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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)."
I am the OP. The reason this approach counts as an 'escape hatch' is that it appears that the executive branch already has the authority to carry it out (in 31 USC 5112(k) ). To stop it, Congress would need to pass a law. To do that in the face of a presidential veto would require 2/3 supermajorities in both the House and Senate. As long as Obama can get 34 of the 51 Democrats in the Senate (or 53 Democrats plus independents who caucus with the Democrats) to back this approach, there is nothing that the House can do to stop it.
Nothing to worry about.
(US debt to GDP since 1929, source Deutsche Bank, picture taken from Q2 2011 report of Brummer & Partner Zenit hedge fund.)
Meanwhile:
* Profits share of GDP
* Wages share of GDP
(http://www.marketwatch.com/story/corporate-profits-share-of-pie-most-in-60-years-2011-07-29)
Not when you have the power to say that money means whatever you say it means.
There seems to be this misconception, especially among technocratic IT dudes who get their economic education from Civ IV, that money, currency, is tied to some absolute value, the way a meter is equal to 1,650,763.73 wavelengths of the orange-red emission line in the electromagnetic spectrum of the krypton-86 atom in a vacuum.
Money does not work that way. It never has. China says their yuan is worth X amount of dollars and the US says the dollar is worth X amount of euros. But none of those units of measurement is set to any standard. Even the "gold standard" wasn't really a standard because gold was still being pulled out of the ground, and its perceived value changed with cultural trends. The Indians really like gold, for example, so gold becomes more valuable. That's it. So you never tie your currency to a metal, you tie it to how much people want that metal, which is not a fixed number. Since there is no absolute standard for money, it can mean whatever we decide it means. All of this other nonsense is just smoke and mirrors to keep people from realizing that fact.
More and more, the economic elites measure wealth in very ugly human terms. A CEO is worth 800 workers and 100,000 Chinese peasants. Sort of the way a really successful athlete has to measure his worth by comparing his salary to the salary of the guy who's not catching as many touchdown passes. He doesn't even know how many zeroes are in the amount of money in his contract, but he knows his contract has to be just a little richer than the guy who had the biggest contract last year. The money itself has no meaning. Without poor people being sufficiently poor, rich people can't feel sufficiently rich. The entire purpose of money now seems to be to give rich people a way to measure how much more valuable they are than a tool & die maker or coal miner or single mother of three. Or a 62 year old unemployed auto worker.
Everybody stays poor simply to prop up the egos of the rich. When you start getting bonuses in the tens of millions and salaries in the hundreds of millions, the only way that's left to increase a rich man's perceived value is to have the perceived value of everyone around him to go down. That's what "supply-side" or "trickle-down" economics is all about. It was also called "Reaganomics" in honor of the man who presided over its inauguration as the economic system of the future. If the species should survive that long, people will look back at the turn of the millennium with disgust, as a period when the means were available to alleviate so much poverty and inequity and suffering, but the rich and powerful kept that suffering in place just to make themselves feel rich and powerful, so they could go to bed at night knowing they were that much more valuable than everyone else.
You are welcome on my lawn.