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 a new model of living, residents will have their own “microunits” built around a shared living space for cooking, eating and hanging out.
SYRACUSE—This office looks like a pretty typical co-working space, what with the guy with a ponytail coding in one corner, the pile of bikes clustered in another, and the minimalist desks spread across a light-filled room. Troy Evans opened this space, CoWorks, in a downtown building here in February.
Coworking is probably a familiar concept at this point, but Evans wants to take his idea a step further. On Friday, on the top two floors of the building, he’s starting construction on a space he envisions as a dorm for Millennials, though he cringes at the word “dorm.” Commonspace, as he’s calling it, will feature 21 microunits, which each pack a tiny kitchen, bathroom, bedroom, and living space into 300-square-feet. The microunits surround shared common areas including a chef’s kitchen, a game room, and a TV room. Worried about the complicated social dynamics of so many Millennials in one living unit? Fear not, Evans and partner John Talarico are hiring a “social engineer” who will facilitate group events and maintain harmony among roommates.
What do we actually know about the candidate’s health?
Cameras rolling, Manhattan gastroenterologist Harold Bornstein was confronted last week with a letter that carried his signature. In that letter, the writer “state[d] unequivocally” that Donald Trump “will be the healthiest individual ever elected to the presidency.”
Donald Trump would be the oldest individual ever elected to the presidency. He sleeps little and holds angry grudges. He purports to eat KFC and girthy slabs of red meat, and his physique doesn’t suggest any inconsistency in this. His health might be fine, but a claim to anything superlative feels off.
Bornstein might have jumped on that opportunity to get out of this mess—to say that Trump had dictated the letter, and Bornstein only signed it. Or that Trump had at least suggested phrases. Because it’s not just the facts of Trump’s life that don’t add up, but the linguistics of the letter.
In the age of the digital hermit, a psychologist explains what it means to avoid other people—and what to do about it.
People today might not actually be avoiding social interaction any more than they did in past decades, but they’re certainly more vocal about it. The rise of digital communication seems to be spawning a nation of indoor cats, all humble-bragging about how introverted they are and ordering their rides and groceries without ever talking to a human.
Sometimes reclusiveness can be a sign of something more serious, though. Social anxiety is one of the most common mental illnesses, but it’s still poorly understood outside of scientific circles. The good news is that it’s highly treatable, according to Stefan G. Hofmann, the director of the Social Anxiety Program at Boston University.
I recently talked with Hofmann about how social anxiety works and what people who feel socially anxious can do about it. An edited transcript of our conversation follows.
The San Francisco quarterback has been attacked for refusing to stand for the Star Spangled Banner—and for daring to criticize the system in which he thrived.
It was in early childhood when W.E.B. Du Bois––scholar, activist, and black radical––first noticed The Veil that separated him from his white classmates in the mostly white town of Great Barrington, Massachusetts. He and his classmates were exchanging “visiting cards,” invitations to visit one another’s homes, when a white girl refused his.
“Then it dawned upon me with a certain suddenness that I was different from the others; or like, mayhap, in heart and life and longing, but shut out from their world by a vast veil. I had thereafter no desire to tear down that veil, to creep through; I held all beyond it in common contempt, and lived above it in a region of blue sky and great wandering shadows,” Du Bois wrote in his acclaimed essay collection, The Souls of Black Folk. “That sky was bluest when I could beat my mates at examination-time, or beat them at a foot-race, or even beat their stringy heads.”
Practices meant to protect marginalized communities can also ostracize those who disagree with them.
Last week, the University of Chicago’s dean of students sent a welcome letter to freshmen decrying trigger warnings and safe spaces—ways for students to be warned about and opt out of exposure to potentially challenging material. While some supported the school’s actions, arguing that these practices threaten free speech and the purpose of higher education, the note also led to widespread outrage, and understandably so. Considered in isolation, trigger warnings may seem straightforwardly good. Basic human decency means professors like myself should be aware of students’ traumatic experiences, and give them a heads up about course content—photographs of dead bodies, extended accounts of abuse, disordered eating, self-harm—that might trigger an anxiety attack and foreclose intellectual engagement. Similarly, it may seem silly to object to the creation of safe spaces on campus, where members of marginalized groups can count on meeting supportive conversation partners who empathize with their life experiences, and where they feel free to be themselves without the threat of judgment or censure.
