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.
The Democrat’s command and poise left her rival looking frustrated, peevish, and out of sorts.
Monday brought the first debate of the presidential season, but it often felt like two separate debates. One, from Hillary Clinton, was wonky, crisp, and polished; if not always inspiring, it was professional and careful. The other, from Donald Trump, was freewheeling, aggressive, and meandering, occasionally landing a hard blow but often substance-less and hard to follow. But the two debates intersected at times, sometimes raucously, as Trump repeatedly broke in to interrupt Clinton.
It was a commanding performance from the Democratic nominee. Clinton delivered a series of detailed answers on subjects ranging from race to the Middle East to tax policy. Meanwhile, she delivered a string of attacks on Trump, assailing him for stiffing contractors, refusing to release his tax returns, fomenting birtherism, and caricaturing black America. She stumbled only occasionally, but left few openings for Trump. She remained calm and often smiling as Trump repeatedly attacked her and interrupted her answers—doing it so often that moderator Lester Holt, often a spectral presence at the debate, finally cut in twice in short order to chide him. (Vox counted 40 instances; Clinton made some of her own interruptions, but fewer.) Clinton displayed a sort of swagger perhaps not seen since her hearing before Congress on Benghazi.
If undecided voters were looking for an excuse to come around to Clinton’s corner, they may have found it on Monday night.
Donald Trump sniffled and sucked down water. He bragged about not paying federal taxes—“That makes me smarter.” He bragged about bragging about profiting from the housing crisis—“That’s called business, by the way.” He lost his cool and maybe the race, taking bait coolly served by Hillary Clinton.
If her objective was to tweak Trump’s temper, avoid a major mistake, and calmly cloak herself in the presidency, Clinton checked all three boxes in the first 30 minutes of their first debate.
It may not matter: Trump is the candidate of change and disruption at a time when voters crave the freshly shaken. But the former secretary of state made the strongest case possible for the status quo, arguing that while voters want change in the worst way, Trump’s way would be the worst.
For decades, the candidate has willfully inflicted pain and humiliation.
Donald J. Trump has a cruel streak. He willfully causes pain and distress to others. And he repeats this public behavior so frequently that it’s fair to call it a character trait. Any single example would be off-putting but forgivable. Being shown many examples across many years should make any decent person recoil in disgust.
Judge for yourself if these examples qualify.
* * *
In national politics, harsh attacks are to be expected. I certainly don’t fault Trump for calling Hillary Clinton dishonest, or wrongheaded, or possessed of bad judgment, even if it’s a jarring departure from the glowing compliments that he used to pay her.
But even in a realm where the harshest critiques are part of the civic process, Trump crossed a line this week when he declared his intention to invite Gennifer Flowers to today’s presidential debate. What kind of man invites a husband’s former mistress to an event to taunt his wife? Trump managed to launch an attack that couldn’t be less relevant to his opponent’s qualifications or more personally cruel. His campaign and his running-mate later said that it was all a big joke. No matter. Whether in earnest or in jest, Trump showed his tendency to humiliate others.
In a unique, home-spun experiment, researchers found that centripetal force could help people pass kidney stones—before they become a serious health-care cost.
East Lansing, Michigan, becomes a ghost town during spring break. Families head south, often to the theme parks in Orlando. A week later, the Midwesterners return sunburned and bereft of disposable income, and, urological surgeon David Wartinger noticed, some also come home with fewer kidney stones.
Wartinger is a professor emeritus at Michigan State, where he has dealt for decades with the scourge of kidney stones, which affect around one in 10 people at some point in life. Most are small, and they pass through us without issue. But many linger in our kidneys and grow, sending hundreds of thousands of people to emergency rooms and costing around $3.8 billion every year in treatment and extraction. The pain of passing a larger stone is often compared to child birth.
Who will win the debates? Trump’s approach was an important part of his strength in the primaries. But will it work when he faces Clinton onstage?
The most famous story about modern presidential campaigning now has a quaint old-world tone. It’s about the showdown between Richard Nixon and John F. Kennedy in the first debate of their 1960 campaign, which was also the very first nationally televised general-election debate in the United States.
