Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisn't Thal And I'm Tracy Hallaway. So Tracy,
Speaker 1: you know, like I'm a serious financial journalist. I'm a
Speaker 1: serious journalist and one aspect of journalism that I think
Speaker 1: is important. Why are you laughing? Sorry? I shouldn't laugh
Speaker 1: I shouldn't. I'm sorry, I just know where this is
Speaker 1: going go on. No, No, I just feel like one
Speaker 1: important aspect of journalism is impartiality. Like you know, I
Speaker 1: don't think we should like take views on many things.
Speaker 1: We should be open minded, we should be intellectually honest,
Speaker 1: but it is not really our job to take a
Speaker 1: position on things, you know what I'm saying. Sorry, I
Speaker 1: don't know why I can't stop laughing, Because impartiality is very,
Speaker 1: very important. I think the difficulty comes when when you
Speaker 1: I mean, in a lot of financial journalism, people have
Speaker 1: strong opinions about one topic one way or the other,
Speaker 1: and sometimes those opinions seem to be grounded in logic,
Speaker 1: and so you get frustrated if other people don't see
Speaker 1: the same logic. But yes, like we are not supposed
Speaker 1: to take sides, We're supposed to lay out both sides
Speaker 1: of the argument every time. So I I take this
Speaker 1: responsibility as a serious Capital j journalist very seriously. But
Speaker 1: I have to admit, if I'm being completely honest, if
Speaker 1: I've been completely honest, there is one topic that I
Speaker 1: find very hard to Um, let's say, avoid showing my bias. Um, yes, okay,
Speaker 1: uh so we're talking about minting the trillion dollar coin,
Speaker 1: of which you have been an advocate for a very
Speaker 1: long time. First of all, I can't believe that we've
Speaker 1: managed to do what is it like six years of
Speaker 1: the Odd Lots podcast and we haven't yet done a
Speaker 1: mint the Coin episode. Um, that's one thing. And then secondly,
Speaker 1: I mean, this is the one thing that I remember
Speaker 1: about your writing, or like the foremost thing about your
Speaker 1: writing before we started working together at Bloomberg. It was
Speaker 1: the big post you did at Business Insider. I think
Speaker 1: it was way back in something like that about minting
Speaker 1: the coin and the discussion people were having about it
Speaker 1: at the time. And I remember reading that and thinking
Speaker 1: this must be a joke. This is so weird. Um,
Speaker 1: you know, I started thinking about whether or not we're
Speaker 1: in a simulation again. And and now like fast forward
Speaker 1: to one and there are actual politicians in Washington who
Speaker 1: were talking about it. It's been a really incredible decade.
Speaker 1: So yes, I am going to fully my bias. Actually
Speaker 1: admitted it to one of our colleagues the other day.
Speaker 1: I was like, you know, I'm a serious journalist, but
Speaker 1: I have to admit that I really think the debt
Speaker 1: sailing is a very absurd law and that a very
Speaker 1: good solution is for the Treasury to mint a trillion
Speaker 1: dollar platinum coin and just end as far as once
Speaker 1: and for all. So yes, this is my bias. But
Speaker 1: you know, people, it is weird, and I will be
Speaker 1: the first to admit it's like a weird thing. Like
Speaker 1: I'm not going to deny that it's strange that it
Speaker 1: seems that it's a legal loophole, that it's a hack.
Speaker 1: That people have lots of questions, both on the economics,
Speaker 1: the legality and the sort of like the institutional aspects
Speaker 1: of how this can be done and who is the
Speaker 1: unilaterally authority to just create a train dollar the money.
Speaker 1: I admit that there's a lot of questions and people
Speaker 1: have reason to be skeptical. Nonetheless, I think it's a
Speaker 1: good idea. Maybe you do too well, maybe you'll be convinced.
Speaker 1: And I think though it is surprising that after all
Speaker 1: these years of the Outlaws podcast, where finally for the
Speaker 1: first time doing a coin episode, because, as you point out,
Speaker 1: I've actually been writing about this topic for really a
Speaker 1: most a decade. Yeah, so this is going to be
Speaker 1: one of the episodes where I think I sit back
Speaker 1: and learn a lot from both you and our guests,
Speaker 1: and I think I'm probably going to be representative of
Speaker 1: maybe the average person who encounters the idea. I kind
Speaker 1: of get how the mechanics of it would work, but again, instinctively,
Speaker 1: it just seems absolutely crazy to I guess, try to
Speaker 1: fix the absurdity of American political theater with what basically
Speaker 1: amounts to more absurdity. But I have a feeling we're
Speaker 1: going to get into that there is some logic to that.
Speaker 1: So yeah, I I hope you play an active role
Speaker 1: in this conversation because we have to ask the tough questions.
Speaker 1: Let's let's get started. So alright, let's without further ado,
Speaker 1: we have the best guest, I think to discuss it.
Speaker 1: We're gonna be speaking to Rowan Gray. He is an
Speaker 1: assistant professor of law Lambit University. He is also a
Speaker 1: longtime coin advocate, and he has in fact written what
Speaker 1: I think is probably the definitive sort of law review
Speaker 1: article on the legality of the coin. It is extremely thorough,
Speaker 1: both in terms of talking through its economics, some of
Speaker 1: the common objections to it, and why he believes it's
Speaker 1: illegal and perhaps even mandatory route to circumvent the debt ceiling.
Speaker 1: It is titled Administering Money, Coinage, Debt Crises in the
Speaker 1: Future of Fiscal Policy, a very serious, thorough, rigorous legal work,
Speaker 1: and in addition to advocating, he's also a bit of
Speaker 1: a sort of policy entrepreneur, having worked with elected representatives
Speaker 1: to introduce laws that would bring about the coin. So
Speaker 1: he is a scholar and an activist and an entrepreneur
Speaker 1: on the subject. So the best guest to discuss it Rowan.
Speaker 1: Thank you so much for coming on, coming back on
Speaker 1: all lots. Thank you so much for having me. It's
Speaker 1: a pleasure to be here talking about a jointly favorite topic. Yeah,
Speaker 1: so let's let's actually just start with like the really
Speaker 1: big picture, because you know, there are still some people
Speaker 1: who are, like I encounter on Twitter and so forth,
Speaker 1: they're like, can you just point me, just like the
Speaker 1: simple version, like, how does the coin work? Yeah, I
Speaker 1: mean the starting point is that the coin works like
Speaker 1: all coins work, which is that the Mint, which is
Speaker 1: the oldest monetary institution in the United States, predating the
Speaker 1: Federal Reserve by over a century, which is housed within
Speaker 1: the Treasury, would mint a coin of a certain value
Speaker 1: and would deposit that coin at the Federal Reserve uh,
Speaker 1: and the Federal Reserve would take that coin and then
Speaker 1: own that coin and record it on its balance sheet
Speaker 1: as an asset like you and I would if we
Speaker 1: go to coin that someone gave us UH, and then
Speaker 1: it would credit the Treasury for the equivalent amount of
Speaker 1: dollars that the coin is worth, which is legally speaking,
Speaker 1: its face value, and that money would then be available
Speaker 1: in the Treasury's regular spending account to end in the
Speaker 1: same way as it would if it sold any other
Speaker 1: financial instrument like a Treasury bond or a Treasury note,
Speaker 1: and then it would go about the daily spending, and
Speaker 1: this coin would work the way that all the other
Speaker 1: coins that get minted on a regular basis work, in
Speaker 1: the sense that the Mint would would issue it and
Speaker 1: then take the money in and then sweep the money
Speaker 1: back into the treasury sort of general account. It's general
Speaker 1: spending account. Um. The only difference here would be that
Speaker 1: the number of zeros on the end of the coin
Speaker 1: would be substantially larger than most other coins, and for
Speaker 1: a change, it would be made out of platinum instead
Speaker 1: of cop rosing or whatever else. So, I mean, the
Speaker 1: idea here is that basically you would bypass all the
Speaker 1: political wrangling that we see, you know, every three or
Speaker 1: four years nowadays, I guess over raising the debt ceiling.
