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.
Anxiety and listless days as a foreign-policy bureaucracy confronts the possibility of radical change
The flags in the lobby of the State Department stood bathed in sunlight and silence on a recent afternoon. “It’s normally so busy here,” marveled a State Department staffer as we stood watching the emptiness. “People are usually coming in for meetings, there’s lots of people, and now it’s so quiet.” The action at Foggy Bottom has instead moved to the State Department cafeteria where, in the absence of work, people linger over countless coffees with colleagues. (“The cafeteria is so crowded all day,” a mid-level State Department officer said, adding that it was a very unusual sight. “No one’s doing anything.”) As the staffer and I walked among the tables and chairs, people with badges chatted over coffee; one was reading his Kindle.
Imagine listening to the president’s address to Congress as if it were the first speech he’d given.
During Richard Nixon’s years as a slashingly anti-Communist U.S. senator and vice president, The WashingtonPost’s famed cartoonist Herblock (Herbert Block) was a relentless critic. His trademark was portraying Nixon with a heavier and heavier five o’clock shadow, caricaturing him as a thug.
Then in 1968, when Nixon returned to Washington as president, Herblock drew a famous cartoon saying in effect, “every new president deserves a clean shave” and began presenting a better-looking Nixon (for a while).
I decided to approach Donald Trump’s speech tonight to Congress in the “clean shave” spirit. During the campaign I was not an admirer. I thought his inaugural address was unique among such speeches in its dark divisiveness, and since the inauguration I’ve considered his actions more abrasive than even I had foreseen.
Glowing reviews of the president’s first address to Congress miss the crucial respects in which he fell short.
President Donald Trump wore a non-sparkly tie last night. His suit fit. He seems to have upgraded his haircut too. After some initial hesitation, Trump found something positive to say about Black History Month and something negative about anti-Semitic hate crimes.
Better still, Trump worked his way through more than an hour of television without insulting or demeaning anyone. He did not mention his crowd sizes, argue about his vote margin, or attack the press. Although he again trafficked in misleading or deceptive statements, he eschewed outright lies.
Different people will have different reactions to Trump’s spotlighting of a Navy SEAL’s widow to immunize himself against accusations that he cavalierly and ignorantly ordered troops into a poorly considered combat mission—but clearly, many TV viewers found the moment inspiring and affecting.
The ride-sharing giant’s full-blown PR crisis is getting worse.
It took eight years and at least as many back-to-back-to-back-to-back controversies to break Travis Kalanick.
After a stunning month of scandals at Uber, Kalanick, its founder and CEO, sent an emotional and uncharacteristically apologetic memo to his employees Tuesday night. “This is the first time I’ve been willing to admit that I need leadership help,” Kalanick wrote. “And I intend to get it.”
Uber has always been controversial, but never like this.
Kalanick’s message came hours after a video surfaced that showed dashboard-camera footage of him arguing with an Uber driver who had just given him a ride. In the video, Fawzi Kamel, who gave a recording of the conversation to Bloomberg, tells Kalanick that he and other drivers suffered as a result of lower fares for riders. “People are not trusting you anymore,” Kamel tells Kalanick. “I'm bankrupt because of you... You changed the whole business. You dropped the prices.”
Calvin College is no fundamentalist Christian school.
GRAND RAPIDS, Mich.—It would be easy enough to drive past Calvin College without giving Betsy DeVos’s alma mater a second thought. Six miles southeast of downtown, the school is a sprawling cluster of nondescript buildings and winding pathways in a quiet suburb. But to bypass Calvin would be to ignore an institution whose approach to education offers clues about how the recently appointed U.S. education secretary might pursue her new job, and about the tug religious institutions feel between maintaining tradition and remaining relevant in a rapidly diversifying world.
DeVos is now Calvin’s most famous alum, and in recent weeks, the school has been painted in some circles both online and in conversation as a conservative, insular institution that helped spawn a controversial presidential-cabinet member intent on using public dollars to further religious education. But that is a grossly simplified narrative, and one that obscures the nuances and very real tensions at the school.
