do this. So there's that.
-- The Fed could send some of its bonds back to the Treasury as dividends. Printing money is a pretty good way to make money, never more so than the past few years. The Fed remits most of its profits -- $89 billion in 2012 -- to the Treasury, which kind of makes the Treasury its sole shareholder. As @IvanTheK first suggested, the Fed could advance some of these profits to the Treasury as a dividend if there wasn't enough incoming revenue to pay the interest on the debt on any given day during a debt ceiling standoff. It's an elegant solution, but, again, not one the Fed is likely to go for.
-- Use IOUs to pay our bills. If we don't hit the debt ceiling, we will immediately have to stop paying 40 percent of our bills ... unless we pay the rest with IOUs. Paul Krugman proposed something along these lines, and law professor Edward Kleinbard points out that California successfully used them during its own budget crisis in 2009. Back then, California paid people with IOUs yielding 3.75 percent that people could trade to banks for cash at a slight haircut. In other words, the banks made money off the trades. The federal government could do the same, but there are a few legal hurdles. If the IOUs pay any interest, it's hard to see how they're not debt; but if they don't pay any interest, it's hard to see how they're not money. Either would be illegal. Maybe everybody would be happy enough with this arrangement not to challenge it, like in California, but maybe not -- not to mention the awful optics of "Obama dollars".
-- Refuse to negotiate, and blame the Republicans for any economic damage. Welcome to everybody's favorite game, debt ceiling chicken! Here's how it works. Obama says there's nothing he can do to lift the debt ceiling on his own; that's it up to Republicans to pay the country's bills; and that if they don't, they will get blamed for Social Security checks not going out. It's the strategy former Treasury Secretary Robert Rubin used back in the mid-90s when then-Speaker Newt Gingrich threatened to hold the debt ceiling hostage, and it's the strategy Obama seems to be using now. As Ezra Klein points out, Obama has deliberately ruled out all of these different debt ceiling end-arounds, because he doesn't want Republicans to think they have any alternative to increasing it themselves. Now, maybe half of them really do welcome default, as Politico reports, but maybe not. That's a terrifying bunch of "maybes", but it's where we are today.
In other words, Obama is happy not to mint the coin, because he thinks minting it reduces his leverage. Now it's a psychological game of chicken, with Obama and Republicans accelerating toward the other, each convinced they cannot swerve, and when they meet in the middle, they'll set off the mother of all global market crashes.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
The 2016 Sony World Photography Awards are now taking entries, and the organizers have been kind enough to share some of their early entries with us.
The 2016 Sony World Photography Awards are now taking entries, and the organizers have been kind enough to share some of their early entries with us, gathered below. Last year’s competition attracted over 173,000 entries from 171 countries. Entries will be accepted until May 1, 2016. All captions below come from the photographers.
Why are so many kids with bright prospects killing themselves in Palo Alto?
The air shrieks, and life stops. First, from far away, comes a high whine like angry insects swarming, and then a trampling, like a herd moving through. The kids on their bikes who pass by the Caltrain crossing are eager to get home from school, but they know the drill. Brake. Wait for the train to pass. Five cars, double-decker, tearing past at 50 miles an hour. Too fast to see the faces of the Silicon Valley commuters on board, only a long silver thing with black teeth. A Caltrain coming into a station slows, invites you in. But a Caltrain at a crossing registers more like an ambulance, warning you fiercely out of its way.
The kids wait until the passing train forces a gust you can feel on your skin. The alarms ring and the red lights flash for a few seconds more, just in case. Then the gate lifts up, signaling that it’s safe to cross. All at once life revives: a rush of bikes, skateboards, helmets, backpacks, basketball shorts, boisterous conversation. “Ew, how old is that gum?” “The quiz is next week, dipshit.” On the road, a minivan makes a left a little too fast—nothing ominous, just a mom late for pickup. The air is again still, like it usually is in spring in Palo Alto. A woodpecker does its work nearby. A bee goes in search of jasmine, stinging no one.
The Republican frontrunner has surged in the polls by taking a tough stance on immigration—and if critics want to stop him, that’s what they need to attack.
A new round of attack ads are heading Donald Trump’s way, some from John Kasich’s campaign and the super PAC backing him, and more in the future from an LLC created specifically to produce anti-Trump messages.
New Day for America’s 47-second ad splices together some of the Republican front-runner’s most awkward video moments: his suggestion he might date his daughter, his claim of “a great relationship with the blacks.” The Kasich campaign’s ad turns Martin Niemöller’s famous words “nobody left to speak for me” into a warning from one of John McCain’s fellow Hanoi Hilton POWs that a Trump presidency is a threat to freedom.* John Kasich’s Twitter account has fired direct personal challenges to the famously thin-skinned mogul.
Nobody’s focused on winning the peace. That’s a big problem.
In August 1941, Winston Churchill and Franklin Roosevelt met off the coast of Newfoundland to outline a shared vision for the post-World War II era. The British prime minister was so thrilled to see the American president that, in the words of one official, “You’d have thought he was being carried up into the heavens to meet God.” The two countries issued the Atlantic Charter, which sought “a better future for the world” through the principles of self-determination, collective security, and free trade. The United States hadn’t even entered the war yet, but it was already focused on winning the peace. The endgame was not just the defeat of the Axis powers, but also the creation of a stable global order, in which World War II would be the last world war.
An entire industry has been built on the premise that creating gourmet meals at home is simple and effortless. But it isn’t true.
I write about food for a living. Because of this, I spend more time than the average American surrounded by cooking advice and recipes. I’m also a mother, which means more often than not, when I return from work 15 minutes before bedtime, I end up feeding my 1-year-old son squares of peanut-butter toast because there was nothing in the fridge capable of being transformed into a wholesome, homemade toddler meal in a matter of minutes. Every day, when I head to my office after a nourishing breakfast of smashed blueberries or oatmeal I found stuck to the pan, and open a glossy new cookbook, check my RSS feed, or page through a stack of magazines, I’m confronted by an impenetrable wall of unimaginable cooking projects, just sitting there pretending to be totally reasonable meals. Homemade beef barbacoa tacos. Short-rib potpie. “Weekday” French toast. Make-ahead coconut cake. They might as well be skyscraper blueprints, so improbable is the possibility that I will begin making my own nut butters, baking my own sandwich bread, or turning that fall farmer’s market bounty into jars of homemade applesauce.
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
CRISPR can finally tell us which human genes are essential—and which matter specifically to cancer cells.
Humans have between 20,000 and 25,000 genes, but which of these really matter? Which are essential, and which are merely optional add-ons?
It’s crazy to me that we still don't know, even though it’s been almost 15 years since the first draft of the human genome was published. Partly, the problem is a technological one. The best way of working out if a gene is essential is to disable it and see what happens, and “we just didn’t have a good way of systematically manipulating genes in humans cells,” says Jason Moffat from the University of Toronto. Sure, scientists have been able to tinker with individual genes, but working through them all, and knocking them out one by one, has been nigh-on impossible.
America loves its freeways. After the 1956 Federal Highway Bill created the pathway for a41,000 mile interstate highway system, states and cities jockeyed for the funding to build ever-more extensive networks of pavement that could carry Americans quickly between cities. Sometimes, they built these highways right in the middle of cities, displacing communities and razing old buildings and homes.
“This was a program which the twenty-first century will almost certainly judge to have had more influence on the shape and development of American cities, the distribution of population within metropolitan areas and across the nation as a whole, the location of industry and various kinds of employment opportunities,”Daniel Moynihan wrote in 1970 about the federal program that built these thousands of miles of highways.