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 Post subject: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 1:54 pm 
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In Bernanke We Trust.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 4:50 pm 
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Krugman's latest gem.

http://krugman.blogs.nytimes.com/
Quote:
January 7, 2013, 9:05 am35 Comments
Be Ready To Mint That Coin

Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious.

For those new to this, here’s the story. First of all, we have the weird and destructive institution of the debt ceiling; this lets Congress approve tax and spending bills that imply a large budget deficit — tax and spending bills the president is legally required to implement — and then lets Congress refuse to grant the president authority to borrow, preventing him from carrying out his legal duties and provoking a possibly catastrophic default.

And Republicans are openly threatening to use that potential for catastrophe to blackmail the president into implementing policies they can’t pass through normal constitutional processes.

Enter the platinum coin. There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.

So why not?

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years.Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.

So if the 14th amendment solution — simply declaring that the debt ceiling is unconstitutional — isn’t workable, go with the coin.

This still leaves the question of whose face goes on the coin — but that’s easy: John Boehner. Because without him and his colleagues, this wouldn’t be necessary.

:ohyeah!:

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 5:26 pm 
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Why stop at one, why not make 10 of them?


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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 5:31 pm 
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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 5:42 pm 
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you don't think that's a bit tongue in cheek?

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 5:56 pm 
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Stip wrote:
you don't think that's a bit tongue in cheek?

http://krugman.blogs.nytimes.com/
Quote:
January 7, 2013, 11:37 am31 Comments
Moral Obligation Coupons

Don’t like the platinum coin option? Here’s a functionally equivalent alternative: have the Treasury sell pieces of paper labeled “moral obligation coupons”, which declare the intention of the government to redeem these coupons at face value in one year.

It should be clearly stated on the coupons that the government has no, repeat no, legal obligation to pay anything at all; you see, they’re not debt, and therefore don’t count against the debt limit. But that shouldn’t keep them from having substantial market value. Consider, for example, the fact that the government has no legal responsibility for guaranteeing the debt of Fannie and Freddie; nonetheless, it is widely believed that there is an implicit guarantee (because there is!), and this is very much reflected in the price of that debt.

So the government should have no trouble raising a lot of money by selling MOCs. It’s true that if they’re sold on the open market, they would probably sell at a substantial discount from face value, so this would in effect be high-interest-rate financing. But that’s better than either default or giving in to blackmail.

And maybe the coupons wouldn’t have to be sold on the open market; why not just have the Fed buy them? Bear in mind that the Fed doesn’t always buy safe assets; it’s buying a lot of mortgage-backed securities (from Fannie and Freddie; see above), and during the worst of the financial crisis it bought lots of commercial paper. So why not slightly speculative pieces of paper sold by the Treasury?

Again, while this may all seem kind of dodgy, it’s important to realize that unless the president does something like this he will be forced to do something illegal: namely, fail to spend money that, by act of Congress, he is legally obliged to spend. Fancy footwork is by far a better alternative; and if it enrages Mitch McConnell, well, that’s just an extra bonus.

Update: If there is a legal problem even with selling these coupons, there are still alternatives, such as paying suppliers with these coupons and then having the Fed buy them. The mechanics really don’t matter; as long as we’re in a liquidity trap, printing money, printing conventional debt securities, or printing funny money with no legal standing that nonetheless lets the government pay its bills are all equivalent.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 6:28 pm 
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yeah, I still can't help but think he's being tongue in cheek hostile about these ideas, although underneath it there's obviously some thinking about what does and does not constitute debt, the nature of money, etc.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 6:45 pm 
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Stip wrote:
yeah, I still can't help but think he's being tongue in cheek hostile about these ideas, although underneath it there's obviously some thinking about what does and does not constitute debt, the nature of money, etc.

You're probably right, it just struck me as funny. Funny in a horrifying kind of way, mind you.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 7:04 pm 
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4/5 wrote:
Stip wrote:
yeah, I still can't help but think he's being tongue in cheek hostile about these ideas, although underneath it there's obviously some thinking about what does and does not constitute debt, the nature of money, etc.