Speaker 1: And I'm wondering maybe just to like step back even further,
Speaker 1: could you explain why we have a debt ceiling in
Speaker 1: the first is sort of limits on the amount of
Speaker 1: debt in the US and what that's supposed to accomplish. Yeah. Thanks,
Speaker 1: I think it's a great starting point. The starting point,
Speaker 1: at least to me, is to think about what the
Speaker 1: world was like before the debt selling, and before there
Speaker 1: was a practice where if Congress wanted to create a
Speaker 1: new spending program or or spend on a particular project,
Speaker 1: you know, a canal or a war or the postal service,
Speaker 1: it would appropriate the funds used through the appropriations process,
Speaker 1: and then usually either in a separate accompanying bill, or
Speaker 1: sometimes in the same bill. It would direct the Treasury
Speaker 1: on how to finance that spending. So sometimes it would say,
Speaker 1: issue a bunch of three month bills. Sometimes it would
Speaker 1: say issue a bunch of thirty year bonds. Sometimes it
Speaker 1: would say issue some combination. Sometimes it would say, raise
Speaker 1: the revenue through a cuss TAM's taxes, or through a
Speaker 1: new tax, or through sign your ridge with the mint.
Speaker 1: And it would tell the Treasury how which which sort
Speaker 1: of financing mechanism, and that financing mechanism would be specific
Speaker 1: to that spending bill. And for a long time this
Speaker 1: was the way that things worked. Each spending commitment had
Speaker 1: its own financing authority. But when World War One comes
Speaker 1: along and the United States is sort of getting bigger,
Speaker 1: and this really started probably with the Civil War with Lincoln,
Speaker 1: but it kind of reached its sort of mature form
Speaker 1: in the twentieth century. Um it became basically logistically unwieldy,
Speaker 1: impractical to have a different spending authority, different financing authority,
Speaker 1: I should say, four different spending commitments in a way
Speaker 1: that the Treasury had no discretion. So you would have
Speaker 1: situations where there'd be excess money left over in this
Speaker 1: financing authority, and then a different spending commitment would not
Speaker 1: have enough and the Treasury Secretary wouldn't be able to
Speaker 1: move that spending a financing authority around to make sure
Speaker 1: that it could finance everything. And so the debts in
Speaker 1: which sort of started nine seventeen and then kind of
Speaker 1: reached its mature forming in nine. But it was never
Speaker 1: originally intended to be a limit on spending. It was
Speaker 1: intended to facilitate more executive branch autonomy and discretion and
Speaker 1: flexibility in financing practices. So so that's really interesting, and
Speaker 1: I already learned something new because I always had just
Speaker 1: sort of been under this assumption that the only purpose
Speaker 1: was to create this sort of like nominal or you know,
Speaker 1: fig leaf restraint on the amount of debt, and I
Speaker 1: hadn't realized that actually sort of served this purpose to
Speaker 1: establish flexibility. So these days, obviously most people would agree
Speaker 1: is just an opportunity for politicians to grandstand and to
Speaker 1: say they opposed the debt, even if they rang it up. Now,
Speaker 1: you mentioned that the trillion dollar platinum coin would really
Speaker 1: be like any other coin, except that a it would
Speaker 1: have a lot more zeros at the end of it
Speaker 1: and be it would be made out of platinum. What
Speaker 1: don't you talk us about it have to be made
Speaker 1: out of platinum. Well, this is the key thing. So Roan,
Speaker 1: what don't you talk to us about the specific law
Speaker 1: and where that law came from, where that gives legal
Speaker 1: authority to the creation of this high denomination clips. Yeah. So,
Speaker 1: you know, when you think about the debt ceiling, one
Speaker 1: way to think about it is that there's a quantitative cap.
Speaker 1: But within that cap, the Treasury Secretary has a lot
Speaker 1: of discretion. They want to issue three months, one year,
Speaker 1: two year, ten year, thirty year, or you know, fifty year.
Speaker 1: As as Minutian was floating for a hot minute when
Speaker 1: he was the Treasury secretary. The dead ceiling is really
Speaker 1: talking about the aggregate cap. The Coinage Act has a
Speaker 1: very different set of constraints. It constrains qualitatively. That is
Speaker 1: to say, you know, if it's going to be one
Speaker 1: center has to look like this, if it's going to
Speaker 1: be made of gold, it could only be up to
Speaker 1: one dollar, etcetera. But it has never and does not
Speaker 1: today impose any quantitative cap. There's not a point where
Speaker 1: the Mint says, oh, we produced the number of coins
Speaker 1: we can for this year, we'll have to stop shop
Speaker 1: in September or something. You know, it was a big
Speaker 1: year for coins. Nothing like that. There's been no limit
Speaker 1: on the number of coins that can be issued, but
Speaker 1: there has been these qualitative caps and so you know,
Speaker 1: we probably have seen you know, dollars, silver dollars, things
Speaker 1: like that, and they're above a single dollar. There's commemorative
Speaker 1: usually coins, you know, twenty five dollar palladium coins, certain
Speaker 1: kinds of sort of collector coins and things. But in
Speaker 1: the nineties particularly, there was a bill that was passed
Speaker 1: that amended the Coinage Act to create a new provision
Speaker 1: on two K which granted the Treasury Secretary of the
Speaker 1: authority to Mint an issue platinum bullion or platinum proof coins.
Speaker 1: And proof there just means a high production grade, like
Speaker 1: very very very shiny coins of whatever denomination the Treasury
Speaker 1: Secretary wished whatever they thought was useful and socially beneficial.
Speaker 1: And this was originally a bill that was sponsored by
Speaker 1: a Republican member who was the Subcommittee on Coinage is
Speaker 1: chair named Mike Castle, in very close consultation with then
Speaker 1: director of the Mint, Philip Deal, who was previously, I
Speaker 1: believe the legal director of the Senate Finance Committee. It
Speaker 1: could be Banking Committee. I could be confusing those Mint
Speaker 1: Director Deal was probably one of the most sort of
Speaker 1: visionary MINT directors of our generation because even putting aside
Speaker 1: this provision, he transformed the internal budget of the MINT.
Speaker 1: He he made it off budget in the way that
Speaker 1: the FED is off budget. He gave it more autonomy.
Speaker 1: He created a whole range of new products and things
Speaker 1: to bring in more revenue. And one of the reasons
Speaker 1: that Mike Castle like this was because it would bring
Speaker 1: in sign rridge revenue, that is, the difference between the
Speaker 1: face value of the coin and how much it costs
Speaker 1: to produce, and that that revenue would go into the
Speaker 1: Treasury's account and reduced the need for additional borrowing. So
Speaker 1: Mike Castle was a fiscal conservatos like this is good
Speaker 1: and from the Mint's point of view, this was a
Speaker 1: was a pretty kind of powerful catch all provision. At
Speaker 1: the time, the aim was actually to allow the mid
Speaker 1: directed to make even smaller coins than the ones that
Speaker 1: were being sold and to give more flexibility on that end.
Speaker 1: But the way the language was written, and again Director
Speaker 1: Deal was very intentional and very smart about this. Gave
Speaker 1: the Treasury Secretary under the plane language, complete discretion. But
Speaker 1: wanted to be a five dollar coin, want to be
Speaker 1: a five hundred dollar coin, want to be a five
Speaker 1: thousand dollar coin, Wanna be a five million dollar coin?
Speaker 1: The law said, this is within the Treasury Secretary's discretion,
Speaker 1: just like it's within their discretion whether to issue a
Speaker 1: thirty year bond or a five year bond or a
Speaker 1: fifty year bond. That law stayed on the books, and
Speaker 1: when the regular financing system works the way it's supposed to,
Speaker 1: nobody is looking in the draw for the crazy hail
Speaker 1: Mary statutes. But the dead ceilings showdown sort of they were.
