The only thing we have to fear is fear of the trillion-dollar coin itself.
It is the single most important comment in the history of Internet comments. Probably.
Back in the summer of 2011, as House Republicans threatened to force us to default on our obligations, a commenter on Cullen Roche's blog, Pragmatic Capitalism, suggested an inventive way around the debt ceiling: a trillion-dollar coin.
Ah, the debt ceiling. It's the ludicrous credit limit Congress has given itself, which could force us into default. Here's why it makes no sense. Imagine you were a high-earner living beyond your means, and your credit card company came to you offering to pay you to expand your line of credit -- but you said no! You've made a resolution not to increase your total debt anymore, no matter how attractive the offer. That's a fine resolution, but, remember, you're still living beyond your means. Uh-oh. You still have all your old bills to pay, but now you don't have the money to pay them all. Pretty soon, your credit card notices you're not paying all your bills, and jack up your interest rate. This is the worst personal-finance plan ever, and it's what House Republicans are saying they'll do to the economy by holding the debt limit hostage to their demand for deep spending cuts.
Enter the trillion-dollar coin. It sounds nuts. But there's a loophole that actually lets the Treasury create coins in whatever value it wants, even $1 trillion. It's all straightforward enough. The Treasury would create one of these coins, deposit it at the Federal Reserve, and use the new money in its account to pay our bills if the debt ceiling isn't increased. This has gone from being just another wacky idea in the world of internet comments to something that's getting taken seriously due, in large part, to the efforts of Joe Weisenthal of Business Insider and Josh Barro of Bloomberg View to promote it. (Which you can follow on Twitter at #MintTheCoin). Their logic is that as silly as the trillion-dollar coin sounds, the debt ceiling is far sillier -- and much more destructive.
As this terrifying report from the Bipartisan Policy Center shows, the consequences of going over the debt ceiling are unthinkable and unpredictable. At best, it will mean immediate 40 percent austerity; at worst, it will mean an outright default on our debt. Both are bad enough that a legal gimmick like the trillion dollar coin sounds sane in comparison, if it comes to that. At least that's what Representative Jerry Nadler, Paul Krugman, and, as of pixel time, over 6,000 other patriotic Americans think.
But maybe you're not convinced yet. Alright, here is EVERYTHING you need to know about the trillion-dollar coin, and why it might just be the crazy solution Washington deserves and needs.
What's this nonsense I've been hearing about a trillion-dollar coin? It's got to be some kind of elaborate --
Stop. It's no joke. At least no more than voluntarily defaulting on our obligations by refusing to lift the debt ceiling would be. It sounds like something out of the Simpsons, but thanks to a crazy technicality the Treasury really can create a trillion-dollar coin, which would let us keep paying our bills if the debt ceiling isn't raised. It's an absurd solution to an absurd problem, but a solution nonetheless. As they say, when in Washington....
No, I'm pretty sure this is from the Simpsons.
Almost. That was a $1 trillion bill, which Fidel Castro tricked out of Monty Burns, but this is real life, so it has to be a $1 trillion coin. A platinum coin, to be exact.
I'm almost afraid to ask, but why does it need to be a coin? And why platinum?
We don't make the loopholes. We just find them. The Treasury can't print money on its own, because the money supply is supposed to be the strict purview of the Federal Reserve ... but that might not be quite so strict after all, thanks to a coin-sized exception. Congress passed a law in 1997, later amended in 2000, that gives the Secretary of the Treasury the authority to mint platinum coins, and only platinum coins, in whatever denomination and quantity he or she wants. That could be $100, or $1,000, or ... $1 trillion.
Did Congress decide life wasn't imitating Bond films enough? What were they possibly thinking?
The idea was Treasury would only use this authority for collectible coins, while making a little money for the government in the process. But the law is vague. It only says the Treasury can mint platinum coins in any denomination it wants. So, to infinity and beyond!
Okay. So the Treasury can mint a trillion-dollar coin because of a law that lets it mint commemorative coins in whatever denomination it chooses, right? Doesn't this violate the spirit of the law?
