Obama and the Trillion Dollar Platinum Coin
The White House has rejected the brilliant (and Nobel Prize-winning Princeton economics professor and New York Times columnist Paul Krugman-approved) trillion dollar coin idea. But Obama also knows that something must be done about the debt ceiling. He says:
You don’t go out to dinner and then eat all you want and then leave without paying the check.
Unfortunately, the credit card we need to use to pay for the meal we just enjoyed is maxed out. We need a credit limit increase. Then we can use our fresh credit to pay for our meal (and maybe some extra aperitifs).
Because boy-oh-boy did we enjoy that meal we were just served by the Democrats and Republicans in the federal government. Drug wars, real wars, public schooling, the plethora of government regulatory agencies that keep us safe from entrepreneurs that want to sell us things we want to buy…we have all enjoyed the government feast and now it is time for ALL of us citizens of the United States of America to pay with credit we don’t have.
But don’t worry, this debt ceiling hiccup is really no different than the fiscal cliff. It will be resolved last minute. That is just the government’s way of ensuring that as many (proper) additional spending measures are added to the bill at the last minute as possible.
And in reality, the end result will be little different than the brilliant trillion dollar coin idea. Instead of a coin, the treasury will create treasury debt instead. And then, just as if it were a coin, it will sell that debt to the Federal Reserve. The Federal Reserve will create some fresh digital dollars and then the federal government will spend those fresh dollars.