New MSM Trillion Dollar Coin Wave Misses the Big Story: Drum and Yglesias

By Joe Firestone

In my last two posts I’ve been reviewing the new wave of mainstream posts and commentary on Platinum Coin Seigniorage (PCS) by way of providing background for making the case that the MSM are missing “the big story” about PCS. Thus far I’ve reviewed recent posts by Pethokoukis, Wiesenthal, and Carney, and an MSNBC cable segment by Chris Hayes. All four have looked at PCS in terms of the Trillion Dollar Coin (TDC) and its possible impact on the impending debt ceiling shakedown. None have viewed it from a broader point of view. Let’s now look at the commentaries by Kevin Drum and two from Matthew Yglesias here and here.

Kevin Drum

Drum presents his view of the theories that “. . . have been floating around. . . “ since last year’s debt ceiling crisis including: the constitutional 14th amendment option; the platinum coin, the priority of legislation (that Congress has approved deficit spending since passing the latest debt ceiling implying approval of an increase in the ceiling); and the “you and whose army” theory that even if the President breaches the debt ceiling, no one could do anything about it because they would have no standing to sue. Here’s what he says about the coin:


There’s an obscure statute that authorizes the Treasury to mint 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.” Jack Balkin suggests that the secretary of the Treasury could simply mint a $1 trillion platinum coin, deposit it at the Federal Reserve, and then write checks on it. I don’t buy this one either. It’s just too outré. It’s the kind of thing that sounds cute to a blogger tapping away on his laptop, but there’s no way an actual president would ever try anything so obviously childish.

A bit unfair, I’d say. Labeling using “outré,” followed an ad hominem using “a blogger” to discredit a serious proposal without arguing against it. Apart from the fact that being “a blogger” says nothing about the quality of one’s argument in the first place, as long as Drum wants to appeal to authority rather than to reason, as a good “progressive” from Mother Jones should; Jack Balkin’s not just “a blogger tapping away.” He’s a Professor at Yale Law School; and the originator of the PCS idea,  beowulf (Carlos Mucha), is an Attorney. In addition, the most frequent blogging advocate for the PCS idea, namely me, is a Ph.D. in political science and a former university professor, before pursuing a long career in Washington, primarily as a researcher and consultant. Seems to me all three of us are further away from being just “bloggers” than Kevin Drum himself, who seems to me to be the one just “tapping away on his laptop.”

As for outré, one person’s “outré,” is another person’s solid new idea, it’s not an argument against that idea. Drum got some pushback from readers about his treatment of PCS, and he then posted an update on it:

Several people have pushed back on my dismissal of the platinum coin ploy. I’m not a lawyer, but my sense is that this is so wildly contrary to the intent of the law, which was to allow the Treasury to issue commemorative and bullion coins, that a court probably would intervene if the president tried to pull this off. The other ploys are at at least minimally plausible, but this one is banana republic territory.

Drum can’t resist the labeling without justification, can he? The Banana Republic Law is the debt ceiling law, and its use to extort concessions from a safety net that more than 2/3 of the American people want proves it. On the other hand, according to a Yale Law professor and many others who have looked at it, PCS is authorized by legislation passed late in 1995. Any challenge to it on grounds of intent is highly dubious for two reasons.

First, the Courts generally don’t try to interpret laws based on theories about Congressional intent. The Justices aren’t collective psychologists who are expert at divining the intent of the Congress. They are expert, however, at interpreting what the text of a law says, and so that is what they stick to almost all the time. A challenge to PCS based on intent isn’t something any Court is likely to take up.

Second, Drum gives the “you and whose army” theory with a fair amount of conviction, saying it is the strongest theory of all. But that theory applies in spades to PCS, if we consider that the possibility of using it is written into the law, and the only one with standing to challenge it is the Congress itself, which won’t, because the Democrats have a majority in the Senate, and won’t challenge the President. Again, the PCS option is stronger than the constitutional option from this point of view; because as long as the PCS  and consol options are legal, the debt ceiling legislation isn’t unconstitutional.

In another update, Kevin Drum agrees with the idea that the best option is to shut the Government down in chunks because the Republicans “would cave before long.” I suspect they would, but I think this option would still result in real damage to real people; while the PCS option avoid that damage. Perhaps Kevin, doesn’t see this because he thinks a TDC wouldn’t make any difference in the political situation in the longer run. However, if he thinks that, it may be because he, like the other mainstream bloggers, hasn’t given any thought to variations of PCS that might change the political situation and move it in a new direction entirely. Drum is another MSM blogger who’s supposed to be “progressive.” If that’s true then why isn’t he discussing how the PCS authority can be used to further broader progressive aims, rather than simply solve the debt ceiling crisis?

