There was a similar war game to this a few years back, and it found that one of the biggest “costs” in the cost/benefit analysis was that Iran would almost certainly stop all traffic in the straight of Hormuz (which carries 20% of all the world’s oil everyday). The price of gas would go up exponentially, and would cripple the US economy and the global economy.

This nytimes article doesn’t seem to take that cost into account.

31 U.S.C. § 5111
(a) The Secretary of the Treasury–
(1) shall mint and issue coins described in section 5112 of this
title in amounts the Secretary decides are necessary to meet the
needs of the United States;

31 U.S.C. § 5112. Denominations, specifications, and design of coins
(k) The Secretary may mint and issue platinum bullion coins and
proof platinum coins in accordance with such specifications, designs,
varieties, quantities, denominations, and inscriptions as the Secretary,
in the Secretary’s discretion, may prescribe from time to time.

http://frwebgate.access.gpo.gov/cgi-bin/usc.cgi?ACTION=RETRIEVE&FILE=$$xa$$busc31.wais&start=2282115&SIZE=93048&TYPE=TEXT

Brad DeLong explains Treasury’s options come August 3 if the debt limit isn’t raised. They all involve breaking the law.

Incorrect David, you should post a correction. DeLong lists printing a platinum coin as an option. That is perfectly legal.

Don’t be confused, a default would be terrible for pretty much everyone.

I don’t disagree with that, but i’ve said it before and i’ll say it again. Minting a $1 trillion platinum coin obviates the risk of default.

http://www.nakedcapitalism.com/2011/07/scott-fullwiller-qe3-treasury-style%E2%80%94go-around-not-over-the-debt-ceiling-limit.html

That blue dog quote at the end is hearting. There is no reason for Dems to cave on this, since if the debt ceiling is not raise, Obama can still print a trillion dollar coin to pay the bills. http://fdlaction.firedoglake.com/2011/07/13/obama-hints-he-might-violate-law-and-the-consitution-to-stop-social-security-checks/

Considering that you would only need 1/3 of the House on the McConnell plan, I’m not sure that one Blue Dog vote would be required.

The 1/3 vote would be to sustain the veto after Obama requests the debt ceiling increase. But before Obama can even submit the request, Congress has to grant him the power to do that right? Wouldn’t they need a majority vote for that (supermajority in the senate)?

Links have occasionally been linking to the pages for me for a good week or two. Does this on different browsers and different computers.

Excellent post Jon, thanks pointing out that minting a trillion dollar coin would be way to not break ANY laws.

Obama is duty bound to obey the law, even if he doesn’t like the minting idea, what legal alternative does he have? Like you point out, Obama’s stated alternative is ILLEGAL.

Why would that be? There is no international precedent on who is eligible to receive frozen assets.

Another way they can get the money is if we just hand it to them.

The big banks HATE QE, it hurts their profits.

Think of it this way, with QE1 and 2, the Fed bought (and still owns) about $1.2 Trillion worth of government debt that would otherwise be owned by the big banks. That debt pays roughly 3% a year. So that is $36 Billion a year that they are not getting thanks to QE1 & 2.

If fact, the effect is the EXACT same as if Obama were to just mint $1.2T cash, and not raise the debt ceiling.

http://my.firedoglake.com/mikediaz/2011/07/11/if-no-debt-limit-deal-is-reached-obama-may-only-have-one-legal-option/

i didn’t say anything about recognizing them as a government. I just meant giving them the frozen assets.

I can only imagine how the exchange between McConnell and Reid went:

McConnell: I’m an going to totally cave to you guys.
Reid: No, you can’t out cave us. We are going to cave to you!

Political scientist John Sides ran the numbers on this. If you want to get re-elected, the thing to do is to fix the economy.

Exactly, despite all these ad hoc political rationales for what will or will not get Obama reelected, every single strategists knows that the numbers tell you the biggest factor in any election is the economy.

The industry simply hasn’t learned from its mistakes, and continues to try and paper over problems with false documents.

Thanks for the update David. The MOTU went years where they were simply above the law and above regulation, they are too arrogant to believe they need to “learn” anything.

The UN resolution that authorized the NFZ also authorized giving all of Ghaddafi/Libya’s frozen assets to the people of Libya. Why are they broke? Have we not given them their own money back yet?

Steny Hoyer said the other day that no House Democrat would vote for a bill with zero revenue increases. I hope (for once) they hold the line.

Not reaching the debt limit does NOT mean default. It would be illegal for Obama do default. Progressives should be against this deal.

Thanks DW. The idea of coin seigniorage belongs more to beowulf and letgetitdone, but I like to emphasize the fact that it would be Obama’s only LEGAL option if we hit the debt limit.

I realize, Obama et al., would hate my diary, but if enough people recognize that it is his only LEGAL option, maybe pressure will build for him to abide by the law. (that’s a mute point now, as McDonnell’s cop out insures it doesn’t reach that point).

This whole idea that reaching the debt limit would be no big deal is deeply irresponsible.

Not if Obama keeps paying ALL the nations bills by minting a single platinum coin of say $1 Trillion dollars.

I gave links to the law that make this PERFECTLY LEGAL in a diary i wrote the other day. Title 31 U.S.C. Section 5111(a) authorizes Treasury to mint unlimited amounts of coins. Section 5112(k) of the same title authorizes Treasury to mint platinum coins in ANY DENOMINATIONS it wants.

Payment prioritization has shaky legal foundations anyway.

That’s quite an understatement David. The Supreme Court has specifically ruled against it.