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 speech to Congress, the French president elegantly rebuked his host’s entire worldview.
PARIS—There was the moment French President Emmanuel Macron greeted President Trump with a kiss on both cheeks, French-style, prompting a Fox News commentator to explain that in France, that kind of thing is normal, even for men. There was the moment Trump pretended to brush dandruff off Macron’s shoulder during an Oval Office photo shoot. There was the unforgettable, amused, “I-can’t-believe-this-is-happening” look on Macron’s face when Trump said the Iran deal was terrible, end of story. There was the press conference where Trump, in television game-show-host mode, said he might withdraw from the Iran deal, or might not and instead offer “a very large deal, maybe deal, maybe not,” and anyway stay tuned for his May 12 decision deadline. There was the weird photo of the two presidential couples planting a tree, and Melania Trump’s white, wide-brimmed hat.
Americans don’t realize how fast the country is moving toward becoming a better version of itself.
I have seen the future, and it is in the United States.
After a several-year immersion in parts of the country that make the news mainly after a natural disaster or a shooting, or for follow-up stories on how the Donald Trump voters of 2016 now feel about Trump, I have a journalistic impulse similar to the one that dominated my years of living in China. That is the desire to tell people how much more is going on, in places they had barely thought about or even heard of, than they might have imagined.
In the case of China, that impulse matched the mood of the times. In the years before and after the world financial crisis of 2008, everyone knew that China was on the way up; reporters like me were just filling in the details. In the case of the modern United States, I am well aware that this message runs so counter to prevailing emotions and ideas as to seem preposterous. Everyone knows how genuinely troubled the United States is at the level of national politics and governance. It is natural to assume that these disorders must reflect a deeper rot across the country. And indeed, you can’t travel extensively through today’s America, as my wife, Deb, and I have been doing in recent years, without being exposed to signs of rot, from opioid addiction to calcifying class barriers.
The anchor's claim that her blog was hacked to include homophobic posts looks implausible.
A strange story about MSNBC host Joy Reid has been unfolding for a week. It began when a Twitter user with about 1,000 followers, @Jamie_Maz, dug up what appeared to be homophobic posts on Reid’s defunct blog, the Reid Report. They were similar in nature to posts that Reid apologized for as “insensitive” back in December, after @Jamie_Maz brought those to light.
The new round of posts contain a lot of cliche gay jokes about Charlie Crist and others, concerns that “adult gay men tend to be attracted to very young, post-pubescent types, bringing them ‘into the lifestyle,’” and commentary like “part of the intrinsic nature of ‘straightness’ is that the idea of homosexual sex is ... well ... gross ... even if you think that gay people are perfectly lovely individuals.”
The rapper and president are bros now. Here’s why.
The scandals are like sediment in the delta of Kanye West. Each new controversy—each paparazzi fight, each “BILL COSBY INNOCENT,” each repackaging of ratty apocalypse couture as expensive fashion, each “multiracial women only” casting call—instead of burying him, only builds up higher and higher until it somehow becomes the very thing that grounds him. It’s worth wondering if, some untold number of years in the future, contemporaries will reflect on West and struggle to remember past the questionable comments and erratic behavior to even recognize his brilliant artistic contributions. The rapper and producer has become a pulsar of nihilism, an object to be followed closely only if one wants to have their faith in humans tested.
The field widely agrees that race is a social construct, but gets into trouble when it ignores semantics.
In a recent op-ed in The New York Times, “How Genetics is Changing Our Understanding of Race,” the geneticist David Reich challenged what he called an “orthodoxy” in genetics. Due to concerns of political correctness, he argued, scientists are unwilling to do research on—or, in some cases, even discuss—genetic variation between human populations, despite the fact that genetic variations do exist. “It is simply no longer possible to ignore average genetic differences among ‘races,’” he wrote.
The piece was widely circulated, drawing condemnation from some social scientists who were appalled by its implications and praise from people who believe that discussion of racial differences has become taboo. Predictably, it rang the bell for another round of an ongoing media fight over why there’s a gap between black and white IQ scores. Ezra Klein referenced the piece in Vox, and debated it with Sam Harris. Andrew Sullivan riffed on campus leftists and culture war.
A new report highlights the growing trend of unmarried parents living together with their children.