Matthew Yglesias

In his post on 12/06 Yglesias just refers to the TDC idea and to one his posts on it in 2011.

But resetting into a no concessions mindset, the White House has a lot of tools. Not only can he argue that the 14th Amendment obviates the debt ceiling (which I would if I were him) or have the Mint create a couple of $1 trillion platinum coins (which is weird, but on a sounder legal basis) he can use his control over the executive branch to make the lapse of borrowing authority as painful to Republicans as possible.

He says he prefers a 14th Amendment challenge to it; but then calls it both “weird” and on a sounder legal basis, which makes one wonder why it’s “weird”? Why do many MSM bloggers seem to feel obligated to characterize PCS in negative terms, even as they grant that it is a legal option? Do they need to do this to keep their credentials as among the Very Serious People (VSP)?

In his post on 12/07, he says:

Why did Congress draft a statute that doesn’t specify what denominations the platinum coin may be? I have no idea. But it’s a gaping loophole in the basic monetary framework of the United States, and pretty clearly allows Secretary Geithner to at least temporarily evade the debt ceiling by financing the government through seigniorage. The administration officials to whom I’ve raised this point generally respond by chuckling. Kevin Drum offers what amounts to an incredulous stare argument that this is undoable, “no way an actual president would ever try anything so obviously childish . . . so wildly contrary to the intent of the law . . . banana republic territory.”

Maybe so. But such is the stuff of which great leaders are made. And there is precedent for it. In 1933, Franklin Roosevelt essentially broke the back of the Great Depression by taking the United States off the gold standard. As a matter of substantive policy that was much more radical than evading the debt ceiling. And as a procedural matter it was tricky. Did Roosevelt have the authority to do that?

Sort of! He issued Executive Order 6102  under the terms of the World War I Trading With the Enemy Act. Is that what congress intended? Clearly not. FDR’s Depression-era gold policy had nothing whatsoever to do with World War I or any other war. But it was on the books.

So Yglesias’s attitude toward PCS is different from the other bloggers. He recognizes that it’s legal and that a great President will use any law on the books that will help him do what’s necessary at a particular time. And about PCS specifically, he says later:

I don’t think it would be a good idea for the government to be routinely financed by coin gimmicks, but it’s a much better option than the alternative of default or endless debt ceiling crises. Putting the platinum coin on the table is a good way of clarifying that whatever House Republicans say or do, default is not an option and no concessions will be made so they ought to save face and embrace the McConnell Principle.

So, Matthew Yglesias wants to have the President tell Congress that whatever the Republicans do, he has the coin alternative to use to avoid the debt ceiling, and then rather than use it, negotiate something like the McConnell principle to avoid debt ceiling controversies in the future. But, why does he propose this? There are so many other alternatives, and this is such a trivial think to get in return for the PCS power, which is after all, the Ace of Trumps in this game.

– The President could tell Congress that he has the coin alternative and insist that they repeal the debt ceiling legislation entirely or he will use it.

– Or he could tell them nothing, and just use the coin power to mint a coin sufficiently large to buy all the Fed debt and to redeem all the Intra-governmental debts creating accounts at the Fed for the Trust funds. That would lower the debt subject to the limit to something like $9.5 T, making the debt ceiling issue a dead letter for at least a few years.

– Or he could do something really radical like mint a $60 T coin, and immediately start repaying the intra-governmental and Fed debts and all the other debt instruments, while leaving nearly $44 T still available to cover future deficit spending for 15 – 20 years.

Why wouldn’t real progressives such as Matthew Yglesias claims to be, favor an alternative like that, since it changes the political context  by removing the memes of “we’re running out of money,” “SS and Medicare are fiscally unsustainable,” and “our grandchildren will bear the horrible burden of our enormous national debt,” from the political debate?

It’s a puzzle isn’t it?

Looking at the posts of Pethokoukis, Wiesenthal, Carney, Drum, and Yglesias, we’re seeing certain common elements. None goes beyond discussion of PCS in the low trillions, and generally there’s a focus on the TDC meme and its relationship to the debt ceiling.

Also, none is concerned with how the existence of PCS is related to the option of challenging the debt ceiling legislation by using the 14th Amendment. Chris Hayes’s cable segment follows the same pattern.