Speaker 1: They were going on in a low grade way since
Speaker 1: about the fifties, but never really to the point of
Speaker 1: kind of complete government shutdown until about the midies, and
Speaker 1: then it really got bad with President Obama. That was
Speaker 1: when really for the first time that it looked like
Speaker 1: one party would would just not play ball at all
Speaker 1: rather than just do the regular kind of grandstanding and
Speaker 1: grumbling and eventually pass something. And that was when a
Speaker 1: lawyer named Carlos Mitscher, who at the time was going
Speaker 1: under the internet Monica Beowulf did some digging because he
Speaker 1: had heard some people talk about, you know, coinage as
Speaker 1: a power that was under explored, and found this law
Speaker 1: on the books and said, look, you know, we could
Speaker 1: use this now and avoid the need to continue to
Speaker 1: sort of have these recurrent crisis and this law is
Speaker 1: pretty clear. This is this is a pretty clear interpretation.
Speaker 1: There is no ambiguity here, there's no asterisks, and it
Speaker 1: would be consistent with how coinage works in general. Again,
Speaker 1: just a matter of degree, not kind. When the idea
Speaker 1: of first surfaced, like, what was the intention behind it?
Speaker 1: Do you think was it basically a thought experiment of
Speaker 1: how you could solve the dead ceiling crisis? Or was like,
Speaker 1: was it basically just like trolling by you know, some
Speaker 1: finance nerds, a little bit of both. I think, you know,
Speaker 1: I'll let Carla speak for himself, but I think, um,
Speaker 1: he was making this comment on an MMT blog, And
Speaker 1: you know, one of the things that mmts like to
Speaker 1: talk about is the fact that the government spending limits
Speaker 1: are not on the financial side, they're on real resource
Speaker 1: and inflationary capacity, etcetera. But to the extent that there
Speaker 1: are procedural restrictions on how the treasury spends or how
Speaker 1: you know whether the Treasury spending account can go into
Speaker 1: a negative overdraft or not. And those kinds of questions, Um,
Speaker 1: they're all self imposed. They are all things that we
Speaker 1: passed a law and could pass a different law tomorrow
Speaker 1: and change destruction. Right, They're not They're not a sort
Speaker 1: of physical constraint. There are a socially constructed constraint. And
Speaker 1: so that was the sort of water that Carlos was
Speaker 1: swimming in when he started looking into this stuff. This
Speaker 1: was the sort of general discussions that we were having
Speaker 1: on those blogs back in the day that was, you know,
Speaker 1: there are things like the dead ceiling, there are things
Speaker 1: like treasury bond auctions that happened, But are they because
Speaker 1: they need to or just because they're sort of a
Speaker 1: leftover of a different regime, or because they serve a
Speaker 1: useful social fiction. And it was just one more example
Speaker 1: of showing how arbitrary and stupid and self imposed these constraints.
Speaker 1: Remember this is taking place against the backdrop of the
Speaker 1: Deficit Reduction Commission and Obama saying, you know, we're out
Speaker 1: of money now when asked when the government's going to
Speaker 1: run out of money? And all these things. So, in
Speaker 1: addition to solving the acute problem with the dead ceiling
Speaker 1: crisis with this sort of clever legal hack that required
Speaker 1: only the President's um and I guess the Mint stamping machines,
Speaker 1: it was also a very pedagogically and and symbolically powerful
Speaker 1: way to make the point that there's a big, fat
Speaker 1: infinity sign next to how many dollars the US government has,
Speaker 1: and and that's always been the case, even if we
Speaker 1: do create laws to obscure that fact. Let's talk a
Speaker 1: bit more about the intent behind the law and why
Speaker 1: you're doing to see that as a problem. So, Mike
Speaker 1: Castle from Delaware, the congressional author obviously was not thinking
Speaker 1: of this as a way to circumvent the dead ceiling.
Speaker 1: It was about a collectible coinage and senior edge revenue
Speaker 1: at the Mint. Philip Deal, the Mint director at the
Speaker 1: time we draft the language, He's like, yeah, this is legal,
Speaker 1: but this is clearly like not the intent of the law.
Speaker 1: It was about creating more collectible coins for people. Why
Speaker 1: isn't that a problem? Decided It's like, look, obviously this
Speaker 1: was not their intent. This is just about creating some
Speaker 1: more options for collectible coin collectors. Etcetera. Why should we
Speaker 1: now just dismiss this as sort of like an absurd
Speaker 1: reinterpretation that's clearly not what the law is intended for. Yeah.
Speaker 1: I think there's a couple of layers. So the first
Speaker 1: layer is intent can be looked at narrowly or broadly.
Speaker 1: The narrow intent here, the short term, immediate intent was
Speaker 1: to actually make it possible to create smaller denomination platinum coins, right.
Speaker 1: But the way that that problem was solved was not
Speaker 1: to write a law that said the maximum value of
Speaker 1: this coin is a hundred dollars or smaller. It was
Speaker 1: to say, you know what, let's get out of the
Speaker 1: business entirely of regulating what the denomination is. Let's leave
Speaker 1: that up to the Treasury Secretary. So even if the
Speaker 1: immediate problem is one thing, if you develop a broader
Speaker 1: solution that it fixes that problem and fixes potential other problems,
Speaker 1: that's fine. The second thing is, at a broader level,
Speaker 1: the goal of this bill was to give the Mint
Speaker 1: more tools to use the sign rridge power to generate
Speaker 1: additional revenue that would reduce the need to borrow. That's
Speaker 1: what my Castle has said, That's what Deal has said,
Speaker 1: was that the goal of these commemorative coin programs, which
Speaker 1: again remember deal kind of ramped up as the mint
Speaker 1: director was to bring in more revenue, which meant less
Speaker 1: borrowing was necessary. So in that sense, using it in
Speaker 1: this way, and again I wouldn't deny it all that
Speaker 1: there's a lot more zeros than any of the people
Speaker 1: that wrote this whatever expected to appear on a coin
Speaker 1: like this. In a broader sense, that is still entirely
Speaker 1: consistent with what it's doing. It's minting a coin to
Speaker 1: generate revenue to reduce the need to issue additional government debt.
Speaker 1: There's another layer, which is about legislative intent, you know,
Speaker 1: And of course we're at a time now where the
Speaker 1: politicization of the courts is pretty overt and obvious. No
Speaker 1: one would look at the Supreme Court and pretend that
Speaker 1: decisions aren't going to be, you know, impacted by the
Speaker 1: fact we have a six three court now in one way,
Speaker 1: but a number of the people on the Court have
Speaker 1: been pretty dismissive of legislative intent as something that they
Speaker 1: should look to it all. Um. So if they're consistent
Speaker 1: with their own principles, which I don't expect it will
Speaker 1: always happen. But if they were, then that shouldn't even
Speaker 1: be an issue for them. Um. But even even sort
Speaker 1: of more progressive members of the Court have said, you know,
Speaker 1: we're all textualists now, and whatever we might look to
Speaker 1: legislative intent, we don't usually do so when the plain
Speaker 1: meaning of the statute is so obvious, when it's very
Speaker 1: very clear, when there's no room for sort of wiggle
Speaker 1: room or interpretation, there's no point where we have to
Speaker 1: sort of ask more deeply than what's being said to
Speaker 1: us plainly to our faces. Then we don't get into
Speaker 1: that kind of messy process of trying to work out
Speaker 1: legislative intent. The fact that this is not the one
Speaker 1: narrow thing that people uginally created this law for shouldn't
Speaker 1: be fatal to it, because it's not fatal to any
Speaker 1: other law we use. We creatively reinterpret laws all the time,
Speaker 1: especially in moments of crisis, especially when the alternative is
Speaker 1: even worse. And in this situation, that's I think that
Speaker 1: the context in which this comes up is that the
Speaker 1: alternative here is catastrophic and unconstitutional, and if we can
Speaker 1: read this on its face, take it on its face,
Speaker 1: and in doing so, of the not only a political
Speaker 1: crisis and an economic crisis, but a legal constitutional crisis.
