[jeffkrol]

-- Direct the mint to create a jumbo platinum coin with face value $500 Brillion.

-- Direct the mint to deposit the coin in its account at the New York Federal Reserve.

-- Direct the Treasury to "sweep" the mint's account to collect profits from coinage (this would result in marking up Treasury's account at the New York Fed by $500 Billion).

-- Inform Congress and the public that the previous actions were taken to head off any possibility of default or Government shutdown due to the House's possible refusal to raise the debt limit. The President should also mention that increasing the size of Treasury's account balance at the Federal Reserve will not be inflationary because Government spending will remain exactly the same as it would have been if the coin had not been minted.

-- Wait for reactions to this move. The ensuing uproar from many quarters including the business community, many economists, and the Federal Reserve, will focus on fears of inflation, and it's likely that top economists, and some Federal Reserve officials such as Ben Bernanke will claim that spending without issuing debt to absorb the new money placed into the private economy is inflationary, because the quantity of money in the economy will increase. It's likely that this view will create quite a stir in the media, and even that the value of the dollar will go down in international markets briefly, because the expectations of people will be affected by this argument.

-- Respond to this reaction by pointing out that it was forced on the Administration, which could not stand idly by while the full faith and credit of the United States was threatened by irresponsible Congressional partisans whose purpose was to take the economy hostage to force an agreement on spending cuts that are against the wishes of the American people, as indicated by every public opinion poll appearing in recent weeks. The President should also point out, that even though he doesn't believe that the minting of jumbo coins to pay for spending is inflationary, for reasons he previously stated, he is willing to work with Congresspeople who think there's a possibility of inflation enduring beyond the initial psychological reaction to minting jumbo coins, and then he can suggest two proposals that Congress may want to consider to remove the need for the Executive Branch to issue jumbo coins to meet debt ceiling crises.

First, Congress could eliminate the debt ceiling so that the US has no more crises of this sort again. Congress can still cut/control spending through the appropriations process, even in the absence of a debt ceiling, and this is the appropriate way for Congress to do it so that individual Congresspeople must go on record for any cuts in Federal programs they want to make.

Second, Congress could eliminate the requirement that Federal deficit spending must be matched by issuance of new debt dollar-for-dollar. The President could emphasize here that if this was done, not only would there be no more debt ceiling crises, but the Federal Government could pay off most of the national debt, except for very long-term instruments, within ten years, because the only thing that is maintaining that debt is Congress's requirement that new debt be issued in response to deficit spending.

He can also point out here that he doesn't think that the rollover of Federal Government debt is any problem for the long run because of the way the US's fiat currency system works. But for those who do think it is either a short or long-term problem, then this option will eliminate the problem because it will eliminate the national debt which we will not then have to hand on to our grandchildren. He can then add that he knows that many will react to this proposal by saying that it will be inflationary to try to eliminate the national debt this way. But he thinks that since the amount of Government spending won't change if we implement this proposal; he doesn't think so. But if it should turn out that inflation results from this effort to pay off the national debt; then the Treasury will simply begin to issue debt again to drain off the excess money supply.

Daily Kos: President Obama Should Use Coin Seigniorage Now!
Now that's thinking outside the box...............

[Parallax]

So where do you get the 500 Brillion (sic) to buy the platinum? Borrow it? Wouldn't that require the debt ceiling to be raised first?

[mikemike]

So where do you get the 500 Brillion (sic) to by the platinum? Borrow it? Wouldn't that require the debt ceiling to be raised first?

I don't think they are talking about switching to a platinum standard. I think they are just minting a fancy $500 Billion coin they want to make it too expensive for any enterprising coin collector to buy.

I like the idea but I think they should make 2 coins each worth $239 Billion and they should be minted from 239 grams of Plutonium 239.

We should switch to a radioactive metal standard.

[Nesster]

I like the idea but I think they should make 2 coins each worth $239 Billion and they should be minted from 239 grams of Plutonium 239.

We should switch to a radioactive metal standard.

