The trillion dollar coins is a concept that emerged during the United States-sky debt crisis in 2011, as the proposed way to bypass any requirement for the United States Congress to increase the country's borrowing limit, through such printing of platinum coins very high value. This concept gained more attention at the end of 2012 during the debate over the fiscal negotiations of the United States and new debt-ceiling discussions. After reaching headlines during the week of January 7, 2013, the use of the trillion-dollar coin concept was eventually rejected by the Federal Reserve and Treasury. Five days later, Minority Senate Whip John Cornyn announced that the Republican Senate would end their threat to block an increase in the debt ceiling.
Video Trillion dollar coin
Legal basis
The issuance of paper currency is subject to various accounting restrictions and quantities that platinum coins do not. According to the United States Mint, the currency is accounted for as follows:
Since Fiscal Year (FY) 1996, Mint has operated under the United States Public Funds Fund (PEF). As permitted by Public Law 104-52 (codified on 31 U.S.C.Ã, 5136), PEF eliminates the need for allocation. The proceeds from the sale of coins outstanding to the Federal Reserve Bank (FRB), bullion coins to authorized buyers, and numismatic items to the public and other customers are paid to PEF and provide funding for Mint operations. All operational, bullion and numismatic expenses and capital investments issued for operations and Mint programs are paid from PEF. By law, all funds in PEF are available without fiscal year restrictions. Specified revenues exceeding the amount required by PEF are transferred to the United States Treasury General Fund as off-budget and on-budget receipts. Out-of-budget receipts consist of seigniorage, the difference between the receipt of the Federal Reserve System from the sale of coins circulating at face value and the full cost of printing and distributing coins in circulation. Seigniorage is kept periodically to the General Fund where it reduces the government's need to borrow.
The striking concept of a trillion-dollar coin that will result in a trillion dollars in seigniorage, which will be off-budget, or numismatic profits, to be budgeted, and transferred to the Treasury, based on the authority granted by Section 31 USC Ã,§ 5112 of the United States Code for the Treasury to "mint and remove gold bullion coins" in each denomination of the Financial Secretary may vote. So, if the Treasury would print a trillion dollars in coins, it could hold such coins in a Federal Reserve Treasury account instead of issuing new debt.
31 U.S.C. 5112 (k) as originally ratified by Public Law 104-208 in 1996:
The Secretary may mint and issue bullion coins and platinum proofs in accordance with the specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's policy, may prescribe from time to time.
In 2000, the word "bullion" was replaced by "platinum bullion coin".
Gold bullion coins can, by this law, be printed in any denomination, while coins in certain other metals are limited to the sum of $ 50, $ 25, $ 10, $ 5 and $ 1. This is the origin of the concept of denominational coinage very high, because the platinum clause gives the only gap.
Philip N. Diehl, former Mint director of the United States and with Republican congressman Michael Castle co-author of platinum coin law, said the procedure would be permitted by law. However, Castle says he never intended to use it. The provisions of platinum coins were finally ratified by the Republican Congress over objections from the Treasury Democrats in 1996.
Laurence Tribe, a professor of constitutional law at Harvard Law School, says the trillions of trillions of dollars coins is sound and that coins can not be challenged in court because no one will stand to do so. Professor Jonathan H. Adler of Case Western Reserve University Law School has said that he believes the legality of a trillion-dollar coin becomes doubtful.
Maps Trillion dollar coin
The appearance of the concept
The idea for the Treasury to print coins and send them to the Federal Reserve to pay off debt was first popularized by Populist Bo Gritz's Presidential Candidate in 1992. As part of his standard stem speech, he would hold a five-inch sample coin. The specific concept was first introduced by Carlos Mucha, a lawyer who commented under the name "beowulf" on various blogs. "Beowulf" outlined the idea in a series of comments on Warren Mosler's blog in May 2010, noting that "Congress has delegated to Tsy [Treasury] all the authority security authorities required to print a $ 1 trillion coin...." Beowulf also attracted attention on the concept of blog economist Brad Delong in July 2010 and in his own blogpost analysis in January 2011 but it was not until July 2011 that the use of such concepts as an unorthodox method in resolving debt The stabbing crisis came to the attention of the financial press and in media blogs mainstream. At that time the idea also received support from law academics such as Yale Law School Jack Balkin. After the 2011 summer debt crisis was resolved, attention to the concept faded.
This concept gets renewed, and more importantly, the attention at the end of 2012 because the limit-limit debt is being approached once again. In early January, economist Paul Krugman supported the idea and insisted that opposition to the idea came from people who did not want to admit the truth that "money is a social tool." His support attracted considerable media attention. The former director of Mint Diehl is widely quoted in the media that denies criticism of the coin and its legal basis. Congressman Jerry Nadler endorsed the idea and it was featured in the international press on January 4, 2013.
