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Me Versus Congressman Greg Walden on the Platinum Coin

Okay, I am totally burned out on this coin idea and I think most of you are also, but this was a good interview that touched on some important points.  Congressman Greg Walden also joined CBC Radio to give his side of the debate.  Here are the key points:

  • The coin is just a temporary workaround that would allow the Treasury to continue spending.
  • The choice is relatively simple in my opinion.  Should we have to choose between default and issuing the coin we should issue the coin because the alternative would be catastrophic.
  • Contrary to popular belief, the coin is not inflationary.  It would just continue government spending at a pace that was already allotted.  In other words, not issuing the coin would result in $100B or so of govt spending that comes out of the economy immediately.  So it’s inflationary only to the extent that it’s NOT deflationary.
  • I say eliminate the debt ceiling AND the coin loophole.  Seems fair to me.
  • Greg Walden says the coin is “dangerous” because it’s inflationary.  This is not accurate.  As I said before, it only spends to the extent that money was ALREADY in place to be spent.
  • Greg Walden says we have a serious debt problem in Washington.  I think this is confused.  Government spending and borrowing is a problem to the degree that it causes inflation and erodes living standards.  There is no such thing as the government “running out of money” so the idea of the government having a solvency constraint like a household or a business is inapplicable.  Obviously, if the government can just mint up a coin to spend then it doesn’t have a solvency problem.  BUT, even Congressman Walden understands it could be inflationary.  But people have been saying this endlessly for years regarding government spending, TARP and QE.  If they’re right then why is inflation still so low?  Why do we look more like Japan than Weimar?
  • Finally, he says we’re “spending money we don’t have”.  This is just patently false.  The US government deficit spends by harnessing its private banking system and selling bonds to the public.  If we didn’t have the money the bonds wouldn’t get sold.  But bond auctions continually go off without a hitch as expected….
  • He says the threat of default is legitimate.  The Congressman should understand that it’s illegal for him to willingly choose to default.   It’s not illegal to mint the coin.  He’s just playing a game of chicken with the US economy.

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