Frederick
J. Sheehan is the author of Panderer to Power: The Untold Story of How Alan
Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill,
2009) and "The Coming Collapse of the
Municipal Bond Market" (Aucontrarian.com, 2009)
"Under
current law, the Treasury is technically allowed to mint as many coins made of
platinum as it wants and can assign them whatever value it pleases. Under this
scenario, the U.S. Mint would make a pair of trillion-dollar platinum coins.
The president orders the coins to be deposited at the Federal Reserve. The Fed
moves this money into Treasury's accounts. And just like that, Treasury
suddenly has an extra $2 trillion to pay off its obligations for the next
two years - without needing to issue new debt. The [current $16.4 trillion
national debt] ceiling is no longer an issue."
-Brad Plumer, Washington Post, December 6, 2012, "Could
the 'Platinum Coin Option' Solve the U.S. Debt Crisis?"
In reality, the U.S. Constitution permits Congress alone to "coin
money," but technicalities are particularly in vogue for a country
stumbling through its dotage. Author Plumer may be auditioning for The Onion,
but he did cite the authority of Yale Law School (Professor Jack Balkin) for
legal counsel. (As you probably deduced, Balkin teaches Constitutional Law.) As
to its practicality, Plumer turned to one Joseph Gagnon from the Peterson
Institute for International Economics: "I like it. There's nothing that's obviously economically problematic
about it."
Whatever Gagnon's reasoning, he is a candidate for the Federal Reserve Board,
just as Balkin is a shoo-in for the Supreme Court. This proposed plan to wipe
out the federal deficit involves more substance than the Fed's open
market operations. Platinum is a physical element on the periodic table:
it is real. Federal Reserve Chairman Ben S. Bernanke has preternaturally expanded
the Fed's balance sheet - that is, he has declared over $2 trillion into
electronic existence where nothing exists - since 2008. Simple Ben is a laggard
here. If the Treasury can declare a platinum coin worth $1 trillion, why not
stamp 100 coins at $10 trillion each, wipe out the national debt, and give
every American a few million dollars? Everyone would be rich.
The Washington Post, Yale, and the Peterson Institute are good brand
names. In America, it does not matter what is stated but that it is declared by
a revered source. Reuters reporter Cate Long recommended, in the wake of
Hurricane Sandy, that the billions of dollars needed to repair busted
infrastructure was there for the taking: "Tough times is no excuse to give
away public assets to private entities. The most obvious source of funding for
these projects would be for the Federal Reserve to purchase public infrastructure
bonds instead of the $40 billion a month of mortgage-backed securities it has
been buying." (See: "Can
the Port Authority and MTA Afford Repairs After Sandy?"
Looking beneath the surface, Long has described how
state and municipal debts are funded. The Chinese and Japanese are no longer
dependable buyers of U.S. Treasury obligations. The Federal Reserve buys the
majority of Treasuries. Without the Fed's backstop of the
several-trillion-dollar deficit at such an unnatural rate of interest, it would
be impossible for corrupt or incompetent municipal borrowers to find a buyer of
bonds below 10%. As long as such proposals as Cate Longs' are written and read
without acknowledging the obvious contradictions, To Be Foolish Will Be Very Heaven.
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