You're probably right, it just struck me as funny. Funny in a horrifying kind of way, mind you.


fair enough. I can't decide if he is responding to what he sees as the absurdity of the idea of a debt ceiling (which is a very interesting constitutional question), the politics of the situation, the totemic faith we have in some types of money, or what. I don't read Krugman all that much anymore so I don't know what he's been talking about lately. The only times columnist I regularly read is Ross Douhat, who is a very thoughtful conservative.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Mon January 07, 2013 9:51 pm 
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The Jobs Numbers and the Deficit

By Robert Kuttner, Reader Supported News

07 January 13



The private sector created 155,000 jobs in December, almost exactly the average for the 11 previous months of 2012 and for all of 2011. Once again, it is a record far too weak to produce real progress towards either an adequate recovery or decent growth in wages and salaries. At this rate of job creation, according to the Economic Policy Institute, it will take another decade to get back to the employment rate of early 2008.

According to the Labor Department, there were 7.5 million net jobs lost in the recession, and a gain of only 3.5 million net jobs so far in the recovery. We have 4 million fewer jobs now than five years ago, and a much larger labor force.

Consider the connection between these tepid job figures and the debate that still occupies center-stage in Washington -- deficit reduction. Supposedly, businesses are not creating enough jobs because business leaders are anxious about the Federal debt.

For months, we have been hearing that businesses have been putting off making new investments or hiring new workers for fear that Congress would fail to cut the federal deficit. The austerity lobby helpfully put reporters in touch with businessmen who claimed that the uncertainty about the budget was dampening their willingness to expand, producing stories like this one in the New York Times last August. The Times contended:

A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months.

But this turned out to be just about total baloney. During the months when the Congress and the press kept everyone on the edge of their seats wondering about the dreaded fiscal cliff, business behavior went on as normal -- and a mediocre normal at that. The lousy rate of job creation hardly changed. Detroit enjoyed a good fourth quarter as very low-interest rates stimulated auto sales. Christmas sales were about what was predicted, as consumers turned to their credit cards.

To the extent that the economy has remained stuck in first gear, it has everything to do with high unemployment and lagging wages, and just about nothing to do with the fiscal cliff or worries about the debt ratio 20 years down the road.

The sluggish recovery has intensified a power shift from working people to corporations that has eroded the standard assumptions about the nature of employment. What the Labor Department calls "payroll employment" -- the basis for both its statistics and assumptions -- is becoming every more scarce.

A generation ago, the norm was a salaried job with a paycheck, regular hours and benefits, and the assumption that you'd keep the job and maybe get a promotion of you performed well. This is a vanishing dream for those under 30.

Supposedly, the new flexible workforce loves not being chained to a single job or a single career, or to regular hours. But the reality is that the new labor market of temp, part-time, and contract employees exists for the convenience of the boss, not the workers. These shifts have little to do with the "new," computer-mediated economy and everything to do with changes in relative power.

The higher the unemployment rate, the weaker the bargaining power of employees. And it's very hard to unionize workers at even the relatively benign employers of the new economy like, say, Starbucks or Whole Foods, because workers in these places hope they won't be there forever -- they're all really doing something else.

I recently encountered the term, "slasher" -- meaning not a psychopath with a knife but a worker juggling three or four jobs. As in, I'm a slasher: barista-slash-web designer-slash research assistant-slash nanny. This is the increasing face of the new labor market, and it will remain so until we get a decent recovery and more bargaining power for workers.

Which brings me back to the fiscal cliff and the deficit. Remember, employers were supposedly holding back investing and hiring for fear that the economy would go off the cliff, meaning that automatic tax increases and spending cuts would contract the federal budget by $607 billion in 2013 -- so severe a contraction that the Congressional Budget Office projected it would kick the economy back into recession.

But the same economic charlatans who were warning about the impact of these cuts want us to leap off a much bigger cliff--of four or five trillion dollars in budget cuts over a decade. Either severe fiscal contraction is bad for a fragile economy or it is good for a fragile economy, but both things can't be true.