Speaker 1: I think that's entirely consistent, and so do constitutional scholars
Speaker 1: like Lawrence Tribe and Jack Balkan and a number of
Speaker 1: others who have far more experience with the canons of
Speaker 1: constitutional interpretation than I do. So two things here. I
Speaker 1: think I understand the legality argument, and I understand also
Speaker 1: the argument that the way the debt ceiling is currently
Speaker 1: being used, it basically seems like an ana criticism, and
Speaker 1: it seems like it's damaging the economy. You know, increasingly
Speaker 1: frequently we have these like brinkmanship theater like events in
Speaker 1: Congress where uh, they get closer and closer to a
Speaker 1: technical default and market start to panic and it ends
Speaker 1: up feeding back into the real economy. So that's not great.
Speaker 1: But is minting the coin really the best way to
Speaker 1: solve the issue? And are there any other options on
Speaker 1: the table for permanently solving the issue of the debt ceiling?
Speaker 1: And how realistic are those alternatives? Yeah, I mean there's
Speaker 1: some other creative accounting gimmicks, and I think it's important
Speaker 1: to acknowledge this is basically an accounting gimmick. But it's
Speaker 1: an accounting gimmick to deal with an accounting failure. And
Speaker 1: if you've ever worked in business and things, you know
Speaker 1: that's a very common way to get around a silly
Speaker 1: accounting restriction is to use creative accounting. So this isn't
Speaker 1: sort of outside the realm of normality in that sense.
Speaker 1: In fact, one of theirs as times that we really
Speaker 1: did go to the wire with the debt ceiling was
Speaker 1: the Treasury Secretary rated the Social Security Fund there in
Speaker 1: a way that the Government Accountability Office later said was
Speaker 1: probably a violation of the Social Security Act. But you know,
Speaker 1: quote um, considering the extraordinary circumstances of the moment, it
Speaker 1: was sort of understandable. But there are sort of other alternatives.
Speaker 1: For example, debt held by the public. Some lawyers have
Speaker 1: suggested that we could interpret that to exclude the treasury
Speaker 1: securities held by the FED. The FED is currently considered,
Speaker 1: you know, part of the public for accounting purposes for
Speaker 1: the budget, because that's how we ignore the Fed's balance
Speaker 1: sheet when doing budget analysis. People are saying, we could
Speaker 1: just not count that part, and that would give us,
Speaker 1: you know what, another five or seven trillion or something
Speaker 1: of a breeding room. I don't find that a long
Speaker 1: term fix it just sort of staves off the inevitable,
Speaker 1: and hopefully we would you change the debt ceiling in
Speaker 1: the meantime, but it's a temporary stop gap in a
Speaker 1: way that the coin is more permanent. Others have suggested
Speaker 1: we could issue a console, which is basically a perpetual
Speaker 1: government bond, because the way that the debt ceiling statute
Speaker 1: is written is that the only instruments whose quote principle
Speaker 1: and interest is guaranteed is under that ceiling. But consoles
Speaker 1: do not have a principle to be repaid. So this
Speaker 1: is actually another Carlos Mitcher classic, you know, shout out
Speaker 1: to him for for trying to follow up his his
Speaker 1: debut album with some other sophomore hits as well. The
Speaker 1: only sort of categorical solution I've seen that sort of
Speaker 1: comes at the same level is just to blow through
Speaker 1: the debt ceiling and say that the alternative would be
Speaker 1: a default, and that violates Section five of the fourteenth
Speaker 1: Amendment that the public debt shall not be questioned, So
Speaker 1: we should just do that. And I think that that's
Speaker 1: actually a much worse solution in terms of the political implications,
Speaker 1: because it requires the press talk about that a little
Speaker 1: bit because you mentioned the sort of you know, a
Speaker 1: breach of the dead ceiling and a theoretical default. It's
Speaker 1: a political crisis, it's a financial crisis because treasuries are
Speaker 1: the world's safest asset that their defaults in the pod
Speaker 1: it is kind of unthinkable what that would do to
Speaker 1: the financial system. And then as you mentioned that, there
Speaker 1: is this constitutional crisis, and so you get this sort
Speaker 1: of question of whether a default is even legal. And
Speaker 1: I think, like I think even that Bill Clinton has said,
Speaker 1: you know what, just some people have said, just ignore
Speaker 1: the dead ceiling law, keep issuing it because you could
Speaker 1: just devoke the fourteen the Amendment, and that says you
Speaker 1: can't question the debt. Explain to us what that that
Speaker 1: fifth section of the fourteenth Amendment says, and why you
Speaker 1: don't think it's safe or sound too. Simply ignore the
Speaker 1: dead ceiling on constitutional grounds. Yeah. So, um, and and
Speaker 1: just give some context. My my Lawer of View article
Speaker 1: on this um is really a kind of response to
Speaker 1: another article by a lawyer named Michael Doff and an
Speaker 1: economist name Neil Buchanan in the Columbia Lawer of View
Speaker 1: called how to Choose the Least unconstitution all option lessons
Speaker 1: for the president from the debt ceiling standoff, And it's
Speaker 1: a it's a sort of constitutional theory paper, but it
Speaker 1: uses the debt ceiling to make the point. And it
Speaker 1: was obviously very impactful in that debate. It came out
Speaker 1: around and I know people in the White House and
Speaker 1: things were reading it and considering it. And then in
Speaker 1: their argument was basically that Congress gives the treasury three
Speaker 1: directives spend a certain amount, tax a certain amount, borrow
Speaker 1: a certain amount. And if the amount of spending net
Speaker 1: of taxes, so the deficit, the size of the deficit
Speaker 1: that needs to be financed, exceeds what is available to
Speaker 1: be borrowed or issuing treasury debt, then there is a
Speaker 1: paradox the treasure that the Congress has given contradictory directives
Speaker 1: to the Treasury. And their argument was that if you
Speaker 1: have these contradictory directors, if something has to give one
Speaker 1: of these three the tri lemma, one of them can't stand.
Speaker 1: That of those three, spending and taxing are sort of
Speaker 1: core legislative fiscal power us. If we think of the
Speaker 1: power of the purse, which you know, the legislature has
Speaker 1: relative to the power of the pen and the power
Speaker 1: of the sword, that spending and taxing us sort of
Speaker 1: the very core of that power. And so if one
Speaker 1: of these has to be violated, it's better to violate
Speaker 1: the debt ceiling than to unilaterally have the president cut spending,
Speaker 1: which some people are talking about. Now you know, we're
Speaker 1: going to prioritize paying interest on the debt, but not
Speaker 1: you know, social Security recipients or federal employees or something,
Speaker 1: or unilaterally raising taxes and I'm just going to appropriate
Speaker 1: people's money, and then that's how I'll finance things. Relative
Speaker 1: to those options, blowing through the debt ceiling is the
Speaker 1: least bad, because, let's be honest, it's an accounting gimmick anyway.
Speaker 1: For the last seven or eight years at least, and
Speaker 1: certainly even before that, we were basically raising it as
Speaker 1: a pro former matter, or just suspending it entirely for
Speaker 1: extended periods of time and then sort of re enacting
Speaker 1: it for five minutes to whine about it, and then
Speaker 1: suspending it again for another few years. So, given all
Speaker 1: of that, if we have to, if one of these
Speaker 1: has to break, let's break the debt cell And I
Speaker 1: agree with that logic on its face in the sense
Speaker 1: that yeah, absolutely, of those three we should violate the
Speaker 1: dead selling rather than you know, have the executive brand
Speaker 1: start start doing power of the purse stuff um in
Speaker 1: the more fundamental way. But my argument was they just
Speaker 1: missed the whole fourth option, a pretty central fourth option,
Speaker 1: in fact, maybe even the most central, which is that
Speaker 1: the Treasury does not only tax and borrow money, it
Speaker 1: also creates money. And this is the kind of MMT
Speaker 1: inside right, which is that the money that gets taxed
Speaker 1: has to be created first. The money that gets borrowed
Speaker 1: is usually injected in by the Federal Reserve to the
Speaker 1: primary dealers, who then lended quote unquote to the Treasury.
