So I now see four possible paths through the debt ceiling crisis. Reaching a deal with Kevin McCarthy isn't one of them 1/
The possible paths are:

  • Discharge petition, forcing a floor vote that brings in a handful of sane Rs
  • 14th amendment: Just say we don't believe the debt ceiling is constitutional
  • platinum coin
  • premium bonds, which sell for much more than face value 2/

I suspect that Biden et al would prefer the first, but in the end will do whatever it takes. Rs are trying a financial version of January 6; this cannot stand 3/

  • 委員会審査省略動議*1で、少数のまともな共和党員を巻き込んで本会議での採決に持ち込む
  • 修正第14条*2:単に、債務上限は憲法違反と考える、と言う
  • プラチナコイン*3
  • 額面より遥かに高い金額で売却するプレミアム国債



About possible end runs around the debt ceiling. I have no inside information, but my guess is that premium bonds are a more likely route than the platinum coin. Why? Because nobody understands premium bonds, while people think — wrongly — that they understand the coin 1/
Premium bonds: a bond has a principal or face value, which is what is paid when it matures, and a coupon that is paid every year until then. The idea is to issue bonds with, say, a $1000 principal and a $100 annual coupon. 2/
Since market interest rates are way below 10%, such a bond could be auctioned off for much more than $1000 — but Treasury could say that if the bond replaces an existing $1000 bond, it hasn't increased the debt even though it's raising a lot of money 3/
Extreme example would be consols, which are just a perpetual coupon with no principal. In my experience, if you try to explain all this, people's eyes glaze over — which is good! Hard to get outraged over something that baffles you 4/
The coin: Treasury exploits a quirk that permits minting of platinum coins in any denomination to mint a coin with a face value of $1 trillion, deposits it at the Fed, then uses funds from that bank account to pay bills 5/
I keep seeing people saying that this would be MMT, that we'd just be printing money to cover the deficit. But it wouldn't be that at all. The Fed would surely sterilize any impact on the monetary base by selling off some of its huge portfolio of U.S. debt 6/
Think of the Fed as a branch of the federal government, which from a fiscal point of view it is. Then this consolidated entity would in effect be covering deficits by selling bonds — i.e., normal deficit finance, just through the back door 7/
But as I said, people who really should know better constantly get this wrong, and imagine that the coin would be inflationary. And that's a reason to prefer a route that doesn't inspire confident misconceptions 8/
As for claims that Powell would refuse to accept the coin, or the Supremes would block premium bonds — well, nobody knows. But my guess is that nobody wants to be the guy who destroys the world economy. Even people happy to see it burn don't want their fingerprints on it 9/
極端な例はコンソル債で、元本がなくて永続的な利子だけで成り立っている。私の経験に照らすと、人々にこうしたことをきちんと説明しようとすると、彼らの目は泳ぐ――それは良いことなのだ! よく理解できないことに憤激するのは難しい。


Gah. Maybe not as clear as intended. Fed accepts coin; Treasury then draws on its account to pay for stuff, either receiving actual cash or, mostly, making payments that show up in bank reserves. So monetary base — currency plus reserves — injected into system 1/
If it stopped there, it would be as if Treasury was paying its bills by printing money. But Fed would almost surely remove the newly created monetary base by selling bonds. (That's "sterilization" when we do foreign exchange intervention). 2/
The end result is that using the coin to pay bills isn't monetary policy, because the Fed doesn't let it change the relevant money supply. It's really just borrowing through the back door 3/
What I think may be the source of confusion: creating the account doesn’t need sterilization; withdrawals from the account do 4/