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.
Choosing a president isn’t easy in this election, but here are three ways an intelligent conservative might vote.
The day of decision is nearing. All the talk fades, and one mark must be made beside one box on the ballot. Many Republicans are agonizing. They reject Donald Trump; they cannot accept Hillary Clinton. What to do?
I won’t conceal, I’m struggling with this question myself. I’ve listened to those Republicans, many my friends, who feel it their duty to stifle their anger and disappoint, and vote for Trump; to cast a protest vote for the Libertarian Gary Johnson or the independent Evan McMullin; or to cross the aisle and vote for Hillary Clinton as the lesser evil. On the way to my own personal answer, I found it helpful to summarize the best case for each of these options.
Emphasize the word “best.” If your case for Trump rests on the assumption that America is hurtling toward national doom, if your case for McMullin rests on the hope of tossing the election into the House of Representatives, if your case for Hillary argues that she is a large soul eager to work cooperatively with those who think differently from her? I’d say you are not thinking very clearly. Despair and fantasy are misleading counselors.
“Light” events are some of the heaviest lifting in political life. Comedy is hard to begin with, and for the kinds of people involved in politics, jokes are vastly more difficult to write or deliver than “substantive” remarks. And for presidents or presidential aspirants, we’re talking about a special kind of joke. These eminent figures need to come across as “modest” and self-deprecatory, but only up to a humble-brag point. (That is, just enough so the audience and reviewers will say, “Oh, isn’t it charming that he’s willing to laugh at himself!”) Real comedy often includes a “what the hell!” willingness to say something that will genuinely shock or offend, which national politicians can’t afford to do. The White House Correspondents Dinner, the Gridiron, the Al Smith Dinner—any event like this is hard (as David Litt, a former member of the Obama speechwriting team, explains in a very nice item just now).
It isn’t the only democratic institution that finds itself in danger.
Four years ago, as a speechwriter for President Obama, I commissioned a binder full of women.
A little context. It was the morning of the Al Smith Dinner, the election-year tradition in which both parties’ nominees don white-tie attire and deliver comedy monologues to New York City’s elite. Our opponent, Governor Mitt Romney had recently used the words “binders full of women” while discussing gender parity in government. Eager to mock the clumsy phrase, I asked a staffer on the advance team to put together a prop.
But our binder never saw the light of day. Obama nixed the idea. I remember being disappointed by the president’s decision, and wondering if POTUS was phoning it in. Of the jokes that did make it into the final draft, one in particular stood out for its authenticity.
First there was McCain’s caving to Bush’s signing statement on his own torture bill, then his selection of an extremely unqualified and unvetted running mate, then he backed Trump until nearly the bitter end—even after Trump insulted his POW experience and his fellow vets with PTSD. And now, a shameless betrayal of constitutional principle that would have gotten far more attention this week if Trump hadn’t one-upped McCain with all his incendiary “rigged” rhetoric. Reader Don explains:
I don’t know if your readers have seen this yet, but it seems that McCain has announced that his fellow GOP Senators will not confirm any Supreme Court nomination by Clinton. Trump is an ignorant, narcissistic, nasty piece of work. But McCain used to be a guy who remembered and honored (at least sometimes) the old bipartisan traditions of the Senate. His statement is just outrageous and inexcusable. What he’s basically saying is that only Republican presidents get to appoint Supreme Court Justices.
I understand that their thinking is that they don’t want the bias of the Court to shift from conservative to liberal. But the Court has shifted back and forth over the years, and we have managed to survive those changes. Apparently, today’s Republican Party feels that the country somehow won’t survive a Democratic administration or a liberal Supreme Court.
We have what might be described as an asymmetric politics. One party disagrees with the other party’s policy domestic policy positions, but recognizes the legitimacy of an opposition party and accepts that the other party is patriotic and loyal to the country. The other party rejects the legitimacy and loyalty of the other party. The efforts to de-legitimize former President Clinton, President Obama, and likely future President Hillary Clinton are part of this effort. The refusal of the GOP Congress to allow Obama any legislative accomplishments was another part of it. I expect that a GOP House will adopt the same obstructionist tactics starting in 2017.
People predict that the U.S. population will continue to get younger, better educated, and less white. I hope our political experiment lasts long enough to see that day.
What began as a two-hour morning outage spanned well into the afternoon as Twitter, Reddit, Spotify, Github, and many other popular websites and services became effectively inaccessible for many American web users, especially those on the East Coast.