Maybe. But remember, part of the point of creating these commemorative coins was to increase government revenue. As former Congressman and author of the original bill Mike Castle told Dylan Matthews of the Washington Post, the intent was to use the government's seigniorage power to very modestly reduce the deficit. Seigniorage is the delightfully literal concept of making money by making money. It's the difference between the cost of creating currency, and the value you assign to that currency -- in other words, the "profit" governments get from minting money. The trillion-dollar coin is seigniorage just like commemorative coins are seigniorage -- well, except that the trillion-dollar coin is a whole, whole lot more of it. Even if you don't find this terribly convincing, it doesn't really matter. The plain text of the law, not its intent, is what matters. And that means the trillion-dollar coin is almost certainly legal.
"Almost certainly legal" is good enough for me, but what if it isn't for everybody else? Would it survive a court challenge?
I just want to say one word to you. Just one word. Standing. It's far from clear anybody would have the legal standing to challenge the trillion-dollar coin in court. That would at least require a joint resolution of Congress, which isn't happening, or an investor who can show that not defaulting on our obligations caused them injury. Even if such an investor exists, say somebody who took credit default swaps (CDS) out on Treasury bonds, they'd be going up against a good bit of precedent. Call it FDR's revenge. When he took office in 1933, FDR faced the singular economic challenge of reversing the massive deflation of the previous four years. Falling wages and prices had increased real debt burdens, and set off a wave of mass bankruptcy. FDR turned this around when he devalued the dollar by taking us off the gold standard, but one problem remained: the gold clauses. These clauses gave creditors the option of getting back in either dollars or gold, with the latter being particularly appealing after its price soared almost 60 percent. But increasing inflation doesn't help debtors if their debts increase in equal measure, so Congress passed a joint resolution that voided all gold clauses in all contracts.
Bondholders were understandably upset about having to get paid back in cheaper dollars, sued, and lost. In a series of cases, the Supreme Court ruled that Congress could indeed nullify the gold clauses in private contracts under its power to regulate money, and that Treasury bondholders could not seek redress. As far as precedents go, this suggests the trillion dollar coin should be legal even if it changes the value of private contracts, like CDS, under the power to regulate money. And that's assuming CDS holders even have standing. They might not. As UCLA law professor Jonathan Zasloff explained to me, investors betting on a U.S. default are betting on something that's unconstitutional under the 14th amendment, and you probably can't base a contract off something that's illegal.
Okay, so this might be legal, but --
If you're still not convinced, just ask Representative Greg Walden, a Republican from Oregon, who's so convinced it's legal that he introduced a bill to close the platinum coin loophole.
FINE. It's legal. But there's still one thing I don't understand. Would we need to come up with $1 trillion worth of platinum to mint our $1 trillion platinum coin?
Repeat after me: seigniorage, seigniorage, seigniorage. Oh, and seigniorage. The entire point of the trillion-dollar coin is it gives us money to pay our bills if the debt ceiling isn't raised. But it won't give us any money if we spend an equal amount creating it. Basically, we want to take the smallest amount of platinum we can find and scribble "$1 trillion" on it. If you think this sounds nutty, ask yourself whether your $100 bill is made from $100 worth of cotton.
So why not just mint 16 of these $1 trillion coins and retire the entire national debt, smart guy? Or, even better, create a single $16 trillion coin -- scratch that, make it $100 trillion!
Now that's just crazy talk. Let me be clear: Nobody wants to use platinum coins to eliminate the debt. As Paul Krugman points out, there's a limit to how much seigniorage a government can extract before hyperinflation sets in, and that's certainly far less than $1 trillion, let alone $16 trillion. The trillion-dollar coin is just a technical fix to the technical problem of the debt ceiling. Remember, not lifting the debt ceiling doesn't prevent borrowing for new spending. It prevents borrowing for spending Congress has already appropriated. The Treasury can get around this by minting the trillion dollar coin, depositing it at the Fed, and paying the bills we've previously promised to pay -- and nothing more. It's about not defaulting on our debts, rather than paying them down.
Can we cut this short? I need to run out and buy some canned food and gold bars to prep for the coming hyperinflation. A trillion dollar coin is only two orders of magnitude away from us matching Zimbabwe for monetary ignominy.