Psychologists who treat dysfunctional families use the term "identified patient" to describe a family member who is scapegoated for the ills of the whole family system or who bears symptoms such as depression that are really a reflection of family dynamics as a whole.

In the depression of our economy, the Federal budget deficit is the "identified patient." But real patient is the failure of the economy to create enough jobs that pay a living wage. The deficit is the scapegoat. None of the economic quacks who contend that budget cutting will produce more private sector jobs can tell a convincing story of cause and effect, on how cutting deficits will yield more or better jobs. In a weak economy, the opposite is true -- as the austerity hawks inadvertently confessed in their own hysteria about the fiscal cliff.

In sum, the mediocre job numbers are likely to continue, and budget cutting will only weaken a feeble recovery. President Obama did well at keeping cuts in Social Security, Medicare and other special spending out of last week's budget deal. But now Republicans are intent on demanding deep cuts as their price for avoiding the "sequester" of automatic spending reductions.

If Republicans succeed in extracting cuts, the unemployment numbers will only get worse. Then they can blame that worsening on President Obama.

The president needs to use his leadership skills to make clear that this is not about this cut versus that cut. Budget cuts do not belong in this argument at all. Government should be investing more, not less, to compensate for the weakness of the private economy.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 12:32 am 
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I think I want to drag some of the debates I left unfinished on the old board over here soon. Also, I think I'm gonna start blogging.


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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 1:21 am 
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dkfan9 wrote:
Also, I think I'm gonna start blogging.

:thumbsup:

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 1:22 am 
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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 1:30 am 
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Why would the debt ceiling be unconstitutional? Congress is supposed to approve all spending and debt issuance, are they not?


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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 1:31 am 
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Stip wrote:
The Jobs Numbers and the Deficit

A generation ago, the norm was a salaried job with a paycheck, regular hours and benefits, and the assumption that you'd keep the job and maybe get a promotion of you performed well. This is a vanishing dream for those under 30.

What I got out of this is, gee the world has changed and those who treat their education and career like people could a generation ago are screwing themselves.


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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 1:36 am 
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simple schoolboy wrote:
Why would the debt ceiling be unconstitutional? Congress is supposed to approve all spending and debt issuance, are they not?



well it may be perfectly constitutional. No one has challenged it yet but I've read arguments that it is of dubious constitutionality. I'll post one here the next time I see one. The issue is whether congress has a constitutional obligation to honor its debts (due process, etc. ) and the debt ceiling is basically Congress saying they are not going to pay for the spending they authorized. Congress can slash budgets but not refuse to honor debts.

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 1:49 am 
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Stip wrote:
simple schoolboy wrote:
Why would the debt ceiling be unconstitutional? Congress is supposed to approve all spending and debt issuance, are they not?
well it may be perfectly constitutional. No one has challenged it yet but I've read arguments that it is of dubious constitutionality. I'll post one here the next time I see one. The issue is whether congress has a constitutional obligation to honor its debts (due process, etc. ) and the debt ceiling is basically Congress saying they are not going to pay for the spending they authorized. Congress can slash budgets but not refuse to honor debts.
There was a ton of talk about the Section 4 stuff the last time this debate happened. There are two practical problems with this tactic, though:

--whether Obama is willing to risk a short term economic panic
--whether the Supreme Court would be accepting of the argument--and it could take months for the case to reach that high.


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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 2:57 am 
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yeah, I suspect this would be a last resort, and Obama will almost always take the deal rather than roll the dice

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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 4:43 am 
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The other thing is that this administration hasn't passed a budget in forever so much of what congress agrees to go into debt for is just rolled over. Its kind of hard to blame this congress for not wanting to fund things agreed to by a previous budget. I was somewhat familiar with that argument and it seems like hokum to me.


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 Post subject: Re: Does anyone care about the economy?
PostPosted: Tue January 08, 2013 5:45 am 
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I just want to hear that nobody heres believe that a infinite debt will help.


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