Speaker 1: And so if we start from the presumption that the
Speaker 1: Treasury only borrows and spends money out there, we're ignoring
Speaker 1: the fact that on a daily basis, it's creating money.
Speaker 1: And nowadays we kind of forget that fact because as
Speaker 1: we have delegated a lot of that responsibility to the
Speaker 1: Federal Reserve, and we think the Federal Reserve is sort
Speaker 1: of separate to the rest of the executive branch, you know,
Speaker 1: and people who talk about unitary executive theory, including a
Speaker 1: number of justices on the Supreme Court would probably disagree
Speaker 1: with that. Maybe, but um, the reason that we have
Speaker 1: ignored that is because, again, the mint is sort of
Speaker 1: sounds like a quaint thing from a documentary about the
Speaker 1: Founding Fathers with a tin whistle in the background or something,
Speaker 1: you know. In reality, the Mint's just been there quietly
Speaker 1: doing its job for for for decades, for centuries, and
Speaker 1: it sends hundreds of millions of dollars a year in
Speaker 1: sign rridge revenue back to the treasury. Um. Just like
Speaker 1: the Fed generates billions of dollars in sign ridge revenue.
Speaker 1: It's the same thing at just a different scale again,
Speaker 1: just a few more zeros um. And so my argument is,
Speaker 1: if you have to choose an unconstitutional option, yeah, violent
Speaker 1: in the debt ceiling is probably the best one. But
Speaker 1: if there's a constitutional option on the table, we should
Speaker 1: be going there first. In fact, we should be really
Speaker 1: trying to go there first, because the alternative is that
Speaker 1: the president gets to choose when they break laws that
Speaker 1: Congress has told them to. And if the reason they
Speaker 1: have to break the law is I literally have no choice, Okay,
Speaker 1: I get it. But if they do have a choice,
Speaker 1: and they just prefer not to use it. That's a
Speaker 1: very different kind of power graph. That's a very different
Speaker 1: kind of way that the president is interpreting it. And
Speaker 1: the way that people have interpreted this is maybe this
Speaker 1: is legal, maybe I can do this, but we shouldn't
Speaker 1: why because then we would reveal to the public how
Speaker 1: money works. We reveal that printing a trillion dollar coin
Speaker 1: is the same as printing a trillion dollars in debt.
Speaker 1: There's no difference between, you know, borrowing and printing money
Speaker 1: on from an economic point of viewing things. And the
Speaker 1: public can't handle the truth. You know, it's Jack Nicholson
Speaker 1: in a few good men. You can't handle the truth.
Speaker 1: And so we need to keep this myth alive that
Speaker 1: money is scarce, that we can only tax or borrow it.
Speaker 1: We can't talk about the big Infinity sign in the sky.
Speaker 1: And in the name of preserving that myth, where you're
Speaker 1: going to violate the Constitution. And that's why they lose
Speaker 1: me when you're knowingly advocating unconstitutional behavior over constitutional options
Speaker 1: because you think it's important to perpetuate a lie. So
Speaker 1: my understanding of that argument isn't that it's necessarily about
Speaker 1: protecting the public from the truth and hiding the true
Speaker 1: nature of debt. But that you know, minting the coin
Speaker 1: is basically like a large scale financial experiment and one
Speaker 1: that we don't necessarily know the consequences of, and that
Speaker 1: seems like a heavy price for the potential, you know,
Speaker 1: like maybe we would get a chance at educating the
Speaker 1: public over how government finances don't function like household finances.
Speaker 1: Like to me, it's that sort of like cost versus
Speaker 1: benefit analysis. So I don't know. I guess my question
Speaker 1: is what's your response to that? And then be like
Speaker 1: what could go wrong if the coin was minted? Like
Speaker 1: where are the risks in this project? Yeah? I mean
Speaker 1: I think, you know, not not to sort of play
Speaker 1: burden shifting games, but I think the idea that we
Speaker 1: are going to normalize the president explicitly violating the Constitution
Speaker 1: whenever they think telling the truth is going to cause
Speaker 1: adverse social outcomes is to me, I think also a
Speaker 1: pretty big experiment. It's also pretty risky to let the
Speaker 1: presidents say, oh, no, I'm not going to enforce that law. No,
Speaker 1: I'm going to do this thing that I'm explicitly set
Speaker 1: told I can't do because I don't like the other
Speaker 1: options available to me to achieve an outcome I think
Speaker 1: is needed. So I don't think it's a matter of
Speaker 1: what is untested and risky and the other isn't blowing
Speaker 1: through the debt ceiling, just saying stuff it, I don't care.
Speaker 1: We're just going to ignore it because there's a higher
Speaker 1: calling I've got no better option, when in reality they
Speaker 1: know full well there's another option. They just don't want
Speaker 1: to talk about that option or don't want to try it.
Speaker 1: Is I think a real threat to having an informed
Speaker 1: electorate and having a public policy discussion based in fact,
Speaker 1: not based in what the administration feels that the public
Speaker 1: needs to know. I think we're in the same category
Speaker 1: as you know, secret fires are courts or weapons of
Speaker 1: mass destruction when we start embracing unconstitutional behavior based on
Speaker 1: fears of how the public will react to the truth
Speaker 1: and in terms of the coin being untested, I think
Speaker 1: we have actually quite a lot of evidence of the
Speaker 1: past decade that large scale quote unquote monetization of government
Speaker 1: debt doesn't really do anything right. Yes, there's a few
Speaker 1: middle steps in the middle there that give the impression
Speaker 1: that this is all market mediated, but the effect is
Speaker 1: if you put the Treasury and the Central Bank together,
Speaker 1: that they're running a deficit of eight billion and they're
Speaker 1: creating eighty billion dollars of new currency or new reserves
Speaker 1: every month. Um. So if there is some catastrophic economic effect,
Speaker 1: we haven't seen it. And nobody who who I think
Speaker 1: respect on the economics says that that would that comes
Speaker 1: naturally told pregnant says, yeah, this is economically indistinguishable from
Speaker 1: issuing debt. And I just think that, you know, constitutional
Speaker 1: behavior should not be guided by preserved delusions. So I
Speaker 1: want to keep pressing on this question. And as I mentioned,
Speaker 1: you you actually know like how things work a little
Speaker 1: bit in d C. You have worked with some members
Speaker 1: of Congress to draft laws promoting the minting of the coin.
Speaker 1: Like I said, you're, in addition to being a scholar,
Speaker 1: sort of a policy entrepreneur. You've worked with last March
Speaker 1: during the debt, during the COVID crisis, you pushed forward
Speaker 1: some legislation, help write some legislation on minting coins. But
Speaker 1: when you know, the White House, for example, very dismissive
Speaker 1: of the coin idea. They don't even really give it
Speaker 1: the time of day. I mean, if you were to say,
Speaker 1: like ask the Press Secretary Jen Saki, you know, like
Speaker 1: what about the coin option. My impression is they basically
Speaker 1: just laugh it off. And I'm still like I'm trying
Speaker 1: to understand why, because I guess, on one hand, I
Speaker 1: sort of get this idea that's like, oh, we have
Speaker 1: to preserve the myth of money and how like we
Speaker 1: can't just create money out of thin air, And I
Speaker 1: get that maybe some people believe that, but it also
Speaker 1: seems like probably a prevailing view is this is just silly,
Speaker 1: We're not going to talk about this, and that their
Speaker 1: dismissal is just the sort of like this is too
Speaker 1: silly for us to even talk about. And I'm curious
Speaker 1: what your view is like when you sort of just
Speaker 1: get these like is it really because oh they all like,
Speaker 1: you know, the White House really doesn't want to let
Speaker 1: us in on the secret of money? Or is it
Speaker 1: really just they have put much started to it, except
Speaker 1: that it's too silly for them to even contemplate and
Speaker 1: talk about. It's like a real thing they would do. Yeah, yeah, No,
Speaker 1: I don't think that the White House is sitting there
Speaker 1: necessarily going, oh, we need to preserve these myths that's
Speaker 1: that's more the general sort of intellectual community that doesn't
Speaker 1: want to entertain this. They'll entertain all sorts of creative
Speaker 1: accounting gimmicks, will entertain all sorts of kind of extremely
Speaker 1: tenuous interpretations of the law. And remember we're talking about
Speaker 1: the same kind of financial legal commentary at that went
Speaker 1: to town on the Fed's thirteen three emergency powers and
Speaker 1: whatever the Republicans might have come back to the negotiating
Speaker 1: table back then, when John Beano was in charge and things.
