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Seigniorage Hack Could Resolve Debt Limit Crisis
UltraOne writes "With the US Senate voting to table the Boehner debt limit bill, the US is only a few days away from running out of cash to pay for all its obligations. Slate is reporting on a fascinating legal hack that could come in handy, described by blogger 'beowulf' back in January 2011. Seigniorage is the extra value added when a government mints a coin with a face value greater than the value of the precious metal contained in the coin. The statute governing the minting of coins contains a section (31 USC 5112(k) ) that authorizes the Secretary of the Treasury to mint and issue platinum coins in any denomination or quantity. To keep the government from running out of money, Timothy Geithner could order a $5 trillion platinum coin struck and deposited at the Federal Reserve. The money could then be used to fund Federal Government operations (blog post contains legal details)."
Not quite, it would only increase inflation if it hit the economy. The effect of having a $5tn coin to borrow against would be more or less identical to issuing another $5tn in bonds. This is just a loophole of sorts the effect on the economy would be mostly the same, although it probably would make the price of platinum spike if they actually went through with trying to mint a $5tn coin.
If the government is doing something profitable, they shouldn't be doing it. With all likelihood, if something is profitable, a guided free market should be able to manage it much more efficiently.
The government's duty is to perform services that are by their very nature not profitable. Public schools, police, fire, national defense, etc... it there isn't a profitable model that can provide these services at the level we expect, the it is up to the government to suplement or perform those services.
If the government is turning a profit, it's either doing something wrong, or doing something that someone else should be doing instead.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
Unless spending faster than GDP on infrastructure actually stimulates faster GDP growth in coming years.
Also because as much as you may like to simplify things, a country does not equal your household in terms of finances. Unless you can print money (legally) the analogy is completely useless.
Slashdot needs a "-1, Wrong" moderation option.
The Urban Hippie
Unless you never circulate the coin and melt it down once the debt level falls below that of the debt ceiling.
The point is that the debt ceiling is a made up limit. Most countries don't have one.
Increasing this arbitrary limit does not let us spend more money - it allows us to BORROW more money in order to pay for those things that we already bought!
In other words, the fight we're having over the debt ceiling now should have taken place over the BUDGET. That's were the spending decisions take place. By not raising the debt ceiling now, all we are saying is that we won't pay back the money we HAVE ALREADY SPENT. That sends a bad message to those that might lend us money in the future - raising our rates - and actually makes us SPEND MORE MONEY in the future to service our debt.
If you want to reduce the deficit, fix the budget (more revenues, less spending). Don't shoot yourself in the foot as a punishment for already having spent more money that you have in the hopes that it will force you to budget better next time.
The entire foundation of your argument is wrong.
Federal spending as percent of GDP
As someone else pointed out, $X is the sum of many things plus $Y, so no matter how much $Y grows it will never exceed $X.
The Democrats and Republicans in congress are putting forth proposals to save 1-2 trillion dollars over the next decade which would continue to leave us with massive deficits over the next ten years. We would be a lot closer to balancing the budget if we would pull the military out of Iraq and Afgananistan, end the Bush tax cuts, and stop bailing out big companies.