United States Debt Default

I see. So you admit that your figure of 102.63% of GDP is not only something you pulled out of your ass, but something you quoted completely out of context, as well?Were you just trying to scare us with a big number? Try a million billion next time, it's much larger.Do you notice how nobody thinks you're the one who knows what he's talking about?

Only the "law" of supply and demand; the Fed introduces far more dollars than the Treasury can print or could print.

I don't pride myself on being a "guru" of any kind, in fact I'm on the record as believing that economics is mostly bullshit anyway.But frankly the two of you should be utterly ashamed that you allow someone who's never taken a single economics course in his life to school you so utterly at it. The problem is - the two of you listen to so much conservative horseshit that you know less than nothing about the economic situation of the United States, so someone who knows nothing at all automatically knows more than the two of you put together.If I'm wrong on the law, Paul should be able to demonstrate it. He's opted not to. If I'm wrong on the economics, Jon, you should be able to demonstrate how. You've opted not to. Why on Earth should anyone think it's the two of you who know what they're talking about, when the only abilities you demonstrate are the abilities to prevaricate, obfuscate, and slander?

I've not proposed that Geithner offer platinum coins to the Federal Reserve Bank; I've proposed that Geithner should strike and issue large-denomination platinum coins to claimants, or to banks on their behalf. And as I've said four times, the law that allows him to do this is US Code 31.5112(k).I'm not aware of any law that forces the Federal Reserve Bank to do anything except for the Federal Reserve Act, but it strikes me that if the US Mint produces a coin that says "legal tender" on the front, and everyone agrees to treat it as legal tender, then there's really not jack shit the Federal Reserve Bank can do about it.

In this case you appear to have pulled them from someone else's ass; according to your "source" these are

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'guesstimated' projection by usgovernmentspending.com

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I didn't want to make you look like a total idiot before, but you'll see that according to both CIA factbook figures, Eurostat, and the IMF, the US public debt as a percentage of GDP is under 100%; according to the factbook it's around 60%, which puts us at about 36th-highest public debt by percentage of GDP. http://en.wikipedia.org/...f_sovereign_states_by_public_debtYou know, but don't let that stop you and Glenn Beck from shouting "fire" in any crowded movie theaters. Really? I must have missed the part where you explained why public debt to the tune of 102.5% or whatever is such a calamity. Seems basically like you thought that throwing out some huge numbers would scare us. If you had an actual point to make you hit "submit" long before you actually made it, but that's kind of your thing - forgetting to make an actual argument in your posts. (And, of course, your other thing is that you have a huge hard-on for me, personally. You seem to have, since the day I got back.) No, I'm not the only one. For instance, here's political scientist Mark Kleiman:

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Fortunately, the Debt Ceiling is not the only stupid law the Congress has passed. It turns out that, back in 1996, the platinum lobby managed to get the following section written into law:

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The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

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Now, arguably a bullion coin is distinct from a fiat coin in that its face value is supposed to reflect its precious-metal content. But the law doesn’t say that.

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So what if the Mint produces three platinum coins with face values of $1 trillion each? (There’s some debate about whose portraits should adorn them, but my nominees would be Ronald Reagan, George W. Bush, and Alfred E. Neumann; the last coin could have What, me worry? in place of In God We Trust.) The Treasury deposits the coins with the Fed; they’re legal tender, so the Fed exchanges them for $3T of Treasury bonds now in its reserves. And the coins are not debt: they’re money. Hey, presto! The debt shrinks by $3T, and we don’t have to issue more coins until after the 2012 election. Problem solved.

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Mark Kleiman is

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Mark Albert Robert Kleiman (born May 18, 1951) is an American professor, author, and blogger who is a Professor of Public Policy at the UCLA School of Public Affairs. Kleiman is a nationally recognized expert[1] in the field of crime and drug policy and the author of Marijuana: Costs of Abuse, Costs of Control and Against Excess: Drug Policy for Results. His most recent book is entitled When Brute Force Fails: How to Have Less Crime and Less Punishment.[2]
He is a research fellow at the Program for Criminal Justice Policy and Management at the John F. Kennedy School of Government at Harvard University, an adjunct scholar at the Center for American Progress, and was Thomas C. Schelling Visiting Professor at the School of Public Policy at the University of Maryland (2006-2007).
Kleiman grew up in Baltimore. He is a graduate of Haverford College, and received an M.P.P. and Ph.D. in Public Policy at the John F. Kennedy School of Government at Harvard University in 1985.
Kleiman was a legislative aide to Congressman Les Aspin and a special assistant to Polaroid CEO Edwin Land.
From 1979 to 1983, Kleiman worked for the Office of Policy and Management Analysis in the Criminal Division of the U.S. Department of Justice, and in 1982-83 he was its director and a member of the National Organized Crime Planning Council. From 1977 to 1979, he was Deputy Director for Management and Director of Program Analysis for the Office of Management and Budget of the City of Boston.
Kleiman is the editor of the Drug Policy Analysis Bulletin. Kleiman also advises governments from the local to federal levels on crime control and drug policy.