An emerging recommendation from some of these posts is for the President to use the TDC option as a threat in the background of his negotiations with the Republicans and then settle with them on some arrangement that makes it much more difficult for debt ceiling crises to occur in the future. This is a very conservative and unimaginative approach to the present situation, and there’s not a lot of difference of opinion among the MSM commentators. TDC is “weird” or “outre.” It’s probably legal. But it’s bizarre. Use it as a threat to defuse the present situation. But, once there’s a deal with the Republicans then put it back on the shelf, and go on with politics as before. Is that all we want to get out of the legislative authority for the Treasury to create seigniorage revenues by using the Fed’s authority to create reserves in unlimited quantity?

The next one will discuss the Bradford and Plumer posts!

29 Responses to New MSM Trillion Dollar Coin Wave Misses the Big Story: Drum and Yglesias

  1. The bit about the courts not looking to Congressional intent in order to make rulings in order to make rulings is incorrect. The court looks at debate transcripts and other historical records to determine the meaning of law. Generally, the Supreme Court only takes up questions where the law, on it’s face, doesn’t directly address the question at hand.

    • The Courts may look at intent when the language of the law is ambiguous. But this language says what it says. The Court will not speculate and say they couldn’t have meant to turn over all their power to coin unlimited amounts of money to the Secretary, because this is unthinkable. In the face of the plain language they have to have something more concrete to hang their hats on. There is nothing there.

      From one point of view it makes sense for the Congress to delegate currency and reserves to the Fed, and coinage to Treasury. Normally, when they’ve done that they regulate various aspects of the coins involved. Here they regulated certain aspects of the platinum coins; but they failed to place a constraint on the face values. That had to be deliberate on the part of the people who wrote that language. The rest of the Congress then accepted that language so it’s the law. The Court can’t go back and say oh, they forgot to add a constraint they meant to have in. That’s a slippery slope the Court could use to modify any law it didn’t like. It’s a very slippery slope for separation of powers. The Court would never do that!

      Then again, there’s the question of standing. The House alone won’t have standing. Especially since it’s not the same House as was sitting then. How can it speak to the intent question. The Senate is run by Democrats. They’re not going to oppose Obama if he uses the seigniorage power.

      • Well, the court needs nothing in the language of the law or the Constitution to do whatever they want, if 5 of them want it badly enough. They created a right to abortion out of “penumbras and emanations”, not language, where the only relevant language said “unalienable right to life”.

        However, normally it is as you say, the courts look to other documents like hearing and debate records when the intent of the law is not clear from the language. In this case, the very same law contains more than one example of the language Congress uses when it intends to specify the various parameters of coins to be minted for collectors. In the case of the platinum coin, they did not use similar language, and instead explicitly left that up to the Secretary of the Treasury.

        I would love to see what was in the hearing and debate records for this one. Probably very little. “Let’s have a platinum coin, too.” “OK.”

  2. Joe
    Great job and thanks for maintaining these historical threads on the PCS.
    FYI and FWIW, my research indicates (Library of Congress Law inquiry) that the Subsection (k) was initially created under the Omnibus Budget R. Act of 1996 and adopted in October of 1996.
    Further research found no record of who created the language and requested its inclusion, nor the “legislative intent” for doing so.
    It being done, I am still not ‘absolutely’ certain that Sub (k), like many other subsections, is not subject to sub (a).
    PS – Can you re-send that email?

    • Thanks for the legislative history. I originally thought it was 1996, but recently saw a copy that said the act was passed in late 1995. Perhaps sub (k) was added through amendment in 1996.

      Sure, I’ll send it again.

      • Clonal Antibody found some stuff on the history of the coin law a while back. I forget the details. Might have written about it at New Arthurian Economics, or Daily Kos.

  3. Why fool around with a $60T coin? What’s the matter with a nice big round number like $1,000T or simply $1Q (for quadrillion). The whole point is to fill up the TGA with enough money so that nobody in this millennium will ever again use the words “bankrupt” and “federal government” in the same sentence. QDC! USA! QDC! USA!

    • I’m interested in getting the Fed where I think it belongs, under the Treasury. So, I favor a coin large enough to pay the debt, and to support deficit spending for 15-20 years while we get organized to get Congress to place the Fed under Treasury. I didn’t want a coin so large that people would forget altogether about the need to make the Fed accountable.

      That said, the $60 T figure isn’t a religious one with me. If $1 Q becomes more popular; I’d certainly be happy with that! QDC’s catchy. I like that!

