Thursday, January 10, 2013

Debating the platinum coin option, which the Pod Pundits find it hard to imagine

Often I would be sympathetic to a warning "not to mistake media coverage for reality."

But Felix Salmon of Reuters makes that warning in a passage that demonstrates much of the poor quality of today's Establishment political commentary. In The game theory of #mintthecoin 01/09/2013, he explains that he thinks it would be a terrible idea for President Obama to use the threat of minting a trillion-dollar coin to avoid the Republicans' debt-ceiling threat because, well, gee, apparently only Republicans can make outside-of-the-box threats in budget negotiations.

It's worth adding a meta-media note here, too. The #mintthecoin meme has successfully migrated from the outer reaches of the econoblogosphere into a fair amount of mainstream media coverage, and as a result it has actually started to be taken seriously outside the Beltway. And even, in a few cases, inside the Beltway too. But be clear, this is absolutely a media-driven meme: people talking about it are not talking about an actual political proposal which an important number of serious DC politicians genuinely want to implement. As I say, it's a Flying Spaghetti Monster thing — it's a ticklish thought experiment, nothing more. Many media organizations are having a lot of fun with it, and that's their right. But, especially in this case, it's important not to mistake media coverage for reality. [my emphasis]
You mean actual citizens, including economists who have a good record on analyzing the current depression, are advocating an idea that isn't one that "an important number of serious DC politicians genuinely want to implement"?

Lawdy, Miss Mellie, bring me the smellin' salts! Ah thank ah'm gone faint daid away!!

Given how the Very Serious People have been negotiating lately, maybe they need to listen to people other than those who think the Democrats just need to let the Repubicans slap them around endlessly.

This does seem to be a case in which the Very Serious People fixed on a script in which the Obama Administration would never do something like this. And, just to be clear, the way Obama has handled the 2011 debt ceiling fight and the year-end 2012 "fiscal cliff" fight, they have good reason to think that! But they also seem to have become so attached to that script that even genuinely serious suggestions of alternatives seem bizarre to them.

Some of it may also be commercial calculation. A protracted fight over the debt ceiling in February-March would be better for TV news ratings than Obama sidelining the Republicans' blackmail by using the trillion-dollar coin, or the 14th Amendment, or so other legal and plausible method to neutralize the Republicans' threat not to raise the debt ceiling and thereby risk the full faith and credit of the United States.

Charlie Pierce has some fun with NBC's Chuck Todd's similar reaction to the idea in Selling Wolf Tickets At The White House Esquire Politics Blog 01/10/2013.

My man Chuck Todd had a minor cow yesterday at the White House press briefing when Jay Carney refused to confirm or deny that the White House was considering the platinum-coin option as a response to the now-customary Republican legislative vandalism regarding the nation's credit. (The White House actually has ruled out unilateral action under the 14th Amendment, which I consider unfortunate.) Chuck's cow-having extended to his electric television show this morning, when he again pronounced himself concerned that the Democrats didn't not seem to be willing to categorically deny they were considering an option that Chuck and his guests — a former Bush II treasury dude and the economics guy from Buzzfeed — see as woefully not serious. The former C-Plus Augustus hireling suggested that a truly serious deal would be for the president to agree to the chained-CPI on Social Security benefits in return for a Republican promise not to mess with the debt ceiling this time around. So the platinum-coin option is a joke, but making it harder for old people to buy food in exchange for a Republican promise not to spray-paint graffiti all over the sides of the economy again is a serious plan. This is the way these people think. [my emphasis]
Paul Krugman has been recommending the trillion-dollar coin idea, although there's no magic about the trillion dollars denomination. It could be 10 trillion. In Barbarous Relics 01/09/2013, he discusses what money is ("a social contrivance and convenience that makes this social system work better") and what it isn't (gold). Not being Chuck Todd, Krugman writes:

And I do find myself thinking a lot about Keynes's description of the gold standard as a "barbarous relic"; it applies perfectly to this discussion. The money morality people are basically adopting a pre-Enlightenment attitude toward monetary and fiscal policy — and why not? After all, they hate the Enlightenment on all fronts.

The bottom line is that we aren’t really having a rational argument here. Nor can we: rationality has a well-known liberal bias.
Krugman also discusses the platinum coin option in Be Ready To Mint That Coin 01/07/2013 and Rage Against the Coin 01/08/2013. In the latter, he addresses the fears of critics who scream that it would be inflationary.

I hate titles like "Idiot's Guide." But this piece by Mark Gongloff, The Trillion Dollar Coin Solution, Or One Coin To Rule Them All: An Idiot's Guide Huffington Post 01/07/2013 gives a talking-points style explanation of the option. His explanation of the inflation risks isn't very good; I'll stick with Krugman on that.

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