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http://en.wikipedia.org/wiki/Mark_kleimanWhere's your Wikipedia entry, AZPaul? I mean, you must have one, with a biography at least as impressive as Mark Kleiman's, right? I notice that he's a research fellow at Harvard; what research do you do at Harvard? Kleiman served under Les Aspin; what Congressman did you ever work for?Kleiman goes on to say:

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Is it legal? Arguably, it would be illegal not to do it. The President is bound by the Constitution and his oath of office to take care that the laws be faithfully executed. Appropriations bills are laws; he’s not allowed to impound appropriated funds, but must expend them. If the debt ceiling isn’t raised — won’t have the cash to do so unless he issues the trillion-dollar coins. And if that’s the only way to carry out his Constitutional duties, then he is not just allowed, but required, to do precisely that.

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Hrm, sounds familiar. Of course, I'm no Harvard scholar, and I wish I could say that I've just been cribbing from Kleiman this whole time, but if you'll observe the relevant dates, you'll see that my first message in this thread was two days before Kleiman published this blog entry. http://www.samefacts.com/...ing/phony-problem-phony-solutionOh, well. Great minds think alike, I guess! Yes, exactly. By definition when the United States Treasury prints money, it cannot be counterfeit. They print the money! Therefore they can print as much of it as they need to.Indeed they have to, because the Executive Branch doesn't have unallotment authority. Go on, prove me wrong - show me where in the Constitution the Executive Branch can unallot legislative appropriations.I'll wait.

Well, fair enough. I'm prepared to admit, then, that AZPaul seems to be convincing people who admit to knowing absolutely nothing about the issue. Well, that's not accurate. Prominent political scientist Mark Kleiman has realized it, as I've just demonstrated; political blogger Matthew Yglesias is where I first heard about it. It's just new to you but as the debt ceiling deadline rolls closer with no sign that the Republican hostage crisis will be resolved, I think you'll hear a lot more about it. And here's econoblogger Mike Norman:

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Congress provided the authority, in legislation passed in 1996, for the US Mint to create platinum bullion or proof platinum coins with arbitrary fiat face value having no relationship to the value of the platinum used in these coins. These coins are legal tender. So, when the Mint deposits them in its Public Enterprise Fund account at the Fed, the Fed must credit that account with the face value of these coins. This difference between the Mint's costs in producing the coins and the credit provided by the Fed is the US Mint's profit. The US code also provides for the Treasury to periodically sweep the Mint's account at the Federal Reserve Bank for profits earned from these coins. Coin seigniorage is just the profits from these coins, which are then booked as miscellaneous receipts (revenue) to the Treasury and go into the Treasury General Account (TGA), narrowing the revenue gap between spending and tax revenues. Platinum coins with huge face values, $1, $2, and $3 Trillion coins have been mentioned, could close the revenue gap entirely, and, if used often enough, technically end deficit spending, while still retaining the gap between tax revenues and spending.

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http://mikenormaneconomics.blogspot.com/...-debt-crisis.htmlContra AZPaul, the Treasury has released Treasury notes as legal tender in the past, and even after the Federal Reserve Act direct Treasury notes are legal tender. Even though the vast majority of paper money in the US are Reserve notes, Treasury notes continue to be legal tender and can still be spent just like money - because they're money! That's why your old $2 bills are still worth 2 dollars. And the US Treasury retains the power to issue fiat currency; 31.5112(k) empowers the Treasury to strike and issue platinum coinage in any denomination, not limited to the actual value of the metal in the coin. AZPaul is simply full of shit, as usual.

And he's a fucking idiot; Obama will consider $3 trillion too much and Cantor will consider it too little ("Why couldn't Boehner get $4 trillion in cuts? Because he's too liberal. Vote Cantor for House majority leader!") so it has zero chance of passing.The Republicans have set themselves up a hostage crisis with no way out, because however Boehner resolves this, Cantor is going to maneuver against him for Majority leader by portraying him as an appeaser. "Soft on hostages." No, because they can't. Boehner can't agree to a deal unless Eric Cantor will vote for it. But Eric Cantor, by definition, can't vote for anything Boehner agrees to because he wants Boehner's job, and therefore he wants to make Boehner out to be an appeaser.If I were Obama, I'd come back to the table and I'd say "ok, guys, here's my final offer - absolutely fucking nothing. No cuts to anything. I tried to work with you morons and got shit on for it, so we're done with this farce. I'm just going to have Geithner use the 31.5112(k) option, print whatever platinum money I goddamn please, and completely ignore the debt ceiling. In fact the 14th Amendment requires me to do so - couldn't let the country default if I wanted. Sorry, fucko, but if you assholes don't like it, you shouldn't have let the platinum lobby write your laws."He should. Will he? I think it's more likely that Cantor will let this one go, than be the guy who cost Congress power over the debt limit for all eternity.

No, I disagree. If Obama is placed into the situation of having to choose between expanding executive power and preside over a historic default on the national debt, he'll expand executive power (just like every executive before him.) He's not a moderate, as I've explained before; he just looks that way because of fundamental limits on executive power.If Republicans truly give him no choice he'll have to ignore the debt ceiling with the 31.5112(k) strategy. But I think it's more likely that Republicans will fall in line behind something that saves the fortunes of rich people.

