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.
Saturday’s unprecedented show of opposition punctured a core myth of the Trump presidency. Will it change his behavior? And can it be sustained?
George W. Bush campaigned as a uniter, not a divider, then presided for eight polarizing years, provoking protests like the one against the Iraq War on February 15, 2003, that sent hundreds of thousands of Americans into the streets of major cities. Those protests stopped neither the Iraq War nor the reelection of the president.
Months after Barack Obama was sworn in, on April 15, 2009, protesters associated with the Tea Party held rallies in 350 cities, attracting more than 300,000 Americans. They were angry about the financial crisis, the Bush administration’s response to it, and the progressive agenda of the polarizing new president and Congress. The following year, 84 Republican freshmen joined the House during the 2010 midterms. By 2012, the Tea Party had fueled victories for politicians including Rand Paul, Mike Lee, Marco Rubio, Ted Cruz, Scott Brown, and Nikki Haley. President Obama’s ability to advance a domestic agenda was all but finished, though he retained enough popularity to be reelected easily in the 2012 campaign.
With a penstroke, President Trump withdrew the U.S. from Trans-Pacific Partnership, imposed a federal hiring freeze, and reinstated the ‘Mexico City policy’ on defunding international abortion-related services.
President Trump marked his first full business day in office with three major executive orders, each one aimed at fulfilling campaign promises he made last year.
His most significant order immediately withdrew the U.S. from the Trans-Pacific Partnership, a multilateral free-trade agreement between the U.S. and eleven other Pacific Rim countries. The pact, aimed at counterbalancing China’s growing economic clout in east Asia, was among the Obama administration’s signature foreign policy achievements and a cornerstone of the pivot to Asia.
But the agreement also drew its share of domestic criticism on both sides of the campaign aisle. Both Democratic nominee Hillary Clinton, who initially supported it, and her primary rival Bernie Sanders criticized the pact for not doing enough to support American workers. Trump was among its most vociferous critics, at one point calling it “a continuing rape of our country.”
The president has reinstated a contentious policy that blocks funding to international family-planning organizations unless they agree not to promote abortion.
On Monday, just days after hundreds of thousands of women marched on Washington, as well as in hundreds of cities around the nation and the world, to call for, among other issues, the protection of women’s reproductive rights, President Donald Trump signed offon the first anti-abortion policy of his term.
It was expected: Almost immediately upon entering office, every new administration since 1984 has repealed or reinstated, according to its party’s position on abortion rights, a rule that prohibits foreign organizations that receive U.S. family-planning funds “from providing counseling or referrals for abortion or advocating for access to abortion services in their country.”
This rule, known as the Mexico City policy, blocks U.S. family-planning assistance to these groups, even if their abortion-related activities—including information, referrals, or services—are conducted with non-U.S. funds. Opponents to the restriction have dubbed it the “Global Gag Rule” because it hinders communication between health-care providers and patients.
If the president and his aides will tell easily disproven falsehoods about crowd sizes and speeches, what else will they be willing to dissemble about?
One of the many things that is remarkable about the Trump administration is its devotion, even in its first days, to a particular variety of pointless falsehood.
Mendacity among politicians and the spokespeople hired to spin for them runs across eras and aisles, though it is true that some are more honest than others, and Donald Trump was a historically dishonest presidential candidate. But the Trump administration has displayed a commitment to needlessly lying that is confounding to even the most cynical observers of American politics.
Narcissism, disagreeableness, grandiosity—a psychologist investigates how Trump’s extraordinary personality might shape his possible presidency.
In 2006, Donald Trump made plans to purchase the Menie Estate, near Aberdeen, Scotland, aiming to convert the dunes and grassland into a luxury golf resort. He and the estate’s owner, Tom Griffin, sat down to discuss the transaction at the Cock & Bull restaurant. Griffin recalls that Trump was a hard-nosed negotiator, reluctant to give in on even the tiniest details. But, as Michael D’Antonio writes in his recent biography of Trump, Never Enough, Griffin’s most vivid recollection of the evening pertains to the theatrics. It was as if the golden-haired guest sitting across the table were an actor playing a part on the London stage.
