WHITE HOUSE WON’T RULE THEM OUT
We love a good conspiracy theory around here, but when we were first alerted to the “trillion dollar coin” scandal we assumed it was nothing but fringe chatter. And that’s saying something considering this website is also “fringe chatter” (for the most part).
Within the last few days, though, this issue has moved squarely into the mainstream of political discourse – and with good reason. “Trillion dollar coins” – a.k.a. currency minted and deposited in the Federal Reserve for the sole purpose of artificially raising the nation’s borrowing limit – are no joke. In fact if U.S. President Barack Obama doesn’t pipe up soon and rule out them out as an option in the upcoming debt ceiling debate, our nation could be facing a major constitutional and monetary crisis.
Our friend Ralph Benko – a sound money proponent who has published several pieces here on FITS – was among the first to sound the alarm on this issue. We spoke with him earlier this week in an effort to figure out what was going on.
“Some left wing nuts discovered a loophole in the law that let’s Treasury mint platinum coins with an arbitrary face value,” Benko explained to us. “(These) lefties decided that if they minted two of them and deposited them with the Fed they could end run the debt limit. Paul Krugman has endorsed. Jay Carney refused to rule it out.”
Benko is right. In fact Carney, the White House spokesman, not only refused to rule it out – he refused to rule it out five times.
Evidently Obama is leaving this option on the table in the hopes of improving his negotiating position in the latest debt debate – believing this nuclear option will prevent so-called “Republicans” from insisting on concessions in exchange for an increase in the borrowing limit (which officially expired on December 31).
All of this is patently ridiculous.
First of all, the Federal Reserve has been on a money-printing rampage over the last four years. If it wants to pull $2 trillion out of its ass for this purpose – or any other purpose – there is nothing anyone can do about it (hence S.C. Senator Tom Davis’ recent statement that Fed chairman Ben Bernanke was a “dictator“).
More importantly, let’s contemplate the “concessions” won by “Republicans” during the last debt ceiling debate.
In exchange for $2.1 trillion in new borrowing capacity (which the federal government exhausted in just seventeen months), the GOP claimed to have secured $1.2 trillion in cuts over a ten-year period – and $900 billion in cuts during a three year window from 2019-21.
What did Obama and his Republican allies do, though? As part of the massive $630 billion “fiscal cliff tax hike” approved earlier this month, they delayed the implementation of these previously agreed upon spending cuts.
So to translate … $2.1 trillion in new debt has disappeared down the government sinkhole in the last seventeen months, and absolutely nothing has been cut.
Which means this wouldn’t be the first time Washington pulled a pair of “trillion dollar coins” out of its ass …