The story is that Kennedy looked great, which is true, and Nixon looked terrible, which is also true—and that this visual difference had an unexpected electoral effect. As Theodore H. White described it in his hugely influential book The Making of the President 1960, which has set the model for campaign coverage ever since, “sample surveys” after the debate found that people who had only heard Kennedy and Nixon talking, over the radio, thought that the debate had been a tie. But those who saw the two men on television were much more likely to think that Kennedy—handsome, tanned, non-sweaty, poised—had won.
Communal living is hardly a departure from tradition—it's a return to how humans have been making their homes for thousands of years.
For most of human history, people were hunter-gatherers. They lived in large camps, depending on one another for food, childcare, and everything else—all without walls, doors, or picket fences. In comparison, the number of people living in most households in today’s developed countries is quite small. According to the Census Bureau, fewer than three people lived in the average American household in 2010. The members of most American households can be counted on one hand, or even, increasingly, one finger: Single-person households only made up about 13 percent of all American households in 1960. Now, that figure is about 28 percent.
Belonging to a relatively small household has become the norm even though it can make daily life more difficult in many ways. Privacy may be nice, but cooking and doing chores become much less time-consuming when shared with an additional person, or even several people. Water, electric, and internet bills also become more bearable when divided among multiple residents. There are social downsides to living alone, too. Many elderly people, young professionals, stay-at-home parents, and single people routinely spend long stretches of time at home alone, no matter how lonely they may feel; more distressingly, many single parents face the catch-22 of working and paying for childcare. Living in smaller numbers can be a drain on money, time, and feelings of community, and the rise of the two-parent dual-earning household only compounds the problems of being time-poor.
The Donald J. Trump Foundation reportedly used $258,000, most of it other people’s money, to settle legal disputes for the Republican nominee.
For people at certain income levels, finding creative ways to avoid taxes is practically a leisure sport. Donald Trump, golf and casino magnate that he is, would never miss out on a leisure sport, would be?
In a new article, The Washington Post’s David Fahrenthold, who’s already collected a series of scoops on the Donald J. Trump Foundation, reports that Trump sometimes had people who owed him money pay his foundation instead—to the tune of at least $2.3 million. That’s legal, provided that the person who would have received the income still pays taxes on the money, which is where things get unclear. A Trump adviser initially denied that Trump had ever directed fees to his foundation, but when presented with evidence that he had a $400,000 fee for appearing on a Comedy Central roast (nice work if you can get it) sent to the foundation, the adviser said Trump had paid taxes on it. But he refused to say whether Trump had paid taxes on the rest of the $2.3 million.
The president and FARC’s leader used a pen made from a bullet to end the nearly 60-year-old war.
NEWS BRIEF The war lasted nearly 60 years and killed a quarter-of-a million people. Thousands were kidnapped, and more were injured by landmines placed in the jungles controlled by the Revolutionary Armed Forces of Colombia (FARC). On Monday, the Marxist group’s rebel leader, Timochenko, used a pen made from a bullet to sign a peace deal with Colombia’s president, Juan Manuel Santos, which ends the last big Cold War-era conflict in Latin America.
The deal, signed in Cartagena, marks the end of four years of negotiations between the government and the rebels. Colombians will vote October 2 on whether to accept the deal—and it’s predicted they will—which would draw FARC soldiers out of the jungle and into designated disarmament zones set up by the United Nations. They will then form a political party recognized by the government and be given 10 seats in Colombia’s 268-member Congress. As part of the deal, FARC was removed from the European Union’s list of terrorist organizations.
A new study of pregnant women finds nausea and vomiting are associated with a reduced risk of miscarriage.
People are always saying the wrong thing to pregnant women.
Expectant mothers hear everything from the obnoxious (“You’re huge!”) to the outright bizarre (“If you eat that Sriracha, your baby will come out bald”).
Then there are the well-meaning—yet utterly unhelpful—superstitions and platitudes: “I can tell from how you’re carrying that it’s a girl.” (No, you can’t.) “At least the terrible sleep you’re getting now is great preparation for all those sleepless nights you’re going to have with baby!” (Bone-splitting exhaustion is not something you need to practice ahead of time.) “But morning sickness means your baby is healthy!”
Actually, there might be something to that last one.
Pregnant women have long been told that feeling miserable every single day for several months may indicate that a developing baby is doing well—especially in the first trimester, when nausea and vomiting are most common. Now, there’s more science to support the idea.