Take a deep breath before you do something rash, like buying overpriced gold coins from Glenn Beck's buddies. As Joe Weisenthal of Business Insider points out, the biggest fallacy about the trillion-dollar coin is that it will be massively inflationary. It won't be. If the government quickly spent $1 trillion, that might be inflationary. But the coin wouldn't pay for new spending. It would pay for old spending -- spending already authorized by Congress that we can't pay for because of a ridiculous self-imposed limit on government borrowing, the debt ceiling. The total amount of spending in the economy would stay the same.
Now, inflation might go up in the long-term if the Fed doesn't intervene. That's because the composition of spending will have changed -- more currency, less borrowing -- even though the amount has not. If the monetary base stays permanently larger, inflation should eventually increase -- which is why the Fed will intervene. It has its inflation target, and it cares very much about hitting it. The Fed can do this if it "sterilizes" the trillion-dollar coin by selling bond in an equal amount, vacuuming up just as much money as the trillion dollar coin injects. Inflation, whipped.
Let me see if I've got this right. The Treasury mints money and pays for stuff with it, and the Fed sells bonds to offset this new money? This sounds kind of like ...
Monetary policy! It's just a particularly convoluted way of doing sterilized quantitative easing (QE). Okay, let's translate this into English. QE is plenty misunderstood, but it's actually simple enough. It's about printing money and buying stuff. More specifically, the Fed prints money and uses it to buy bonds from banks, which increases the reserves banks hold. In sterilized QE, the Fed uses operations like reverse repos -- don't worry, it's not important -- to prevent these new bank reserves from getting lent out. Putting it all together, the Fed 1) prints money, 2) buys stuff, and 3) sucks out as much money as it prints. This should sound familiar. It's exactly how the trillion-dollar coin would work, with the Treasury just replacing the Fed in the first two steps. To simplify a bit, the Treasury would 1) mint the trillion dollar coin, 2) use it to pay for already approved obligations, and 3) have the Fed would suck out as much money as the Treasury mints. It's sterilized QE through the platinum looking-glass.
It seems like a really bad idea to let the executive usurp control of monetary policy from the Fed. Isn't this a frightful precedent?
Yes and no. The consequences could be terrible if trillion-dollar coins become a regular part of policymaking, but monetary-policy-by-executive isn't exactly unprecedented. As former Treasury official and Western Kentucky professor David Beckworth points out, FDR grabbed the reins of monetary policy when he took the U.S. off the gold standard in 1933 and announced he wanted prices to return to their pre-Depression level. Obama could theoretically use platinum coins to do the same, perhaps targeting nominal GDP instead. But the danger, as Ryan Avent of The Economist points out, is if this extraordinary measure became ordinary, or if markets merely feared it might. Treasury bonds might lose some of their safe haven luster and send interest rates up if investors began to anticipate a new normal of higher inflation due to period coin seigniorage.
Hmmm. I'm feeling generous, so I'll concede two points. First, the trillion dollar coin is legal, and second, the economics of it make sense. But that doesn't mean it wouldn't be a political trainwreck.
Indeed. Cardiff Garcia of FT Alphaville makes the rather persuasive case that Democrats shouldn't use the trillion dollar coin as a negotiating tactic to increase their leverage in the debt ceiling talks, since House Republicans would welcome Obama embracing such a ludicrous-sounding ploy -- making a debt ceiling breach more likely. But it does make sense as a form of insurance against the economic carnage a protracted debt ceiling breach would entail.
Okay, serious question time. What if somebody stole the trillion dollar coin?
Good luck getting change for it. Or finding a bank that will accept it as a deposit. It would only turn out to be worth the platinum it was minted on -- which, hopefully, should not be very much.
Even more serious question time. Who should we put on the trillion dollar coin?
There are lots of good options here. Paul Krugman has suggested John Boehner, which has a certain poetic justice to it, but Ron Paul or a banana are good options too.