The websites were not targeted individually. Instead, an unknown attacker deployed a massive botnet to wage a distributed denial-of-service attack on Dyn (pronounced like dine), the domain name service (DNS) provider that they all share.
A distributed denial of service attack, or DDoS, is not an uncommon attack on the web, and web hosts have been fending them off for years. But according to reports, Friday’s attack was distinguished by its distinctive approach. The perpetrator used a botnet composed of so-called “internet-of-things” devices—namely, webcams and DVRs—to spam Dyn with more requests than it could handle.
The candidates are back on the campaign trail, following the third, and final, debate on Wednesday night.
It’s Friday, October 21—the election is now less than three weeks away. Donald Trump and Hillary Clinton are back on the campaign trail to deliver their final pitch to voters, ahead of Election Day. We’ll bring you the latest updates from the trail, as events unfold. Also see our continuing coverage:
Science says lasting relationships come down to—you guessed it—kindness and generosity.
Every day in June, the most popular wedding month of the year, about 13,000 American couples will say “I do,” committing to a lifelong relationship that will be full of friendship, joy, and love that will carry them forward to their final days on this earth.
Except, of course, it doesn’t work out that way for most people. The majority of marriages fail, either ending in divorce and separation or devolving into bitterness and dysfunction. Of all the people who get married, only three in ten remain in healthy, happy marriages, as psychologist Ty Tashiro points out in his book The Science of Happily Ever After, which was published earlier this year.
Social scientists first started studying marriages by observing them in action in the 1970s in response to a crisis: Married couples were divorcing at unprecedented rates. Worried about the impact these divorces would have on the children of the broken marriages, psychologists decided to cast their scientific net on couples, bringing them into the lab to observe them and determine what the ingredients of a healthy, lasting relationship were. Was each unhappy family unhappy in its own way, as Tolstoy claimed, or did the miserable marriages all share something toxic in common?
How the national mythos and U.S. labor laws influence geographic mobility.
Kevin Bacon moves from a big city to a small town in Middle America where dancing is outlawed. Ralph Macchio moves from New Jersey to California, where he learns the art of life and combat. Dianne Wiest moves with her two sons to a California town stocked with vampires.
The trope of American families settling in faraway places isn’t just a plotline for terrible 1980s movies, but a national phenomenon. Decades of data, including a more recent Gallup study, characterizes the United States as one of the most geographically mobile countries in the world. “About one in four U.S. adults (24 percent) reported moving within the country in the past five years,” the report noted. With the comparable exceptions of Finland (23 percent) and Norway (22 percent), Americans also move considerably more than their European peers.
Tristan Harris believes Silicon Valley is addicting us to our phones. He’s determined to make it stop.
On a recent evening in San Francisco, Tristan Harris, a former product philosopher at Google, took a name tag from a man in pajamas called “Honey Bear” and wrote down his pseudonym for the night: “Presence.”
Harris had just arrived at Unplug SF, a “digital detox experiment” held in honor of the National Day of Unplugging, and the organizers had banned real names. Also outlawed: clocks, “w-talk” (work talk), and “WMDs” (the planners’ loaded shorthand for wireless mobile devices). Harris, a slight 32-year-old with copper hair and a tidy beard, surrendered his iPhone, a device he considers so addictive that he’s called it “a slot machine in my pocket.” He keeps the background set to an image of Scrabble tiles spelling out the words face down, a reminder of the device’s optimal position.
The easiest way to take down the web is to attack people’s access to it.
For more than two hours on Friday morning, much of the web seemed to grind to a halt—or at least slow to dial-up speed—for many users in the United States.
More than a dozen major websites experienced outages and other technical problems, according to user reports and the web-tracking site downdetector.com. They included The New York Times, Twitter, Pinterest, Reddit, GitHub, Etsy, Tumblr, Spotify, PayPal, Verizon, Comcast, EA, the Playstation network, and others.
How was it possible to take down all those sites at once?
Someone attacked the architecture that held them together—the domain-name system, or DNS, the technical network that redirects users from easy-to-remember addresses like theatlantic.com to a company’s actual web servers. The assault took the form of a distributed denial-of-service attack (DDoS) on one of the major companies that provides other companies access to DNS. A DDoS attack is one in which an attacker floods sites “with so much junk traffic that it can no longer serve legitimate visitors,” as the security researcher Brian Krebs put it in a blog post Friday morning.