The same place they are now - nonexistent.Contrary to the rhetoric there's never, ever been a consistent electorate support for actual smaller government or smaller deficits. Even the conservatives around here only claim to be for smaller government and balanced budgets - it's just a tribal identity shibboleth they have to repeat so people know what group they're in.Conservatives, like always, have supported only that which enriches the elite. That's why Republicans are planning to scuttle the entire American economy to protect tax breaks for corporate jets.

Where do you think coins come from, CS, and why you're allowed to spend them? How does it always happen to be the case that there's enough dollars to go around, even though the population of the US keeps growing?How could the Treasury Department, the only body legally allowed to print money, print money that was counterfeit? That's what AZPaul is saying is going on, here. The Treasury prints or strikes it such that it says "legal tender" on it. Contra AZPaul, the Federal Reserve doesn't have a monopoly on the creation of dollars and never has. It has a monopoly on reserve notes, which is the predominant form of money in the United States, but it's not the only possible form. If, like most people, you have some $2 bills socked away somewhere, then you're the holder of a Treasury note, which is also a kind of completely legal dollar, the number of which allowed to be in circulation is determined by statute.Unless they're coins. Coins issued by the Treasury aren't reserve notes, they're fiat money. A $1 trillion coin struck by the Treasury has that value because the Treasury says so. That's what "fiat currency" means; that's what Buz is always complaining about, that our dollars are dollars not because they're backed by a dollar's-worth of something, but because the Treasury department says they're dollars. And everybody agrees to play along.

They can push it all the way. Boehner can't deliver a debt ceiling bill without their votes, and they don't want to vote for anything Boehner comes away from the table with.There will only be a debt bill if Eric Cantor and his caucus decide that not busting the debt ceiling is more important than the power of the tea party caucus. Maybe that'll happen. (Frankly the fact that you think it will happen makes me think that it probably won't.) I never said that they would, only that they could and should.

These are the same ratings agencies that committing a multi-trillion-dollar fraud by rating as "AAA" various credit default swaps that were full of toxic mortgages, right? Because they were paid to do so by the sellers of those instruments?

No, fact. A AAA rating has always been understood to mean "money safe." As the Federal Crisis Inquiry Commission found:

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"The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies. Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms."

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http://c0182732.cdn1.cloudfiles.rackspacecl.../...usions.pdfFurther:

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Rating agencies lowered the credit ratings on $1.9 trillion in mortgage backed securities from Q3 2007 to Q2 2008, another indicator that their initial ratings were not accurate.

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http://en.wikipedia.org/..._agencies_and_the_subprime_crisisIf the ratings were, as you say, intended only to refer to the reliability of the issuer and not the security of the investment, then there would be no reason to downgrade the ratings after the fact. That almost all ratings agencies are now doing so disproves your position. No, in fact they're guilty of not actually having done what you claim they do - explicitly disclosed the nature of their default mechanism. In many cases ratings agencies misrepresented or even outright lied about the underlying default mechanisms and rates involved in these toxic securities.Edited by crashfrog, : No reason given.

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In August 2004, Moody's Corp. unveiled a new credit-rating model that Wall Street banks used to sow the seeds of their own demise. The formula allowed securities firms to sell more top-rated, subprime mortgage-backed bonds than ever before.

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A week later, Standard & Poor's moved to revise its own methods. An S&P executive urged colleagues to adjust rating requirements for securities backed by commercial properties because of the ``threat of losing deals.''

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The world's two largest bond-analysis providers repeatedly eased their standards as they pursued profits from structured investment pools sold by their clients, according to company documents, e-mails and interviews with more than 50 Wall Street professionals.

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http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ax...

And he's completely wrong. The Treasury released its own notes for almost the entire nation's history, and they remain legal tender. You can still spend a $2 treasury note like it's worth $2 because it is $2, by fiat. The fact that the Federal Reserve never issued it is irrelevant - they don't have a monopoly on dollars in the United States. This is nonsense, and it bears no relationship to the legalities of monetary policy in the United States.The proof of it is the $2 bill. Yes, exactly. So while statutory Note limitations prevent the Treasury from minting a $1 trillion bill, there's no law against the Treasury striking, issuing, and spending a $1 trillion platinum coin. Which must perforce be legal tender because it says legal tender on it and has been designated as legal tender by the United States Treasury.AZPaul has it completely backwards. Treasury notes aren't legal tender because they're accepted by the Federal Reserve Bank; Federal Reserve Notes are considered legal tender because they're accepted by the United States Treasury. AZPaul gives many indications that he has no idea what he's talking about, if you look closely enough to see. The fact that he conflates coins with bills is one of those indications; the fact that he thinks a private company has the authority to make up money is another. It's nonsensical. Yours must be relatively new, then; $2 bills were United States Treasury notes until 1976. But United States Treasury notes have not ever stopped being currency; they just stopped being printed. There's a statutory limit on the number of US Treasury bills that can be in existence at any one time, but no such limitation on the number of platinum Treasury coins.