Obama's Two Coin Debt Ceiling Fix

Obama's Two Coin Debt Ceiling Fix

This hasn't seen much coverage, and rightfully so, but there is an easy out for President Obama on the perpetual debt ceiling debates.

Simply mint two tiny platinum coins. I'm being serious, actually...

A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. Paper money, along with gold, silver and copper coins, are all tightly controlled.
As absurd as the idea is, it is right there in the books:

The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”

So here is how this ill-conceived plan would pan out. The president has the U.S. Treasury mint two $1 trillion coins. While he is at it, they might as well be paper thin and tiny.

After all, there is no need to waste actual money here on precious metals.

Once these coins exist, the president would order the coins to be deposited in a Federal Reserve vault. The Fed would transfer a $2 trillion balance into the U.S. Treasury's accounts. Voilà! Two years of unfettered spending!

Horrifying? Irresponsible? Completely Absurd? Yes. Completely legal? Yep.

I certainly will not make any claim to supporting the idea, but some people seem to like it. At least in theory.
“I like it,” says Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”

As Gagnon points out, the U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t immediately create any runaway inflation. If it did cause problems, the Fed could always counteract the effects by winding down some of its other programs to inject money into the economy.
After all, the effect it would have on the economy is almost identical to what the Fed is doing through quantitative easing. It would just be a big lump sum. The Fed is only a couple hundred billion away from injecting $2 trillion into the economy over the last several years already.

I'm sure Mr. Gagnon really only likes the apparent ease of which it skips over a ridiculous situation that shouldn't exist in the first place.

The only reason we have a debt ceiling issue is because Congress has given the president contradictory commands. The president has to spend money how Congress allocates it and Congress has forbidden him to borrow enough money to obey its orders.

After a half century of this irresponsible management, we're stuck with almost $16.5 trillion in debt and $1 trillion yearly deficits.

Has the farcical ineptitude of Congress really gotten so bad that this idea to completely circumvent them with this absurd idea almost seems like a breath of fresh air?

Well, we know it won't happen, so we don't have to worry about this becoming reality. Knowing that fact while watching congressman blather and bumble around with no clue about how to fulfill their sworn duties makes shutting them up with two tiny platinum coins sound awfully nice.

That makes this absurd concept a testament to how terrible Congress – and the perpetual debt ceiling debates – have really become.
Article Source: Wealthwire