In his 1899 book The Theory of the Leisure Class, the economist and sociologist Thorstein Veblen wrote that “conspicuous abstention from labor … becomes the conventional mark of superior pecuniary achievement.” In other words, the richer one gets, the less one works and the more likely one is to try to show off one’s ample leisure time.
For a while, Veblen’s theory held, with few exceptions. But no longer. In the U.S., one can now make a good guess about how rich somebody is based on the long hours they put in at work. The wealthiest American men, on average, work more than those poorer than them.
With this workaholic lifestyle, though, comes quite a bit of prestige, a perk that the researcher Silvia Bellezza, a professor of marketing at Columbia Business School, has found Americans to be all too aware of. Bellezza is the author, along with Georgetown’s Neeru Paharia and Harvard’s Anat Keinan, of a recent paper in the Journal of Consumer Research about the prominence of an unusual status symbol: seeming busy.
One of the most volcanically active countries in the world is not ready for a devastating eruption.
Thirteen days before Christmas, somewhere in the frigid waters of the Bering Sea, a massive volcano unexpectedly rumbled back to life.
Just like that, Bogoslof volcano began its first continuous eruption since 1992, belching great plumes of ash tens of thousands of feet into the cold sky over the Aleutian islands, generating volcanic lightning, and disrupting air travel—though not much else.
The volcano is on a tiny island about 60 miles west of Unalaska, which is the largest city in the Aleutians. It has a population of about 5,000 people.
Bogoslof hasn’t quieted yet. One explosion, in early January, sent ash 33,000 feet into the air. Weeks later, another eruption lasted for hours, eventually sprinkling enough ash on the nearby city to collect on car windshields and dust the snow-white ground with a sulfurous layer of gray. Over the course of two months, Bogoslof’s intermittent eruptions have caused the island to triple in size so far, as fragments of rock and ash continue to pile atop one another.
The president’s focus on crimes committed by members of one particular group singles them out for blame.
Donald Trump is worried about violence by unauthorized immigrants. When he spoke before a joint session of Congress on Tuesday night, he invited three relatives of people that unauthorized immigrants had killed to attend as his guests.
In that speech, he called for the Department of Homeland Security to create an office focused on the victims of immigrant crime. And in a January 25 executive order, he instructed the Homeland Security Secretary to “make public a comprehensive list of criminal actions committed by aliens.”
The company powers much of the Internet, but its cloud facilities are difficult to find.
Once in a while—not quite often enough to be a crisis, but just often enough to be a trope—people in the United States will freak out because a huge number of highly popular websites and services have suddenly gone down. For an interminable period of torture (usually about 1-3 hours, tops) there is no Instagram to browse, no Tinder to swipe, no Github to push to, no Netflix to And Chill.
When this happens, it usually means that Amazon Web Services is having a technical problem, most likely in their US-East region. What that actually means is that something is broken in northern Virginia. Of all the places where Amazon operates data centers, northern Virginia is one of the most significant, in part because it’s where AWS first set up shop in 2006. It seemed appropriate that this vision quest to see The Cloud across America which began at the ostensible birthplace of the Internet should end at the place that’s often to blame when large parts of the U.S. Internet dies.
The president outlined a three-part agenda in his Tuesday address that divides Republicans and disadvantages his voter base.
In his first address to a joint session of Congress, President Trump outlined a three-part economic plan. First, he called for an increase in military spending—his budget would reportedly raise it by about 10 percent, or $54 billion, while cutting similar amounts from agencies including the State Department and the Environmental Protection Agency. Second, he called on Congress to repeal and replace the Affordable Care Act. Third, he reiterated his support for tax reform, which, if it follows his previous proposals, would cut taxes by almost $10 trillion, with the benefits largely accruing to corporations and the rich.
Together, these three proposals would represent a dramatic shift away from the policies of the Obama administration: from diplomacy to weaponry, from environmental protection to national-border protection, from public-health spending to private health spending, from eight years of favoring redistribution to a period of falling taxes on the rich, and from a term of falling deficits to the re-emergence of large deficits.