  4. I believe the true brilliance of issuing even a single TDC, is when there is no evidence of inflation due to it—all the memes of “we’re running out of money,” “we can’t afford Social Security,” and “our children we’ll be owned by the China” evaporate. Americans are so not stupid, but we are a little too trusting, and we have accepted some of the conservative context of money for too long. But, I still am having trouble wrapping my head around—if every sovereign nation with a floating currency decides to corner some commodity market—there appears to be nothing to stop them. And I’d like to hear the MMT response. China was hoarding copper last year and the price tripled in two years. What’s to stop North Korea from cornering heavy metals, or Sweden silver, or Rwanda corn? Isn’t this where the inflation boogey monster really is under the bed?

    • Hi Jon, Nations could start commodity hoarding wars with each other. But if they do, then the US is in a pretty good position. Certainly better than China, or Saudi, or any but a few other countries. Our resources are large and varied and we’re in a good position to retaliate against other nations that hoard or even maintain irresponsible cartel arrangements for very long. So, while the scenario you point to can happen 1) it has nothing to do with MMT-based policies, and 2) the US will do better than most in that kind of world.

      • We actually do a bang up job of taking more than our share of world resources now, like 25%, without even trying to corner any commodity. I’d estimate about a 1200# gorilla.

  5. “Why wouldn’t real progressives such as Matthew Yglesias claims to be, favor an alternative like that, since it changes the political context by removing the memes of “we’re running out of money,” “SS and Medicare are fiscally unsustainable[...]? It’s a puzzle isn’t it?”

    I think the reason why ‘progressives’ like Yglesias poo-poo the idea is because they do NOT understand that TDC removes “the memes of “we’re running out of money,” “SS and Medicare are fiscally unsustainable”. They still don’t understand the reality of MMT. If they did, they wouldn’t treat the idea as some ‘crazy’ idea.

    • First, TDC isn’t as good at doing that as PCS. And second, by now many of them have heard about MMT, and its position on sovereign currencies. For example, Bill Mitchell’s MMT piece on Austerity was published in the Nation. It’s hard for me to believe that Hayes, Drum, and Yglesias didn’t see that. Also the MMT wars with Krugman have been very public. These folks must have seen that!

  6. Perhaps, timing has placed you in the wrong church, yet in the right pew.
    Ben Bernanke has proven his own PTC, or should I say “silver bullet” that is a means to unlimited spending over an unlimited time. Quantitative Easing, a/k/a QE.
    Justaluckyfool comments,”
    Ben Bernanke should receive the Noble Prize in Economics.
    Ben Bernanke has proven MMT.
    A Monetary Sovereignty can”t run out of money for purchases of assets.
    A Monetary Sovereignty can issue an unlimited quantity of its own currency.
    Solid proof; QE 4-for as long as needed and in whatever amounts desired!!
    BUT justaluckyfool asks
    “A..” WHY NOT do it for the people ?
    B… Stop doing it solely to benefit the “Private For Profit Banks” (PFPB).
    Just an example: Purchase all residential real estate loans and modify them at 2% for 36 years. This would allow for stabilization of the housing and construction sectors, increase jobs and the bettering of all citizens. And at the same time raise revenue, lower taxes, and fund “for the general welfare. A simple solution; if $100 trillion is needed ,what happens ? all that it does is take away from the PFPB a revenue of $5.5 trillion a year and turns it into Income for the US Treasury.
    Please, Michael Hudson answer, what if Demon Compound Interest were to change its path and be used for the bettering of mankind?
    But , who is man enough to “free the servitude of the people” as it is the right of the people as stated in the 13th amendment.
    May Ben Bernanke see this moment in history, and surely President Obama could place himself next to Lincoln in history. As Lincoln freed the slaves, Obama can free all the people from servitude,( debt that can never be paid).
    May God continue to bless America.

      • Does that mean that President Obama could not appoint me as Sec. of US Treas. and William Black as Fed Chair and be recorded in history as the president that gave “The Role of Money” back to the People.
        Oh well , maybe Ben will “QE 5 “The Wealth Of This Nation”
        1.Make available all that is needed to purchase all loans that are not liquid or guaranteed convertible
        to American goods and services. These funds would be available as loans for the purchasing of those assets with the condition of 2% and a term of 36 years.
        Let’s hope he has to key strock,print or whatever $300 trillion; that would produce an income of $16.5 trillion a year for 36 years .
        How would you REDISTRIBUTE that Wealth since it must be redistributed are the notes can not be paid?
        Please, put “justaluckyfool to rest . Show me that QE is not real.
        Show me QE is not real.
        Show me the Fed didn’t buy billions of dollars of MBS’s for the benefit of mankind???
        and they can continue until they change the rules, “maybe,perhaps, if unemployment goes down to 6.5.
        Since it is not spending there is no inflation, and all the money must come back home for redistribution if “deemed necessary”
        Challenge it! Show me to be the “fool”.
        Show me I got Keynes, Minsky, Desoto, Soddy wrong not to mentio Wm. Black (Banks) and Hudson (Interest).

