What Debt Ceiling Crisis?
Certainly Mr. Orwell hooked onto something when he wrote:
“Some ideas are so stupid that only intellectuals believe them.”
How else can we explain the eternal prosperity — the near immortality — of stupid ideas? For example:
The idea that plunging a nation into debt will raise it up into wealth…
That raising the prices of life’s essentials raises the general economic level…
That prosperity springs from the printing press, that money and wealth are twins.
Hard economic logic fatally undermines such ideas as these. The average human being packs too much sense to embrace them.
Yet they endure through history… murdered and buried 1,000 times… only to spring from the grave 1,001.
It is the intellectuals who shovel them up.
The Trillion-Dollar Coin
Consider now the “trillion-dollar coin” — known alternatively as “big coin” or “jumbo coin.”
The United States government has rammed its head against the debt ceiling, so-called.
In the absence of congressional approval to elevate the debt ceiling, the federal government can issue no more debt.
It must issue that debt to keep it in funds. That is because it hauls in insufficient tax monies to satisfy its innumerable obligations.
Its war chest will empty by early June absent an accord to elevate the debt ceiling.
The United States government would fall into arrears — broke, destitute, penniless — bankrupt.
To skirt the catastrophe the intellectuals have an idea: Disregard the statutory limits. Mint instead a trillion-dollar platinum coin.
The United States Treasury can proceed to write checks against this miracle coin to meet its spending needs… and wants.
That is, the debt ceiling is no ceiling whatsoever. A simple trick can vault you above it.
Money out of Thin Air
Explains Yale man Jack Balkin — intellectual Jack Balkin:
Sovereign governments such as the United States can print new money. However, there’s a statutory limit to the amount of paper currency that can be in circulation at any one time.
Ironically, there’s no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds….
The “jumbo coin” [strategy works] because modern central banks don’t have to print bills or float debt to create new money; they just add money to their customers’ checking accounts.
Perhaps we flatter Mr. Balkin by labeling him an intellectual. Yet the shoe fits his foot with astounding precision. And so he must wear it.
That is, the fellow harbors an idea so stupid… he can be nothing other than an intellectual.
Imagine it coming from a plumber. You cannot. He sees too clearly.
He understands it represents a grand fiction.
He understands it represents something for nothing… the miracle of water into wine… the free lunch.
This is not the world he inhabits. It is the world the intellectual inhabits.
In the above passage intellectual Balkin refers to a loophole within the United States Platinum and Gold Bullion Coin Act of 1995.
This legal gimmickry authorizes the United States Treasury to mint platinum coins. Importantly, it does not limit the coins’ denominations to specified dollar quantities.
Treasury can decree a one-ounce platinum coin’s value at $1, $50, $100 — or $1,000,000,000,000.
That is, the coin’s face value need not maintain the least relationship with the actual platinum price.
Platinum presently trades at $1,052 the ounce.
This $1,000,000,000,000 coin must therefore contain 950,570,342,205 platinum ounces to equal $1 trillion — else it tells a monumental fiction.
Only an Intellectual Can Fathom It
Take in hand a one-ounce coin. Now expand it 950,570,342,205 times.
Can your hand house this coin? Can any known structure house this coin?
Only the intractable intracranial wastes of the intellectual can house this coin. Intellectuals, besides Mr. Balkan, as Mr. Paul Krugman:
On the face of it, Janet Yellen could mint a platinum coin with a face value of $1 trillion – no, it needn’t include $1 trillion worth of platinum – deposit it at the Federal Reserve and draw on that account to keep paying the government’s bills without borrowing.
Or intellectual Laurence Tribe, Harvard man:
The statute clearly does authorize the issuance of trillion-dollar coins.
Stamp this curious and intellectual-blessed coin at West Point. It is then one helicopter flight from New York City and the Federal Reserve’s subterranean vaults at 33 Liberty St…. where it can collateralize the Treasury’s otherwise false promises of payment.
Thus we dangle before you a proposal…
Have We Got a Deal for You!
Our minions inform us that steel accounts for some 55% of the average auto’s weight.
They further inform us the average auto runs to 2,871 pounds.
Our auto therefore houses 1,579 pounds of steel.
One pound of steel presently trades at perhaps $1 the pound (differing grades go at different prices).
Our 1,579 pounds of steel will therefore fetch us $1,579.
We wish to sell you our vehicle for scrap. Yet we are dissatisfied with the limited $1,579 haul.
To our astonishment — however — we have been granted the extraordinary power to determine steel prices.
Thus we decree one pound of steel the equal of $1 million.
To our everlasting glee our $1,579 auto is suddenly valued at… $1,579,050,000!
It can be yours at this reasonable price. Are you ready to sign upon our dotted line?
Now you have the flavor of it all. Now you have the “logic” behind the thing.
Why Stop at $1 Trillion?
Yet questions springs immediately to mind: Why elevate the debt roof at all given this simple solution authorized by the United States Platinum and Gold Bullion Coin Act of 1995?
Why not merely strike a fresh platinum coin when the first trillion is drawn down to zero? And why not strike another when this replacement coin is depleted? And then a third? And a fourth?
Indeed… why limit the platinum coin to $1 trillion face value?
If Congress can declare a $1,052 coin the equal of $1 trillion…
Can it not declare it the equal of $5 trillion? $12.4 trillion? What limits Treasury… for the matter of that… from declaring it the equal of $31.5 trillion?
$31.5 trillion is the approximate value of the nation’s federal debt. The United States government can retire its entire debt at a stroke.
Declare the coin’s value at $93,883,013,033,891 and all American debt — public and private — vaporizes like a puddle in the midday sun.
A debt jubilee? There you have one.
Heaven on Earth
Strike a $250 trillion coin and the United States would be in clover for decades and decades to come.
Strike a $500 trillion platinum coin and heaven would extend to the remotest corner of Earth… until the end of days.
Why should we impose artificial limits upon ourselves? Let our imagination rise to the possibilities before us.
Yet we hear an internal shriek as we type these very words. Someone, somewhere within the nation’s capital, may take our recommendations quite heavily. He may even propose it to his fellows.
And who can say where it goes afterward? For Washington is to the gunwales with intellectuals.
And recall: “Some ideas are so stupid that only intellectuals believe them.”