I like that idea- given the half life of Plutonium 239 economists for the first time can precisely calculate the rate of inflation.

[jeffkrol]

So where do you get the 500 Brillion (sic) to buy the platinum? Borrow it? Wouldn't that require the debt ceiling to be raised first?

didn't read the whole article huh...

The President, after making these proposals, should add that the $500 Billion in revenue from coin seigniorage will probably take the Government through August or September without its having to issue new debt, and that if Congress can't come to agreement on what to do about the debt ceiling before then, he will issue a new jumbo coin, this time one having $1.5 Trillion in face value, and that he will use the new coin for program spending and also to pay off $1 Trillion of the national debt. He can also say that he hopes he doesn't have to do that, but like institutions in the private sector, the Government can't operate well in an atmosphere of psychological uncertainty. Government workers have to know that their work and family lives will not be placed under stress by partisan conflict in Washington. In addition, private sector businesses and workers are greatly impacted by any freeze in Government spending caused by attempts at hostage-taking by Congress.

[shooz]

Considering that coinage is the only money the government can "make", interest free, it's not such a far fetched idea.

The question to me would become how do you keep the commodities markets from trying to corner whatever metal it's coined in.

They sure have cornered the debt market.

[Parallax]

The President, after making these proposals, should add that the $500 Billion

But the first step is the minting of the coin. Where did it come from?
If this will work, why not just mint the 1.5 trillion dollar coin first?
It's a ponzi scheme. I suspect that "letsgetitdone" is Bernie Madhoff's nom de plume.

[shooz]

What about the letsnotgetitdone ponzi scheme of the GOP/TEA?

[Parallax]

What about it?

[jolepp]

In the end the coin could be taken back to the mint, melted and the money involved be paid back and removed from the accounts, if the idea was just to help motivate the (ir)responsible parties to find a solution to the underlying problem. It doesn't even matter what it was minted from, but some very special material would definitely fit the occasion. Clever idea and as such a nice demonstration that money is in fact created out of thin air these days as there is nothing real (such as gold) behind it.

[shooz]

I asked you first!

[shooz]

In the end the coin could be taken back to the mint, melted and the money involved be paid back and removed from the accounts, if the idea was just to help motivate the (ir)responsible parties to find a solution to the underlying problem. It doesn't even matter what is was minted from, but some very special material would definitely fit the occasion. Clever idea and as such a nice demonstration that money is in fact created out of thin air these days as there is nothing real (such as gold) behind it.

All wealth has it's roots in labor.
In the old world it was the labor of gold miners.
In todays world it is the labor of manufacturing as well.

[shooz]

What about it?

Just calling out your red herring.

[mikemike]

Considering that coinage is the only money the government can "make", interest free, it's not such a far fetched idea.

The question to me would become how do you keep the commodities markets from trying to corner whatever metal it's coined in.

They sure have cornered the debt market.

That is not what seigniorage is about. Seigniorage is when the government turns a profit (of sorts) on a currency instrument by giving it a face value higher than the cost of production and that piece of currency is taken out of circulation.

For example a US Quarter costs about $.05 to produce (cost of materials, minting costs, QC, etc.) but has a $.25 face value. If the coin goes into circulation and is used it will eventually come out of circulation be recollected, destroyed, and a new quarter will be issued to replace it. If you collected the 50 state quarters and put them in your drawer, the government turns a $10 "profit" (revenue from seiniorage) from your collection of coins.

What MMT is trying to say is that the treasury can force the federal reserve to be a coin collector by producing a coin with a face value so ridiculously high that it will never leave their vault. The coin could be made from $50 worth of platinum or any kind of metal and be given any face value.

The congress usually authorizes these special programs like the state quarters or commemorative coins. I don't know if it requires an act of congress to authorize this or if that is just a courtesy but if it is required I think that would see the same hurdle as you have with raising the debt ceiling. If it is not required then they might as well go for a $5 Trillion coin because they will only be able to pull this trick off once.