  7. 13th Amendment, US CONSTITUTION.
    Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

    You think the Coinage laws had some “unintended consequences” (PTC ?)
    how about.. “Neither slavery nor involuntary servitude…”
    The PFPB (Private For Profit Banks) by means of credit expansion are allowed to charge compound interest on our own currency, in such amounts that redemption of that issuance would demand servitude.
    “**** The Mathematics of Compound Interest***by Michael Hudson, ” A syndicate of less than one hundred American capitalists (justalucky-PFPB), if allowed to collect interest on their capital at a low rate and re-invest for 150 years or less, would at the end of that time own the earth and all real and personal property thereon. This is a simple mathematical proposition, capable of exact demonstration, and any one who doubts the truth of this statement may set all doubts at rest by computing compound interest on one and one-half billions of dollars for one hundred and fifty years, at five per cent per annum”
    After ALL properties are owned, what is left but servitude.

    • You can’t project out accurately even one year, much less 150. But the real point is that the process of compounding you point to would never be allowed to run its course without revolution. It just won’t happen.

      • I thought that was why we’re here.
        To take back the money system from the Petersons of the world.

      • Please, aren’t we the same people that thought that housing prices “couldn’t go down”?
        The same people that say ,”It’s OK to put on the books of Bank of America $68 trillion of derivatives
        so they would be FDIC insured- I mean how must would be at risk ? Ah “nothing” there has to be a winner if there is a loser. Really.
        But ,am I correct in saying that you agree this is not only a possibility but is actually happening?

      • **”would never be allowed to run its course”, Joe.
        Nor would we ever allow money to be leveraged more than 10 fold. (So the banks created a “shadow system” that does 30 times, even 50 times leveraging.
        Or would we ever allow a coin to be valued at $1 trillion just for starters?
        **”You can’t project out accurately even one year, much less 150″
        But- you-can !
        IT IS A PROVEN FACT. It is the Rule of 72. Any amount will double. And at what rate and speed.
        The one I love is a rate of 2% per year for 36 years.$100 trillion becomes $200 trillion. The most powerful force in the universe .
        Please , correct where I have gone wrong in my opinion of what Hudson wrote about compound interest.

        • lucky,
          If you want the penultimate lecture on the MANY crises caused by debt and compounding interest , please have a listen to Dr. Bernd Senf, German Pr.Em at the Berlin School.

          This is his only English language lecture on the subject. But he is well connected to the European “Monetative” movement.
          I’ve seen nothing better than Dr. Senf.

    The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;
    To borrow money on the credit of the United States;
    To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;
    To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;
    To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;
    To provide for the punishment of counterfeiting the securities and current coin of the United States.

    The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

    Some stuff requires a lot of that scholarly “Constitutional Construction” (including the lovely Scalian no-intent-need-apply textualismo “Ouija Board Jurisprudence”), but I don’t think that’s the case here. Congress clearly has both the “power of the purse” and the 14th Amendment duty to honor all “public debt of the United States, authorized by law.”

    Senators and Representatives also Swear to uphold the Constitution. Those who willfully accede to Default should be removed from office.

    I’m somehow not seeing under I.8 the text denoting “Debt Ceiling.”

    • Could that be because we are on the outside looking up. If we were under the dome, we’d probably see one.

    • 31 USC § 3101

      …(b) The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government (except guaranteed obligations held by the Secretary of the Treasury) may not be more than $14,294,000,000,000, outstanding at one time, subject to changes periodically made in that amount as provided by law through the congressional budget process described in Rule XLIX [1] of the Rules of the House of Representatives or as provided by section 3101A or otherwise.

      Congress has both the authority and the obligation to honor the public debt.

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  10. The so-called federal “debt” is nothing more than the total of deposits in T-security accounts at the Federal Reserve Bank. No one owes those deposits, least of all your children and grandchildren.

    Merely change the word, “debt,” to the correct word, “deposits,” and the whole conversation changes.

    Rodger Malcolm Mitchell

  11. John Hobgood

    “Merely change the word, “debt,” to the correct word, “deposits,” and the whole conversation changes.”


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