Speaker 1: I think it's a very different Republican party today, and
Speaker 1: I think even Mitch McConnell is is quite overt that
Speaker 1: he's playing a very different game and he was playing
Speaker 1: back then. And they're probably quite willing to let the
Speaker 1: US go over that cliff. Probably not, i think, for
Speaker 1: treasury securities, for the interest on treasury debt, But I
Speaker 1: think McConnell would have no problem with a few weeks
Speaker 1: of Social Security payments and government employee payments not being made,
Speaker 1: so that there was a precedent that in the future,
Speaker 1: any debt ceiling crisis would would hurt you domestic spending
Speaker 1: but not bond holders or something like that. Um and
Speaker 1: that that was allowed within the fourteenth Amendment. But I
Speaker 1: think the short answer is that the Democrats would prefer
Speaker 1: that the Republicans come back to the table and pass
Speaker 1: this as a matter of course, and they don't want
Speaker 1: to entertain solutions that assume that strategy has failed. We
Speaker 1: don't want to entertain that we can do this on
Speaker 1: our own, because we think this is something you should
Speaker 1: keep coming to the table and working with us on.
Speaker 1: And you know, my god, maybe it's the last institutional
Speaker 1: norm in d C that anybody genuinely believes is going
Speaker 1: to be respected. Um, but I think, frankly it's it's
Speaker 1: a form of naivety to think that the Republicans want
Speaker 1: to come to the to the table with this and
Speaker 1: and that they won't press that nuclear button. Right, we
Speaker 1: were in a post January sixth world now, And yeah,
Speaker 1: I think there's a very obvious political Yeah, there's an
Speaker 1: obvious political calculus for the White House. I just think
Speaker 1: it's wrong today. It might have been right inven It
Speaker 1: might have been dangerous to gamble, but they successfully gambled then.
Speaker 1: But I think with ten years later and the Democrats
Speaker 1: haven't upgraded their playbook, but the Republicans have so a
Speaker 1: related topic. Then what do you think public opinion would
Speaker 1: be like if the government did actually go ahead and
Speaker 1: decide that this was something that they were going to try.
Speaker 1: And I mean, both you and Joe have been talking
Speaker 1: and writing about this topic for over a decade now,
Speaker 1: and there's still a ton of skepticism about it, you know,
Speaker 1: even with you know, you're mostly talking to like people
Speaker 1: who take an interest in finance and are trying to
Speaker 1: understand the logic and the rationale behind actually doing this,
Speaker 1: and it's still sort of an upwards battle. So I
Speaker 1: guess I'm just curious what do you think most people
Speaker 1: would think about this? And then secondly, is there anything
Speaker 1: that policymakers or the government can actually do to educate
Speaker 1: about how the whole thing works? Yeah? I mean I
Speaker 1: think there's sort of two different groups of people, right.
Speaker 1: There's the economists and the economic commentators who know just
Speaker 1: enough to be dangerous, right and just enough to have
Speaker 1: strongly informed opinions that may be based on faulty premises.
Speaker 1: And those are the ones that I was really talking
Speaker 1: about before when I talked about kind of pulling back
Speaker 1: the veil of money, right, I mean, we've been talking
Speaker 1: about m m T for a lot longer even than
Speaker 1: the coin. And there are a lot of people that
Speaker 1: still think it's dangerous to admit what is I think
Speaker 1: plainly evident to people now, which is that when it matters,
Speaker 1: there's no limit to how many dollars you can you
Speaker 1: can create and spend. But there still a lot of
Speaker 1: people that think that that's a dangerous thing to admit
Speaker 1: out loud, and we shouldn't do it. And you know
Speaker 1: where you fall on that is probably where you're going
Speaker 1: to continue to fall if you're already an adult with
Speaker 1: a PhD in economics or you're right for financial journalism,
Speaker 1: there's a living but Um, the average person, I think
Speaker 1: I probably wouldn't even notice. They would only notice two
Speaker 1: d extent they were told by the press. So it
Speaker 1: would be a huge question of how this gets framed,
Speaker 1: And of course it gets framed differently to different people,
Speaker 1: depending on which kind of media you consume, and it
Speaker 1: gets framed differently depending on who controls the narrative initially
Speaker 1: and who sets the term of how that debate gets
Speaker 1: Frank you know, death panels was a very powerful line,
Speaker 1: regardless of how true it was. Um and Trump did
Speaker 1: a masterful job of dominating that the news cycle by
Speaker 1: just being more outrageous every every five minutes, so that
Speaker 1: nobody could really reclaim the prior narrative because he was
Speaker 1: onto the next one, and that was the way the
Speaker 1: public attention went. So I think the short answer, and
Speaker 1: I sort of actually made this point in my paper, is,
Speaker 1: you know, do it on a rainy Friday afternoon, just
Speaker 1: like they do when they make an announcement about a fire,
Speaker 1: as a court you know, change, or a Patriot Act
Speaker 1: amendment or any other kind of law that they don't
Speaker 1: really want the public to notice. Do it over the weekend,
Speaker 1: and then tell everyone on Monday, you know, afternoon that
Speaker 1: it's been done. And you know what, the markets didn't
Speaker 1: collapse and the world kept on spinning, and it's done.
Speaker 1: Now you can complain about it, or you can move
Speaker 1: on and we can get back to the really important work.
Speaker 1: And I think, you know, if they did that, there
Speaker 1: would probably be a bunch of Democrats that would complain
Speaker 1: about it for a while and then fall back in line,
Speaker 1: because the alternative of reinforcing the other sides argument is armageddon,
Speaker 1: and there'll be a bunch of Democrats that would probably
Speaker 1: be relieved to hear this is all finally over. Think
Speaker 1: it's a little bit stupid, but say I'm glad that
Speaker 1: it's done. There would be a lot of you know,
Speaker 1: financial investors and things that would go, wow, I can't
Speaker 1: believe they did that. But again, I'm glad that payments
Speaker 1: are going to continue to be made and finally we
Speaker 1: can kind of move on from this insanity where the
Speaker 1: most powerful economy in the world that runs a global
Speaker 1: reserve currency is constantly on on the edge of tripping
Speaker 1: over its own shoelaces and falling off a cliff to
Speaker 1: its death. You know, if you did frame it the
Speaker 1: right way, right, I think there was someone on Twitter
Speaker 1: that had a good threat of you know, they could
Speaker 1: even write Biden speech right now. You know, I'm sick
Speaker 1: of these games. This is a dumb solution to a
Speaker 1: dumb problem. Let's move on. Let's talk about what really matters.
Speaker 1: You know, I think people are going, all right, fine,
Speaker 1: it's crazy, but no crazier than people storming the capital
Speaker 1: or an orange clown being president for four years. All right,
Speaker 1: this is this is the new normal. Let's let's move on.
Speaker 1: But again, most people aren't scouring the treasury General accounts
Speaker 1: reports on a daily basis. They only know of this
Speaker 1: stuff if a bunch of media people told them. Let
Speaker 1: me ask, actually, like one more sort of technical legal questions.
