I put in a block of time at Pratt. There is more to do.
The wheels are threatening to come off the European economy yet again.
We have seen this play before and will believe the threats when we see the results.
Krugman is worried about the Democrats response to the GOP.
http://www.nytimes.com/2013/01/11/opinion/krugman-coins-against-crazies.html?ref=todayspaper
"So, have you heard the one about the trillion-dollar coin? It may sound
like a joke. But if we aren’t ready to mint that coin or take some
equivalent action, the joke will be on us — and a very sick joke it will
be, too. Let’s talk for a minute about the vile absurdity of the debt-ceiling confrontation.
Under the Constitution, fiscal decisions rest with Congress, which
passes laws specifying tax rates and establishing spending programs. If
the revenue brought in by those legally established tax rates falls
short of the costs of those legally established programs, the Treasury
Department normally borrows the difference.
Lately, revenue has fallen far short of spending, mainly because of the
depressed state of the economy. If you don’t like this, there’s a simple
remedy: demand that Congress raise taxes or cut back on spending. And
if you’re frustrated by Congress’s failure to act, well, democracy means
that you can’t always get what you want.
Where does the debt ceiling fit into all this? Actually, it doesn’t.
Since Congress already determines revenue and spending, and hence the
amount the Treasury needs to borrow, we shouldn’t need another vote
empowering that borrowing. But for historical reasons any increase in
federal debt must be approved by yet another vote. And now Republicans
in the House are threatening to deny that approval unless President
Obama makes major policy concessions.
It’s crucial to understand three things about this situation. First,
raising the debt ceiling wouldn’t grant the president any new powers;
every dollar he spent would still have to be approved by Congress.
Second, if the debt ceiling isn’t raised, the president will be forced
to break the law, one way or another; either he borrows funds in
defiance of Congress, or he fails to spend money Congress has told him
to spend.
Finally, just consider the vileness of that G.O.P. threat. If we were to
hit the debt ceiling, the U.S. government would end up defaulting on
many of its obligations. This would have disastrous effects on financial
markets, the economy, and our standing in the world. Yet Republicans
are threatening to trigger this disaster unless they get spending cuts
that they weren’t able to enact through normal, Constitutional means.
Republicans go wild at this analogy, but it’s unavoidable. This is
exactly like someone walking into a crowded room, announcing that he has
a bomb strapped to his chest, and threatening to set that bomb off
unless his demands are met.
Which brings us to the coin.
As it happens, an obscure legal clause grants
the secretary of the Treasury the right to mint and issue platinum
coins in any quantity or denomination he chooses. Such coins were, of
course, intended to be collectors’ items, struck to commemorate special
occasions. But the law is the law — and it offers a simple if strange
way out of the crisis.
Here’s how it would work: The Treasury would mint a platinum coin with a
face value of $1 trillion (or many coins with smaller values; it
doesn’t really matter). This coin would immediately be deposited at the
Federal Reserve, which would credit the sum to the government’s account.
And the government could then write checks against that account,
continuing normal operations without issuing new debt.
In case you’re wondering, no, this wouldn’t be an inflationary exercise in printing money. Aside from the fact that printing money isn’t inflationary
under current conditions, the Fed could and would offset the Treasury’s
cash withdrawals by selling other assets or borrowing more from banks,
so that in reality the U.S. government as a whole (which includes the
Fed) would continue to engage in normal borrowing. Basically, this would
just be an accounting trick, but that’s a good thing. The debt ceiling
is a case of accounting nonsense gone malignant; using an accounting
trick to negate it is entirely appropriate.
But wouldn’t the coin trick be undignified? Yes, it would — but better
to look slightly silly than to let a financial and Constitutional crisis
explode.
Now, the platinum coin may not be the only option. Maybe the president
can simply declare that as he understands the Constitution, his duty to
carry out Congressional mandates on taxes and spending takes priority
over the debt ceiling. Or he might be able to finance government
operations by issuing coupons
that look like debt and act like debt but that, he insists, aren’t debt
and, therefore, don’t count against the ceiling.
Or, best of all, there might be enough sane Republicans that the party will blink and stop making destructive threats.
Unless this last possibility materializes, however, it’s the president’s
duty to do whatever it takes, no matter how offbeat or silly it may
sound, to defuse this hostage situation. Mint that coin!"
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10 Jan 2013: President of the European Central Bank says eurozone has 'turned a corner' and forecasts regional growth by end of 2013 1 comment
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