"Beowulf" will then notify magazine's Wired magazine that the idea of ​​a coin comes from a Wall Street Journal article in December 2009 that talks about how some people are able to generate frequent-flyer miles at no cost by ordering coins from US Mint with a credit card offering mileage rewards and then depositing a coin to the bank to pay off credit card debt. He also said he was inspired by a 2008 book, Web of Debt, by Ellen Brown, who quoted a former finance official as saying the government could order large coin printing to pay off national debt.. "Beowulf" says the idea of ​​a trillion-dollar coin is more appropriately associated with small discussion groups than individuals, adding that the group was "only in it for lulz" (for personal entertainment).
Analysis and reaction
Some commentators have argued that although the concept may be very legitimate, it will weaken the US government's checks and balances system even if coin-issued expenditures will be authorized to have been passed by Congress. Journalist Megan McArdle writes that "printing a $ 1 trillion coin neatly ends GOP obstructionists, but only by proving that the president himself has little respect for institutional restrictions in his office." Another journalist, Felix Salmon, wrote that the concept "will effectively mark the collapse of a three-pronged system of government, allowing the executive branch only to swing the rights and privileges of the legislative branch." Salmon goes on to explain that he does not agree with what the Republican Congress does, but they have the right to do so, and the president should not use the trillion-dollar coin option to avoid them. In the words of Salmon, "Yes, the legislature behaves like a group of fools if they think that pushing the US government to default is a good idea, but they're right to behave like a bunch of fools."
On the other hand, many economists and business analysts support the coins as a way to counter the threat by members of Congressional Congress to force the country into default by refusing to raise the debt limit. Paul Krugman said, "So printing the coins will be not dignified, but so what? At the same time, it will be harmless economically - and both will avoid the economic development of the disaster and help block the government by extortion. He also said the trillions of coins of the dollar became "the most important fiscal policy debate of our lives".
Michael Steel, spokesperson of House Speaker John Boehner, dismissed the concept by comparing it to the episode of Simpsons called The Trouble with Trillions, which was broadcast 13 years before the US debt-sky crises, in which Homer Simpson is on a mission to find a billion-dollar bill lost.
On January 7, 2013, Republican congressman Greg Walden announced he would introduce a bill to seal the gap of platinum coins. Rep. Walden said that his goal was to "take a proposal from the table". The bill was opposed by a New York representative, Jerry Nadler, who said the idea remains a legitimate option.
On January 12, 2013, the Treasury and Federal Reserve announced they would not print platinum coins, and five days later, the Minority Senate Whip John Cornyn (R-Texas) announced that the Republican Senate would end its threat to block the increase in the debt ceiling.
Inflation risk
The purchase of Federal Reserve trillion dollar coins will be very analogous to the purchase of securities that are part of quantitative easing (QE), in both cases adding to the monetary base, which is the amount of currency in circulation and bank reserves. In the case of coins, commercial bank reserves will increase as the Treasury spends the proceeds from the purchase of coins by the Federal Reserve. If banks lend these reserves, the money supply increases and if the money supply rises too fast, the economy can overheat, inflate and increase future inflation expectations. In April 2011, a paper published by the St. Louis Federal Reserve Bank said "some believe QE will increase sharply the rate of inflation; however, this concern is inconsistent with economic theory and empirical evidence - assuming the Federal Reserve is willing and able to reverse QE as recovery gets momentum. "The paper added that" if the public believes that an increase in the monetary base of QE creates only temporarily, then they will not expect rapid inflation in the near future.These hopes collectively affect the actual price behavior and, in turn, the actual inflation. " The Federal Reserve can ensure that commercial banks do not lend excess reserves by paying interest on their reserves at the Fed so that the commercial banks of return receive more than they can receive from alternative uses. Finally, in the case of coins, the Federal Reserve can also sterilize government spending from coins by selling other assets from the balance sheet on a dollar-for-dollar basis, in which case the effect on the monetary base should be net to zero. If the debt ceiling is revoked, the Treasury may use the loan to repurchase the coins from the Federal Reserve and return them to Mint for disbursement.
Federal Reserve Independence
Although the Federal Reserve has indicated Dec. 12, 2012, that it wants to expand its balance sheet with another $ 1.02 trillion throughout 2013 through US Treasury purchases and government-backed mortgage securities, Greg Ip believes that if the Fed's Balance is expanded for fiscal rather than fiscal the reason for monetary policy that could be the imposition of central bank independence. Ip suggests that such imposition could be avoided if the extra gazillion in the currency is issued directly to the public (in smaller, more useful denominations) than kept by the Fed. As of May 2010 there were $ 40.4 billion in outstanding coins and about $ 900 billion in paper money.
Former US Mint Director Edmund C. Moy voiced doubts about whether the Federal Reserve can buy coins into TheStreet.com , which also notes that under the current system to start orders for coins, orders may have to be placed by the former Fed Chairman Ben Bernanke or one of the 12 Regional Federal Reserve Bank Presidents. Former Director Diehl disagrees with Moy about gold bullion coins but agrees with Moy that a proof of platinum coin will be a problem for the Fed. Diehl repeated his view that "I must think [printing a trillion dollars worth] is lower than raising or eliminating the debt but far better than the default and suffering the consequences of doing so."
See also
- United States national debt
References
Source of the article : Wikipedia
0 Comments