Speaker 1: So you sort of established that the Mint creates money,
Speaker 1: the Treasury has secretaries of the discretion to create high
Speaker 1: denomination platinum coins. Are there any questions about whether there
Speaker 1: would be a dilemma or a debate at the Federal
Speaker 1: Reserve itself about whether it would be compelled to accept it.
Speaker 1: Would it have any um agency in the question of Okay,
Speaker 1: you make an argument that it's all pretty legal, but
Speaker 1: maybe there are lawyers at the FED who would say, no,
Speaker 1: this is about collectibles. This is not about replenishing the
Speaker 1: Treasury General account. Is there any dimension from the FED
Speaker 1: side of the equation? Yeah, And then this is a
Speaker 1: good question. I think that that there's there's one thing
Speaker 1: that's important to start with, which is blustering that you
Speaker 1: that something is illegal is often a good way to
Speaker 1: ensure that the legality never gets challenged. Right, And so
Speaker 1: the FED saying we wouldn't accept it is at this
Speaker 1: point all upside and no downside risk for them. Right,
Speaker 1: if you try to make us accept it, will say no,
Speaker 1: and then you force and then you try and they're like, okay, fine,
Speaker 1: you know, but right now, yeah, they're going to say,
Speaker 1: we don't think we would have to accept it. But
Speaker 1: the Federal Reserve Act is actually quite clear. And again
Speaker 1: this is something that Carlos pointed out, you know, back
Speaker 1: in the original formulation of this proposal, which is that
Speaker 1: there's a statutory provision that says, in the event that
Speaker 1: there is a conflict between the Treasury Secretary and the
Speaker 1: Board of Governors of the Federal Reserve regarding any powers,
Speaker 1: you know, related to the Treasury, uh, that conflict shall
Speaker 1: be resolved in favor of the Treasury Secretary. And again
Speaker 1: that's quite unequivocal. That's quite clear statutory language. So if
Speaker 1: the Treasury said, hey, it is my statutory responsibility to
Speaker 1: mint coins, statute says that I shall mint and issue
Speaker 1: coin or whatever denomination I want, and I decided to
Speaker 1: do this, you do not have the power to tell
Speaker 1: me that my coinage power is limited in this way.
Speaker 1: This is not a Federal Reserve power. This is a
Speaker 1: mint power and that falls squarely within my authority. And
Speaker 1: if you think you disagree with that, well I don't
Speaker 1: care and in fact, the law and Congress said we
Speaker 1: don't care either. So that's the first thing. The second
Speaker 1: thing is that right now, the FED is the is
Speaker 1: the Treasury's fiscal agent. That is to say, it provides
Speaker 1: the accounting and payment sort of settlement services on behalf
Speaker 1: of the treasury. So for the FED to refuse to
Speaker 1: accept a coin like this would be effectively saying, um,
Speaker 1: you have come to us to try to deposit public moneies,
Speaker 1: you know, monies, and we're saying them and we yeah,
Speaker 1: we were required to be your fiscal agent. We're crying
Speaker 1: to provide these services, but we don't want to provide
Speaker 1: this one. And I again don't think there's any justification
Speaker 1: for that. But even before we get to kind of
Speaker 1: black letter law arguments, there's just the politics of it,
Speaker 1: which is and you can see people like Bernankee over
Speaker 1: the last decade saying we will do whatever Congress needs
Speaker 1: us to do. We will do whatever needs to be
Speaker 1: done when there's a crisis. Two thousand and eight, Right,
Speaker 1: you've got Timmy Guitner or Minution or whoever it is,
Speaker 1: huddled up with the FED chair every day on the
Speaker 1: phone hours a day, right, multiple meetings, whatever, you need,
Speaker 1: We're standing by to accommodate and support. So if there
Speaker 1: was a moment where President Biden said, I believe it
Speaker 1: is my constitutional responsibility to avoid a crisis and shutdown,
Speaker 1: to avoid putting the public debt in question, to to
Speaker 1: avoid not spending what Congress has told me I must
Speaker 1: spend that in my powers commander in chief and head
Speaker 1: of the executive Branch, I'm directing my Treasury Secretary to
Speaker 1: to mint this coin. And the FED stands up and says, no,
Speaker 1: we preferred de fall. Well, I think that would be
Speaker 1: incredibly dangerous for the future of Federal Reserve independence. And
Speaker 1: I think no smart FED chair would do that because
Speaker 1: they would know in that moment that if this all
Speaker 1: does go haywi, if this all does go belly up,
Speaker 1: that that's that's on the head of the executive branch.
Speaker 1: That's on the head of the President and Treasury Secretary,
Speaker 1: not on them. And this isn't Paul Volker breaking the
Speaker 1: back of inflation and standing up to those dastardly unions.
Speaker 1: This would be the Federal Reserve Chair telling the President
Speaker 1: that they are going to force a default on the
Speaker 1: government debt in a way that is in violation of
Speaker 1: the Fourteenth Amendment. And I think again, it's easy for
Speaker 1: the FED to say it would even entertain that thought
Speaker 1: now when it's a it's a speculative fiction, speculative hypothesis.
Speaker 1: I think if the full force of the President's office
Speaker 1: in that crunch moment were to come down that way,
Speaker 1: you would be suicidal from an institutional preservation standpoint to
Speaker 1: get in the way, as the FED. M I have
Speaker 1: one more big picture question, which is, you know, you
Speaker 1: described this as a dumb solution to a dumb problem,
Speaker 1: and I guess I'm wondering if the idea of solving
Speaker 1: absurdity with more absurdity, if that kind of poses a risk,
Speaker 1: or if there's a slippery slope there, And you know,
Speaker 1: again with your legal expertise up, I'd be curious to
Speaker 1: get your thoughts on this. But one of the criticisms
Speaker 1: of the Trump administration was that they ignored all these
Speaker 1: previously established norms and what they were doing might not
Speaker 1: necessarily technically be illegal, but it certainly wasn't the way
Speaker 1: that the founding fathers of America had thought that UM
Speaker 1: laws and rules and things like that would be applied.
Speaker 1: So again, like I'm curious the platinum coin discussion. Yes,
Speaker 1: it might be legal, but I don't think anyone who
Speaker 1: set up the laws around minting coins generally, as you
Speaker 1: laid out earlier, was necessarily thinking that this was a
Speaker 1: way to solve restrictions on the government budget. So I
Speaker 1: don't know. I guess the question is, like, does this
Speaker 1: open the door to having a regime where you know,
Speaker 1: whoever can come up with the most technical, absurdist accounting
Speaker 1: loophole kind of wins the day, and you know, maybe
Speaker 1: this gets undone in four years time when someone else
Speaker 1: comes up with like a new way to apply restrictions
Speaker 1: on debt or minting coinage or something like that. I
Speaker 1: forget which economist it was who famously said it takes
Speaker 1: a theory to be a theory, but one way to
Speaker 1: think about the coin. And we talked about this on
Speaker 1: this other podcast, Money on the Left with the a
Speaker 1: podcast with Nathan Tankas and I about the coin a
Speaker 1: few years ago. Um, if we take out the word
Speaker 1: theater and we replace the word ritual, then it starts
Speaker 1: to sound a little bit less crazy. And one of
Speaker 1: the reasons I love the coin is someone that used
Speaker 1: to be an elementary school teacher. Is it's something kids
Speaker 1: can understand. It isn't this hyper wonky technical treasury debt auction,
Speaker 1: eleventh dimensional chess bond holders and all these steps that
Speaker 1: nobody can understand, which to me has a tinge of
Speaker 1: anti democratic, technocratic elitism. That we stamp a coin the
Speaker 1: coin has the face of dead presidents and it's worth
Speaker 1: as much as we say it is because that's what
Speaker 1: the law says. Is something I can teach to a
Speaker 1: seven year old and it has the benefit of being true.