When young couples of the ’60s and ’70s thought about the future, their path forward was often clear: get married, move in, have babies. Two of the steps of that sequence swapped places decades ago—for the first time, in the mid-’90s, over half of all couples lived together before marriage. Now, researchers are finding that the order is again undergoing change: More and more Americans are first sharing a home, then having children. Marriage comes later, if at all.
A report published today by the Pew Research Center finds that 35 percent of all unmarried parents are now living together, up from 20 percent of unmarried parents in 1997. In 1968, the first time the government recorded data on this trend, less than 1 percent of unmarried parents cohabited. While the Pew study defines “cohabiting couples” as including either one or both of the child’s parents—meaning, a couple could be a parent plus his or her new partner—scholars I spoke with told me this trend is driven by an uptick in families in which both members of the couple are also the parents. (The report doesn’t specify how the data breaks down among gay and straight couples.)
An incredibly preserved set of tracks tell the story of an ancient hunt.
Last April, Matthew Bennett was lying on a white salt flat in New Mexico, uncovering fossilized footprints that had been preserved in the white rock. The print belonged to a ground sloth—a bulky animal, whose large feet and curved claws left apostrophe-shaped impressions wherever it walked. There were many such tracks around, but Bennett found one that was very different.
Inside the outline of the sloth’s 20-inch-long foot was a human footprint.
He looked at the next track in the series and found the same thing—a human footprint, perfectly nestled inside a sloth one. There were at least 10 of these, all in a row. “It slowly dawned on me what was happening,” he says. Thousands of years ago, a ground sloth had walked along this site, and a person had followed it, carefully matching its every step. “There was a lot of profanity [from me],” Bennett adds. “That’s what geologists do when we discover something.”
In entertainment, when does empathy become exploitation?
The most chilling scene in the early new episodes of The Handmaid’s Tale comes when a 15-year-old Econowife, Eden (Sydney Sweeney), shyly tells June (Elisabeth Moss) that her new husband refuses to lie with her. June gently explains that she should be patient, that the strangeness of the arranged marriage is hard for her husband, too. “I can’t wait,” Eden replies. “It’s our duty to God.” Then her face hardens. “What if I don’t? What if he can’t?” She wonders if her husband is a “gender traitor,” a crime that carries a death sentence in the theocratic Republic of Gilead.
During the scene, the camera lingers—as it tends to do in The Handmaid’s Tale—on Moss’s face. The shock for the viewer comes as June processes what Eden has said, and what it implies. June’s affect beforehand is sisterly, treating the teenager with a gentle kind of authority. But over the space of a few seconds she realizes how dangerous Eden is—that her devotion to Gilead’s regime could spur a man’s execution in a heartbeat. The moment is quietly terrifying; its menace comes from what isn’t shown or said, but what’s left to viewers to imagine.
Watching the Netflix documentary is a strange experience when you’re constantly waiting to see if a loved one will appear onscreen.
When Netflix’s hit series Wild Wild Country debuted in March, friends who know about my upbringing began messaging me. They wanted to hear what I thought about the documentary, which centers on the so-called cult my mother once belonged to. Even if I had wanted to skip the show, it’d have been impossible to avoid all the articles about the group’s leader, Bhagwan Shree Rajneesh. He stared at me from news sites with the same eyes I’d seen on book covers in my mother’s apartment—after she returned from his ashram in India, and before she left our family a second time to follow him to Oregon, where much of Wild Wild Country takes place. Though mymother made her way back into my life when I was in high school and we now have a close relationship, I never wanted to think about Bhagwan again. But a couple of weeks after the documentary’s release, I braced myself and sat down to watch.
What if the problem isn’t the president—it’s the presidency?
I. A Broken Office
Donald Trump often appears to be a president in rebellion against his office. A president, we have come to expect, hastens to the scene of a natural disaster to comfort the afflicted. After Hurricane Maria devastated Puerto Rico, President Trump arrived tardily and behaved unseriously, tossing rolls of paper towels at storm-battered residents as if he were trying to drain three-point shots.
We have come to expect that when the national fabric rends, the president will administer needle and thread, or at least reach for the sewing box of unity. After white supremacists marched through Charlottesville, Virginia, shouting “Jews will not replace us,” President Trump’s instinct was to emphasize that there were good people among the neo-Nazis.