“It was Donald Trump playing Donald Trump,” Griffin observed. There was something unreal about it.
Popular demonstrations can bring change and topple governments. They can also spark retaliation from those in power.
The signs were so clever.
“We shall overcomb.”
“Viva la vulva.”
“I MAKE THE BEST SIGNS I REALLY DO EVERYONE SAYS SO THEY’RE TERRIFIC.”
Someone even made a papier-mâché vagina dentata.
The people were so cheerful and happy to be with one another, forgetting the cold and enjoying what often seemed less like a protest and more like a block party. There were families there, with grandmas in wheelchairs and babies in strollers. They were ecstatic and in disbelief at the number of people. TheWashington Post reported that the organizers put the attendance at up to half a million. They had hoped for less than half that.
It was surreal how similar this all felt, and my Russian friends on social media confirmed it: “Totally Bolotnaya,” one of them wrote. Bolotnaya is the square in the center of Moscow, right across the river from the Kremlin, where on December 10, 2011 around 50,000 people came out to protest fraudulent parliamentary elections. They had expected 3,000 and were stunned by their success. It was cold and gray that day, too, and the feeling of being in that joyous crowd was unforgettable, which is why I remembered it so vividly today. It is the giddiness of watching people vent their political frustrations with a sense of humor and good cheer, and the euphoria of observing people discover that they are not alone, that there are thousands and thousands of people just like them.
A history of the first African American White House—and of what came next
In the waning days of President Barack Obama’s administration, he and his wife, Michelle, hosted a farewell party, the full import of which no one could then grasp. It was late October, Friday the 21st, and the president had spent many of the previous weeks, as he would spend the two subsequent weeks, campaigning for the Democratic presidential nominee, Hillary Clinton. Things were looking up. Polls in the crucial states of Virginia and Pennsylvania showed Clinton with solid advantages. The formidable GOP strongholds of Georgia and Texas were said to be under threat. The moment seemed to buoy Obama. He had been light on his feet in these last few weeks, cracking jokes at the expense of Republican opponents and laughing off hecklers. At a rally in Orlando on October 28, he greeted a student who would be introducing him by dancing toward her and then noting that the song playing over the loudspeakers—the Gap Band’s “Outstanding”—was older than she was.
Driven by opportunism, pragmatism, or fear, many begin to forget that they used to think certain things were unacceptable.
In The Captive Mind, Czeslaw Milosz tells a story about a man who ventures out in the immediate aftermath of the fall of a regime. Papers full of state secrets lie in the streets, their knowledge less important for the moment than that of where to find something to eat. A little boy plays in a bombed-out street, whistling a song about the leader. “The song remains, but the leader of yesterday is already part of an extinct past.”
When authoritarians fall from power, even if they are secretly mourned, they must be publicly forgotten. Yet they remain as traces within the bodies of their people. The muscle memory to salute, to sing their songs, to fear their wrath, can be hard to shake. My years of studying Mussolini and his two-decade long regime have taught me not to underestimate the individual and collective work of disentanglement that comes with the ruler’s fall from power.
M. Night Shyamalan’s new film ends on a typically surprising note—and there’s a lot to unpack about its wider implications.
This article spoils the entire plot, and twist ending, of Split.
M. Night Shyamalan is a writer and director who is legendarily fond of the surprise twist ending. It was a stunt that made his career with his third film, The Sixth Sense, in 1999, turning a small-scale ghost story into a word-of-mouth smash hit that dominated the box office for an entire summer. He’s deployed it over and over throughout his career, to arguably diminishing returns, before dropping it entirely. But recently, as he’s dipped back into the horror genre that put his name on the map, he’s brought back his favorite gimmick, and his new film Split has a final reveal that is too bonkers not to discuss; one that redefines the overall thrust of the film, and that ends up referring back to his larger oeuvre in an unconventional way.