Why #MintTheCoin Has Already Won

In case you have been living under a rock for the past week, there is a movement (and petition) out there called “#MintTheCoin”. What #MintTheCoin will do is mint a trillion dollar platinum coin if the debt ceiling is not raised. Why do we need to do this? Its because the debt ceiling will not let the US Treasury (legally) issue any more bonds to cover any revenue shortfalls. This is a MAJOR problem because the outcome would be catastrophic. Even if you do not agree with deficit spending, the last thing we should do is technically default on any payments (which is the total opposite of being a “fiscal conservative”). The debt ceiling needs to be raised to cover payments already approved and appropriated by Congress.

This is where the Trillion Dollar Platinum coin comes in. The coin would be minted by the Treasury and deposited at the Federal Reserve ($FED). It would put about ~1 Trillion in the Treasury’s account. This would only be a temporary fix and would be reversed once the debt ceiling is raised. It’s what I call psuedo-QE. It won’t be what I call ‘extra-inflationary’, its legal/constitutional, and much better than the alternatives (like #PrintTheIOU, using the 14th amendment, prioritization, and default). Yes, its a silly idea, but nothing is sillier than one of the richest countries (one that gets paid to borrow!) defaulting on its debt.

Anyway, I’m not here to make an economic or legal argument. I’m here to explain why #MintTheCoin has already won. Below are the reasons why the campaign is already successful, even if it doesn’t lead to the direct or indirect (in negotiations) use of it.

Why #MintTheCoin Has Already Won

1) The debate has shown who GETS what money is and who does not.  Plain and simple. We operate in a world where the dollar (and many other currencies) is free-floating and nonconvertible. It is truly fiat. Yes, that may sound scary, but it’s the reality in the world we operate. The government basically controls (to an extent) how many dollars (or financial assets) are in the economy (via fiscal and monetary policy). We cannot run out of money, the only issue is real constraints (inflation). Its how much we can supply to how much is demanded. Inflation is not only a monetary phenomenon.

Anyway, hopefully the #MintTheCoin conversation has opened many people’s eyes as to what money truely is and where it comes from. It’s not something dug from underground, or something China sends to us; It’s a social construct (very simplified, but that’s the very core of it). Also, on the flip-side, it has publicized and thus discredited the many that don’t understand what it is.

2) It’s show the power of the internet, and mainly blogs. In case you do not know the back-story, the platinum coin idea emerged from a comment, which turned into many blog posts and tweets which turned into this truly legitimate idea possibly being considered by the White House. I don’t know about you, but I don’t see that happening anytime before 2007 (let alone before the digital-era), before the econo-blogosphere experienced its boom. The power of the blog has given ‘normal’ people a voice.

3) Holding the economy hostage will not go unencountered. Using the debt ceiling to force policy (whether or not you agree with it) is NOT the “adult” way to go about things. It’s almost like out of a mafia movie; “Nice economy you got there, it would be a shame if it got damaged”. Let’s say the tables were flipped and the GOP was wanting stimulus in exchange for a debt ceiling hike while the Democrats refused. While I strongly agree with deficit spending, I’d still be against using the economy as hostage to get policy through (even as tempting as that it would be).

4) Shows how silly the political game has gotten that the only way to respond is by using sillier ideas. There’s nothing wrong the system that we should have today, but don’t (mainly because those elected are not really looking out for what benefits the majority). For example, the GOP likes to pledge itself as the “anti-tax” party while the Democrats like the view themselves as the “Middle class” party. Well, where the hell were they both when the payroll tax cut expired when we went over the “fiscal cliff”. Both parties should have gotten together and not only extended that, but also possibly even make it bigger (as it is not only a tax but also helps the middle class). Instead, they acted like a bunch of silly geese (I’d use other words here but I want to keep my blog “clean & professional”) and looked out for their own behinds/public image.

So what will happen?

Putting the #MintTheCoin issue aside, I think the chances of the debt ceiling not being raised is very low (and thus the chances of a platinum coin even smaller). Although, we need to remember, we are dealing with morons here. However, I think Mish (who I heavily disagree with economically) has it right when it comes to the politics of the debate. At some point in the future, this could tip over where #2 becomes more of a reality and less “pretending”.

(Quoted from his post)

Here is a likely seven-point scenario.

  1. Obama will chastise Congress with talk of financial Armageddon if Congress does not raise the debt ceiling.
  2. Congress will pretend to hold the president hostage
  3. The secretary of the Treasury will get into the act with its own version of the default debate
  4. Perhaps a few payments on non-critical budget items will be temporarily skipped
  5. Wall Street will feign panic
  6. Constituents will pressure Congress to approve a new debt ceiling
  7. Congress will raise the ceiling with another useless warning about next time

Tags: $MACRO $FED

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