People can get addicted to almost any product. Do manufacturers have a responsibility to stop them?
“A day doesn’t go by that I don’t see people come in with Q-tip-related injuries,” laments Jennifer Derebery, an inner-ear specialist in Los Angeles.
And yet there’s a scary warning on every box of Q-tips. It reads, “CAUTION: Do not enter ear canal. … Entering the ear canal could cause injury.” How is it that the one thing most people do with cotton swabs is also the thing manufacturers explicitly warn them not to do? It’s not just that people do damage to their ears, it’s that they keep doing damage.
Some even call it an addiction. On an online forum, Q-tip user associates ear swabbing with dependency: “How can I detox from my Q-tips addiction?” MADtv ran a classic sketch on a daughter having to hide Q-tip use from her parents like a junkie.
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.
Education experts offer their thoughts on how—if at all—schools should assign, grade, and use take-home assignments.
This is the third installment in our series about school in a perfect world. Read previous entries on calendars and content.
We asked prominent voices in education—from policy makers and teachers to activists and parents—to look beyond laws, politics, and funding and imagine a utopian system of learning. They went back to the drawing board—and the chalkboard—to build an educational Garden of Eden. We’re publishing their answers to one question each day this week. Responses have been lightly edited for clarity and length.
Today’s assignment: The Homework. Will students have homework?
Rita Pin Ahrens, thedirector of education policy for the Southeast Asia Resource Action Center
Homework is absolutely necessary for students to demonstrate that they are able to independently process and apply their learning. But who says homework has to be the same as it has been? Homework might include pre-reading in preparation for what will be covered in class that day, independent research on a student-chosen topic that complements the class curriculum, experiential learning through a volunteer activity or field trip, or visiting a website and accomplishing a task on it. The structure will be left to the teachers to determine, as best fits the learning objective, and should be graded—whether by the teacher or student. Students will be held accountable for their homework and understand that it is an integral part of the learning process.
Fifteen years after the PBS show ended, the wisdom and empathy of its host persist in an unexpected place: advice columns.
In one of my favorite classic episodes of the PBS series Mister Rogers’ Neighborhood, Fred Roger chats with Jeff Erlanger, an 11-year-old who used an electric wheelchair. After introducing the boy to viewers as his “friend,” Rogers asks straightforward and kind questions about Jeff’s life—his hobbies, his parents, his visits to the hospital—and patiently listens to his answers. Then he invites Jeff to sing the song, “It’s You I Like” with him. It’s an incredibly moving scene that showed young audiences the quiet power of respecting, valuing, and nurturing each person’s emotional world, no matter their age or background.
Rogers’s warmth and earnestness were hallmarks of his show, from the gentle manner in which he’d describe an ordinary experience like going to the doctor, to the way he’d handle more complicated emotions like jealousy or fear.Fifteen years after the last episode of Mister Rogers aired on August 31, 2001, its spirit of affirmation persists in excellent children’s pop culture, such as recent episodes of Sesame Street,Inside Out, and Kubo and the Two Strings.
In its early days, the first English settlement in America had lots of men, tobacco, and land. All it needed was women.
“First comes love, then comes marriage,” the old nursery rhyme goes, but historically, first came money. Marriage was above all an economic transaction, and in no place was this more apparent than in the early 1600s in the Jamestown colony, where a severe gender imbalance threatened the fledgling colony’s future.
The men of Jamestown desperately wanted wives, but women were refusing to immigrate. They had heard disturbing reports of dissension, famine, and disease, and had decided it simply wasn’t worth it. Consequently, barely a decade after its founding in 1607, Jamestown was almost entirely male, and because these men were unable to find wives, they were deserting the colony in droves.
An immediate influx of women was needed to save the floundering colony; its leaders suggested putting out an advertisement targeting wives. The women who responded to this marital request and agreed to marry unknown men in an unfamiliar land were in a sense America’s first mail-order brides.