Last question. You don't seriously think this is a good idea, do you? If ever there was something that tells the world we're a banana republic, it's --
Choosing to default on our obligations. There is nothing crazier than that. If it it's a choice between defaulting on our obligations, and minting a trillion-dollar coin, I say mint the coin. In an ideal world, Obama would end the platinum coin loophole in return for the House GOP forever ending the debt ceiling, as Josh Barro proposed, but I'll settle for anything that involves us paying our bills as we promised.
The only thing we have to fear is fear of the trillion-dollar coin itself.
In an NPR interview, the Pretenders singer compared comments about her book—and its description of her sexual assault—to a “lynch mob.”
In maybe one of the most uncomfortable NPR interviews since Joaquin Phoenix went on Fresh Air, the Pretenders singer Chrissie Hynde spoke with Morning Edition’s David Greene on Tuesday about her book, Reckless. Or, more specifically, about the mass outrage sparked by the section in which she writes about being sexually assaulted at the age of 21 by a group of bikers, and of taking “full responsibility” for it.
GREENE: I’ll just read a little bit here: “The hairy horde looked at each other. It was their lucky day. ‘How bout yous come to our place for a party.’” And you ended up with them, and then you proceeded to describe what they were asking you to do. “‘Get your bleeping clothes off, shut the bleep up, hurry up, we got bleep to do, hit her in the back of the head so it don’t leave no marks.’” This certainly sounds like an awful, awful experience with these men.
HYNDE: Uh, yeah. I suppose, if that’s how you read it, then that, yeah. You know, I was having fun, because I was so stoned. I didn’t even care. That’s what I was talking about, I was talking about the drugs more than anything, and how f***** up we were. And how it impaired our judgment to the point where it just had gotten off the scale.
Here’s what happens if astronomers make contact with a civilization on another planet.
The false alarm happened in 1997.
The Green Bank Radio Observatory in Green Bank, West Virginia, was picking up some unusual signals—and Seth Shostak, then the head of the Center for Search for Extraterrestrial Intelligence (SETI) Research in Mountain View, Caifornia, was convinced that they had come from intelligent life somewhere in the universe.
“It looked like it might be the real deal,” Shostak recalled. Within a few hours, he had a call from The New York Times.
But within a day, it became clear that the source of excitement was actually a European satellite. To make matters worse, a second telescope in Georgia, which would have told the scientists about the true nature of the signal, wasn’t working.
American politicians are now eager to disown a failed criminal-justice system that’s left the U.S. with the largest incarcerated population in the world. But they've failed to reckon with history. Fifty years after Daniel Patrick Moynihan’s report “The Negro Family” tragically helped create this system, it's time to reclaim his original intent.
By his own lights, Daniel Patrick Moynihan, ambassador, senator, sociologist, and itinerant American intellectual, was the product of a broken home and a pathological family. He was born in 1927 in Tulsa, Oklahoma, but raised mostly in New York City. When Moynihan was 10 years old, his father, John, left the family, plunging it into poverty. Moynihan’s mother, Margaret, remarried, had another child, divorced, moved to Indiana to stay with relatives, then returned to New York, where she worked as a nurse. Moynihan’s childhood—a tangle of poverty, remarriage, relocation, and single motherhood—contrasted starkly with the idyllic American family life he would later extol.
Forget the Common Core, Finland’s youngsters are in charge of determining what happens in the classroom.
“The changes to kindergarten make me sick,” a veteran teacher in Arkansas recently admitted to me. “Think about what you did in first grade—that’s what my 5-year-old babies are expected to do.”
The difference between first grade and kindergarten may not seem like much, but what I remember about my first-grade experience in the mid-90s doesn’t match the kindergarten she described in her email: three and a half hours of daily literacy instruction, an hour and a half of daily math instruction, 20 minutes of daily “physical activity time” (officially banned from being called “recess”) and two 56-question standardized tests in literacy and math—on the fourth week of school.
That American friend—who teaches 20 students without an aide—has fought to integrate 30 minutes of “station time” into the literacy block, which includes “blocks, science, magnetic letters, play dough with letter stamps to practice words, books, and storytelling.” But the most controversial area of her classroom isn’t the blocks nor the stamps: Rather, it’s the “house station with dolls and toy food”—items her district tried to remove last year. The implication was clear: There’s no time for play in kindergarten anymore.
