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.
As it’s moved beyond the George R.R. Martin novels, the series has evolved both for better and for worse.
Well, that was more like it. Sunday night’s Game of Thrones finale, “The Winds of Winter,” was the best episode of the season—the best, perhaps, in a few seasons. It was packed full of major developments—bye, bye, Baelor; hello, Dany’s fleet—but still found the time for some quieter moments, such as Tyrion’s touching acceptance of the role of Hand of the Queen. I was out of town last week and thus unable to take my usual seat at our Game of Thrones roundtable. But I did have some closing thoughts about what the episode—and season six in general—told us about how the show has evolved.
Last season, viewers got a limited taste—principally in the storylines in the North—of how the show would be different once showrunners Benioff and Weiss ran out of material from George R.R. Martin’s novels and had to set out on their own. But it was this season in which that exception truly became the norm. Though Martin long ago supplied Benioff and Weiss with a general narrative blueprint of the major arcs of the story, they can no longer rely on the books scene by scene. Game of Thrones is truly their show now. And thanks to changes in pacing, character development, and plot streamlining, it’s also a markedly different show from the one we watched in seasons one through four—for the worse and, to some degree, for the better.
It happened gradually—and until the U.S. figures out how to treat the problem, it will only get worse.
It’s 2020, four years from now. The campaign is under way to succeed the president, who is retiring after a single wretched term. Voters are angrier than ever—at politicians, at compromisers, at the establishment. Congress and the White House seem incapable of working together on anything, even when their interests align. With lawmaking at a standstill, the president’s use of executive orders and regulatory discretion has reached a level that Congress views as dictatorial—not that Congress can do anything about it, except file lawsuits that the divided Supreme Court, its three vacancies unfilled, has been unable to resolve.
On Capitol Hill, Speaker Paul Ryan resigned after proving unable to pass a budget, or much else. The House burned through two more speakers and one “acting” speaker, a job invented following four speakerless months. The Senate, meanwhile, is tied in knots by wannabe presidents and aspiring talk-show hosts, who use the chamber as a social-media platform to build their brands by obstructing—well, everything. The Defense Department is among hundreds of agencies that have not been reauthorized, the government has shut down three times, and, yes, it finally happened: The United States briefly defaulted on the national debt, precipitating a market collapse and an economic downturn. No one wanted that outcome, but no one was able to prevent it.
Readers share their own experiences in an ongoing series.
Prompted by Emma Green’s note on the Supreme Court case Whole Women’s Health v. Hellerstedt, for which a group of lawyers filed a document openly describing their abortions, readers share their own stories in an ongoing collection edited by Chris Bodenner. We are posting a wide range of experiences—from pro-choice and pro-life readers, women and men alike—so if you have an experience not represented so far, please send us a note: email@example.com.
How much do you really need to say to put a sentence together?
Just as fish presumably don’t know they’re wet, many English speakers don’t know that the way their language works is just one of endless ways it could have come out. It’s easy to think that what one’s native language puts words to, and how, reflects the fundamentals of reality.
But languages are strikingly different in the level of detail they require a speaker to provide in order to put a sentence together. In English, for example, here’s a simple sentence that comes to my mind for rather specific reasons related to having small children: “The father said ‘Come here!’” This statement specifies that there is a father, that he conducted the action of speaking in the past, and that he indicated the child should approach him at the location “here.” What else would a language need to do?
The star Daily Show correspondent is moving on to make her own scripted comedy, and her gain is the show’s huge loss.
When Jon Stewart announced he was leaving The Daily Show last year, many fans lobbied for Jessica Williams to replace him, pushing one of the show’s standout performers into a limelight she deemed herself not quite ready for. “Thank you, but I am extremely under-qualified for the job!” Williams tweeted. Comedy Central eventually picked Trevor Noah for the gig, and in the following months, Williams’s star has only risen higher. It’s no huge surprise, then, that on Wednesday she told Entertainment Weekly she was moving on from The Daily Show to develop her own scripted series for Comedy Central. It’s great news for Williams, but a huge loss for the show she’s leaving behind.
The discussion over Williams becoming The Daily Show host in 2015 turned into a minor political maelstrom. Williams publicly pushed back against the idea that she had “impostor syndrome,” as suggested by one writer, for calling herself “under-qualified” and pointing to her young age (25 at the time) as a reason for her disinterest in the position. Indeed, there are a thousand reasons to not want the daily grind of a TV hosting gig, and the heightened scrutiny and criticism Noah has received in his year on the job is among them. But as Williams’s popularity and talents have grown, and as The Daily Show has struggled to retain its critical cachet after Stewart’s departure, it’s been hard not to mourn a different outcome in which Williams took the host job and steered the series in a fresher, more relevant direction.
People in Great Britain felt their leaders weren’t treating them fairly. Politicians in the U.S. should take note.