Speaker 1: If we do have to replace the ritual we have
Speaker 1: today with another ritual, then you know, putting putting the
Speaker 1: coin in the hand of a five year old calling
Speaker 1: the future of America and walking it from the mint
Speaker 1: to the Fed maybe is a better symbol for one
Speaker 1: century fiscal politics than you know, the primary dealer system
Speaker 1: and the Federal Reserve backing up the secondary market with
Speaker 1: repo and reverse repo operations and things. Um, that's a
Speaker 1: very kind of Larry Summer's deregulation of derivative metaphor to me.
Speaker 1: And of course we're at a point in history when
Speaker 1: a huge amount of the public is being introduced to
Speaker 1: monetary politics through the metaphor of digital coins, right, one
Speaker 1: of other Joe's one of his other you know campaigns
Speaker 1: around doge coin. You know, we we meet, we create
Speaker 1: coins all the time. Now, this idea of coinage been
Speaker 1: kind of forgotten, was true twenty years ago and increasingly
Speaker 1: less so now, not because the government has revived coinage,
Speaker 1: but because private actors using cryptographic techniques of revived coinage. So,
Speaker 1: you know, one of the things I in my paper
Speaker 1: on is maybe we should have a kind of you know,
Speaker 1: resurrection of of coinage and re centering of the mint
Speaker 1: in our fiscal politics as a way to kind of
Speaker 1: reset the board and make things no more complicated than
Speaker 1: they need to be so that average people can get
Speaker 1: in on the game. Sociologist Jacob Finding, a friend of mine,
Speaker 1: has this great line that he uses this great term
Speaker 1: which he calls monetary silencing, and he says, whether it
Speaker 1: was the Founding father Revolutionary era, or Andrew Jackson and
Speaker 1: the Bank of the United States, or Lincoln and the
Speaker 1: green Backs, or William Jennings Bryan and the populists, or
Speaker 1: you know, Wilson and the Federal Reserve or f DR
Speaker 1: and the floating of the dollar, or Nixon and the
Speaker 1: floating of the dollar. That monetary politics have been at
Speaker 1: the center of the American political experiment since the start,
Speaker 1: and we go in way eaves where monetary issues sort
Speaker 1: of come to the forefront and then recede back and
Speaker 1: come to the forefront and recede back. Um. And this
Speaker 1: is a moment where whether it's crypto on one hand,
Speaker 1: or central bank digital currencies or this debt ceiling crisis,
Speaker 1: that monetary politics are coming back to the forefront. And
Speaker 1: and one way we can do that is with a
Speaker 1: form of monetary silencing where we tell average people this
Speaker 1: stuff is all too complicated for you. You're dumb, you
Speaker 1: shouldn't understand this stuff. This is for people who are
Speaker 1: smart and who have degrees in finance and economics and macroeconomics, um.
Speaker 1: And we tell average people that this is not a
Speaker 1: space for them to have opinions, or we try to
Speaker 1: make it accessible to people. We try to tell stories
Speaker 1: and build institutions that you can understand, like people carry
Speaker 1: a pocket constitution around. And I think that's that's the
Speaker 1: pedagogical and symbolic and ritualistic element of the coin. And
Speaker 1: in my opinion, now it's no more silly than judges
Speaker 1: wearing robes rolland there a great place to leave it.
Speaker 1: And you know, I said at the beginning that I
Speaker 1: was a fan of believer in the coin of Solution,
Speaker 1: and I am even more so by a high degree
Speaker 1: of believer in the coin solution after talking to Thank
Speaker 1: you so much for coming on, od Love, Thank you
Speaker 1: so much for having me as a pleasure. Thanks Ron,
Speaker 1: that was really good. All right, So are you a
Speaker 1: coiner now? I am maintaining my journalistic integrity by not
Speaker 1: taking sides and continuing to monitor and describe and write
Speaker 1: and think about this in a neutral way. That's a
Speaker 1: total cop out question, but it Ruined laid out a
Speaker 1: really rational explanation of how this would work, why you
Speaker 1: would do it UM, And I think his is probably
Speaker 1: like the most convincing explain nation that I've heard UM
Speaker 1: over the past ten years or so. But on the
Speaker 1: other hand, part of me is just screaming inside that, like,
Speaker 1: there must be another way and why can't we just
Speaker 1: do this like normal people rather than go down a
Speaker 1: route that you know, I know it's serious now, and
Speaker 1: I know it was grounded in serious UM discussions and
Speaker 1: thinking about MMT in the nature of debt, But I
Speaker 1: really don't think it's started in a serious manner, and
Speaker 1: I'm not entirely sure people thought or intended it to
Speaker 1: get this far. And yet, nevertheless, because of everything that's
Speaker 1: happened in recent times, here we are talking about a
Speaker 1: trillion dollar platinum coin being the solution to politicians in
Speaker 1: d C not being able to get their act together
Speaker 1: and play ball in a fair way in order to
Speaker 1: you know, benefit all of the United States. It's all,
Speaker 1: it's all crazy, and I kind of hate it. So,
Speaker 1: I mean, obviously, like I said, it was found it
Speaker 1: very convincing. But what beyond that, Like, what I really
Speaker 1: found extremely compelling was Okay, yes, the coin is silly,
Speaker 1: it's weird. You know, we all sort of agree with that.
Speaker 1: But actually the number of serious ideas that Rowan brought
Speaker 1: up there, sort of like bolster the legal and philosophical case,
Speaker 1: I was like truly impressed by that and thinking about,
Speaker 1: you know, the fact that although it's much smaller, that
Speaker 1: the mint is a source of senior revenue for the Treasury,
Speaker 1: or thinking about these sort of like institutional relationships. He
Speaker 1: put it at the end, you know, why can't we
Speaker 1: change the rituals to make the more accessible somehow in
Speaker 1: the coin conversation there is actually just like really profound
Speaker 1: and important uh questions that gets sussed out from having it,
Speaker 1: and so I was I was really happy to hear
Speaker 1: them fleshed out. Well, this was your initial framing of
Speaker 1: the coin debate. I think you said it was like
Speaker 1: the most important UM fiscal policy discussion ever UM, which
Speaker 1: a lot of people thought was hyperbole, But your point
Speaker 1: was because the discussion was about the nature of money.
Speaker 1: And again that's something that that Rohan talked about, and
Speaker 1: it's one of the reasons I asked him about what
Speaker 1: he thought the public reaction might look like. I have
Speaker 1: to say, like, maybe I spend too much time on
Speaker 1: social media, but Rohan probably is a lot more optimistic
Speaker 1: about how people would react to this, or the ability
Speaker 1: of people to sort of think logically and rationally about
Speaker 1: it UM than some other people might be. But it's
Speaker 1: an interesting experiment and like it's definitely one of the
Speaker 1: more interesting discussions that we've had in a while. Well,
Speaker 1: I guess hopefully, I don't know, I really want to
Speaker 1: see it happened. Other people would say, yeah, this is
Speaker 1: the thing, Like can you hope for it to happen like,
Speaker 1: because then that means that, okay, all right, yes, I
Speaker 1: to see it happened all right. Well, you know, by
Speaker 1: the end of the month you might have your answers.
Speaker 1: So I guess the good news is you don't have
Speaker 1: to wait too long. Should we leave it there? Yeah,
Speaker 1: let's leave it there. Um. This has been another episode
Speaker 1: of the All Lots Podcast. I'm Tracy Alloway. You can
Speaker 1: follow me on Twitter at Tracy Alloway. And I'm Joe Wisenthal.
Speaker 1: You can follow me on Twitter at the Stalwart. Follow
Speaker 1: our guest on Twitter, Rowan Gray. He's at Rowan Gray,
Speaker 1: and you should definitely check out the paper that he
Speaker 1: has written on the subject, extremely thorough, very clear. Follow
Speaker 1: our producer on Twitter, Laura Carlson. She's at Laura M. Carlson.
Speaker 1: Followed the Bloomberg head of podcast Francesca Leavi at Francesco Today,
Speaker 1: and check out all of our podcasts at Bloomberg under
Speaker 1: the handle at podcasts. Thanks for listening to