National Geographic Magazine has opened its annual photo contest, with the deadline for submissions coming up on November 16, 2015.
National Geographic Magazine has opened its annual photo contest, with the deadline for submissions coming up on November 16, 2015. The Grand Prize Winner will receive $10,000 and a trip to National Geographic headquarters to participate in its annual photography seminar. The kind folks at National Geographic were once again kind enough to let me choose among the contest entries so far for display here. Captions written by the individual photographers.
The country has seen periods of turmoil before. But this time may be different.
I am usually an optimist when it comes to Turkey’s future. Indeed, I wrote a whole book about The Rise of Turkey. But these days, I’m worried. The country faces a toxic combination of political polarization, government instability, economic slowdown, and threats of violence—from both inside and outside Turkey—that could soon add up to a catastrophe. The likelihood of that outcomeis increasing amid Russia’s bombing raids in Syria in support of its ally, Syrian President Bashar al-Assad, which threaten to debilitate the moderate rebels and boost the extremists in Syria’s civil war, while leaving Turkey to deal with two unruly neighbors: Assad and ISIS.
Of course, Turkey has gone through periods of political and economic crisis before. During the 1970s, the country’s economy collapsed, and the instability led to fighting among right- and left-wing militant groups and security forces that killed thousands of people. Then, in the 1990s, Turkey was pummeled by triple-digit inflation and a full-blown Kurdish insurgency that killed tens of thousands. Turkey survived both those decades. The historian in me says that Turkey will be able to withstand the coming shock this time as well.
What went wrong with the conversion ministry, according to Alan Chambers, who once led its largest organization
In 2001, Alan Chambers was hired as the president of the world’s largest ex-gay ministry, Exodus International. That same year, U.S. Surgeon General David Satcher issued a report that stated, “there is no valid evidence showing that sexual orientation can be changed.”
Like most conservative Christian leaders at the time, Chambers considered the countercultural nature of his work a point of pride. During the latter part of the 20th century, Exodus and similar conservative groups promoted the idea that gay people could—and should try to—become straight. Ex-gay leaders traveled to churches and appeared on television news programs citing a litany of examples of happily married “former homosexuals” to demonstrate that sexual orientation is a choice and that change is possible.
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.
Two hundred fifty years of slavery. Ninety years of Jim Crow. Sixty years of separate but equal. Thirty-five years of racist housing policy. Until we reckon with our compounding moral debts, America will never be whole.
And if thy brother, a Hebrew man, or a Hebrew woman, be sold unto thee, and serve thee six years; then in the seventh year thou shalt let him go free from thee. And when thou sendest him out free from thee, thou shalt not let him go away empty: thou shalt furnish him liberally out of thy flock, and out of thy floor, and out of thy winepress: of that wherewith the LORD thy God hath blessed thee thou shalt give unto him. And thou shalt remember that thou wast a bondman in the land of Egypt, and the LORD thy God redeemed thee: therefore I command thee this thing today.
— Deuteronomy 15: 12–15
Besides the crime which consists in violating the law, and varying from the right rule of reason, whereby a man so far becomes degenerate, and declares himself to quit the principles of human nature, and to be a noxious creature, there is commonly injury done to some person or other, and some other man receives damage by his transgression: in which case he who hath received any damage, has, besides the right of punishment common to him with other men, a particular right to seek reparation.
“Vaccine hesitancy” is a delicate way of phrasing a serious public-health problem. The World Health Organization defines it as “delay in acceptance or refusal of vaccines despite availability of vaccination services.”
There’s a tendency to treat these vaccine-hesitant people as a monolith, the “anti-vaxers” who are putting everyone at risk. But people who don’t vaccinate aren’t just a homogenous mob of parents who fear toxins and want their kids to be exposed to chicken pox “the natural way.” There are a variety of reasons why people decide not to vaccinate, and a new paper by researchers at Rutgers University and Germany’s University of Erfurt and RWTH Aachen University, published in Policy Insights from the Behavioral and Brain Sciences, breaks down the psychology of four different types of non-vaccinators, in the hopes of finding effective strategies to change their minds.