Britain’s Brexit vote has shocked the political elites of both the U.S. and Europe. The vote wasn’t just about the EU; in fact, polls before the referendum consistently showed that Europe wasn’t top on voters’ lists of concerns. But on both sides of the Atlantic Ocean, large numbers of people feel that the fundamental contracts of capitalism and democracy have been broken. In a capitalist economy, citizens tolerate rich people if they share in the wealth, and in a democracy, they give their consent to be governed if those governing do so in their interest. The Brexit vote was an opportunity for people to tell elites that both promises have been broken. The most effective line of the Leave campaign was “take back control.” It is also Donald Trump’s line.
Questions about the presumptive Republican nominee dominated a press conference of North America’s top leaders, culminating in a rant by President Obama.
NEWS BRIEF Wednesday’s energy summit in Ottawa began awkwardly enough when Canadian Prime Minister Justin Trudeau rather clumsily tried to finagle a three-way handshake with United States President Barack Obama and President Enrique Peña Nieto of Mexico. It only got more awkward when reporters began peppering the North American leaders with questions about Donald Trump.
All three men have harshly criticized the presumptive Republican nominee over the last several months in their home countries. Peña Nieto has compared him to Hitler and Mussolini, Trudeau has said he practices the politics of fear and division, and Obama has denounced his rhetoric on immigration, national security, and just about everything else over the course of the presidential campaign.
Their degrees may help them secure entry-level jobs, but to advance in their careers, they’ll need much more than technical skills.
American undergraduates are flocking to business programs, and finding plenty of entry-level opportunities. But when businesses go hunting for CEOs or managers, “they will say, a couple of decades out, that I’m looking for a liberal arts grad,” said Judy Samuelson, executive director of the Aspen Institute’s Business and Society Program.
That presents a growing challenge to colleges and universities. Students are clamoring for degrees that will help them secure jobs in a shifting economy, but to succeed in the long term, they’ll require an education that allows them to grow, adapt, and contribute as citizens—and to build successful careers. And it’s why many schools are shaking up their curricula to ensure that undergraduate business majors receive something they may not even know they need—a rigorous liberal-arts education.
As explained back in item #18 of this series, I’m using “the Resistance” and “Vichy Republicans” as useful shorthands for, respectively, the GOP figures who are fighting the hostile takeover of their territory, versus those who have acquiesced to a conquering force — which no doubt they’ll criticize once someone else has dealt with it. (And to make this clear every time, of course the analogy does not extend to likening this era’s conqueror, Donald Trump, to the historically unique Hitler.)
A psychology professor sketches a debate that captivates many in his field.
Asked what propositions are worthy of wider debate, Dan McAdams, a professor of psychology at Northwestern University, wondered how humans arrive at their personalities.
I am a personality and life-span developmental psychologist. Thus, my main activities are teaching, writing, and research. In my field, there are many ideas that are widely and vigorously debated. But it is not clear to me that the public at large is aware of these debates. Actually, “debate” is not quite the right word, because it suggests two diametrically opposed sides who take each other on. A better way to characterize it would be “conversations” among psychological scientists of different persuasions and inclinations, all of whom study the phenomenon of human personality. We may think of personality as the distinctive set of psychological characteristics that distinguish one person from the next. The back-and-forth among psychologists regarding the nature of human personality draws mainly from scientific research and theory, but it is also informed by ideology, culture, and personal experience.
A central question in the field of personality psychology today is this: To what extent is our personality given to us, and to what extent do we make it ourselves?
This is not the same thing as the old “nature versus nurture” debate. It is not so much about genes and environments as it is about the role of human will in the formation of personality. It seems pretty clear that certain foundational features of human personality – such as our basic dispositional traits – feel as if they are given to us. For example, as people move through life, from one situation to the next, they do not typically choose to be, say, “extraverted” or “anxious” or “especially kind and considerate.” “This is just how I am,” an especially extraverted person might say, regarding her tendency to be outgoing and socially dominant. “I can’t help it, I am just a very nervous person,” an individual with high levels of the trait neuroticism might conclude.
People tend to feel that their dispositional traits are given to them – by genes, past experiences, luck, whatever. (And research supports the claim.)
At the same time, there are other features of human personality that feel chosen or made, such as one’s life goals and values and, especially, the story that a person has constructed about life. Life stories – or what psychologists call narrative identities – are a very hot topic today in the psychological sciences.
A person’s life story is an internalized and evolving narrative of the self that reconstructs the past and imagines the future in such a way as to provide life with some sense of meaning and purpose. The story provides a subjective account, told to others and to the self, of how I came to be the person I am becoming. With respect to human personality, people’s stories about their lives (their narrative identities) layer over their dispositional traits. To understand a person well, even if that person is the self, one must understand the basic traits that inform everyday social behavior and the inner story that gives meaning to the person’s life.
The traits are given, it seems; but the stories seem to be made. Human beings, therefore, are simultaneously social actors whose behavior is shaped by given traits and autobiographical authors who make meaning out of their lives through narratives.