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There is more than one way to burn down the Reichstag

DCblogger's picture

This post goes out to Jonathan Easley, Matt Taibbi, Felix Salmon, Matt Stoller, Dave Sirota, and any other reporter who wants to take a swing at this.

What if the debt crisis is not brinkmanship? What if the kleptocracy wants a default? Right wing economists actually testified before the Senate Banking Committee that it would be OK for the US to default on the debt. Clearly their paymasters want to put this idea into circulation. Why? Two years ago Eric Cantor actually invested in puts against Treasury bills. Has he done so again? Who else is selling America short in the literal sense? The Koch brothers?

What would happen if the US defaulted on its debt? Well, the current political system would be completely discredited. How would the crisis be resolved? Would the Very Serious People call for a super commission like the thieves who are currently running Detroit? Would we have a national version of that? Would it be the crisis in which a US version of Galtieri would seize power? We need to at least start entertaining the possibility that this is not brinkmanship. We need to consider the possibility that the kleptocracy wants a default.

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Submitted by lambert on

I especially like the detail on Cantor.

* * *

Interestingly, Petraeus cannot be cast in the Galtieri role because of a sex scandal. Which obviously has nothing to do with the sex, since most people in DC have sex, and most of them have scandals. (If only the motel rooms could talk. Oh wait! They can!)

I can't think of another player for the role, but no doubt one can be manufactured easily ("a steady hand"). It would be even more easy if the military hadn't just lost two huge wars at great expense, and just proved itself unable to put "boots on the ground" in a third.

How about some nice policeman, I wonder? (Too bad Guiliani's a cross-dressing crackpot, but perhaps somebody involved in the Occupy paramilitary crackdown could, with becoming reluctance, be induced to play a national role.)

* * *

My thought has been not so much "a man on a white horse" like Galtieri but a "government of national unity" to "deal with the current crisis" using extra-constitutional but of course temporary methods to avoid "gridlock." And rest assured a crisis can be created. Not that I'm foily.

albrt's picture
Submitted by albrt on

On the other hand, if the economies of the developed nations were to descend into utter chaos as outlined above, I believe it might indeed be possible to avoid 2° Centrigrade of surface warming in the 21st century. That, my friends, is the Good News. Perhaps that's the real plan.

Dave Cohen, Decline of the Empire

a little night musing's picture
Submitted by a little night ... on

as if people didn't matter. As if those who get hurt most aren't the poorest (yes, the poorest of rich countries, but that just makes it all the more insensitive and nasty)

CMike's picture
Submitted by CMike on

work out for him last time (check out the five year chart [i.e. the Zoom:... 5y] here). Of course it's outrageous that Congress people make investments that are sensitive to congressional action but, at least in this instance, Cantor is actually buying for his own portfolio what he is selling publicly in the way of economic theory.

But, speaking of what might be a Galtieri moment in the eye of the beholder, let's hear it from DCblogger, Lambert and Let's, if default became imminent and, rather than fulfill a right wing wish list of fiscal cuts to negotiate his way out of it, Obama chose to mint the platinum coin would any of you want Obama to invoke his constitutional obligations and defy the Supreme Court if that body were to issue some sort of injunction referencing the intent of the relevant legislation and denying the validity of such a coin?

CMike's picture
Submitted by CMike on

However, a review by any non-politicized court of the legislative history of the law being invoked to authorize such an action would conclude it was not the intent of the Congress that a president, or the Treasury, could use that law to mint a platinum coin for that purpose. If the Treasury were to mint a coin for that purpose and the Supreme Court were to avoid taking up the question of interpreting the relevant legislation, the decision not to issue an opinion would reflect the Court's political preference in the matter.

Here's a YouTube clip suggesting the highest court may be availing itself of the same see no evil legal strategy in another matter for better or worse (and I think worse).

Alan Grayson: Thank you Mr. Chairman. Chairman Bernanke I'm looking at the report that you handed out this morning and I'm wondering if you can take your copy and turn to page 26.


3:25 Grayson: All right, well, the Constitution says no money shall be drawn from the Treasury but in consequence of appropriations made by law. Do you think...

Bernanke: This money is not drawn from the Treasury.

Grayson: Well, let's talk about that. Do you think that it's consistent with the spirit of that provision of the Constitution for a group like the FMOC [sic] to hand out a half a trillion dollars to foreigners, without any action by this congress?

Bernanke: Congress approved it in the Federal Reserve Act.

Grayson: When was that?

Bernanke: Quite a long time ago, I don't know the exact date.

Frank: I believe, the original act of was 1914 I believe.

Bernanke: I don't know whether this provision was in 1914 or not but the Federal Reserve Act was in 1913.

Grayson: All right and at that time the entire Gross National Product of this country was well under half a trillion dollars, wasn't it?

Bernanke: I don't know.

Grayson: Is it safe to say that nobody in 1913 contemplated that your small little group of people would decide to hand out half a trillion dollars to foreigners?

Bernanke: This particular authority has been used numerous times over the years.

Grayson: Well, actually, according to the chart on page 28 virtually the entire amount that's reflected in your current balance sheet went out starting in the last quarter of 2007 and before that, going back to the beginning of this chart the amount of lending was zero to foreigners. Is that...

Bernanke: It was zero before the crisis, yes. This was part of the process of dealing with central banks to, again, to try to get dollar money markets working normally in the global economy.

Grayson: All right, my time is very limited...

Frank: The gentleman's time has expired.

But anyway, what does anybody think about whether, in this matter of competing branches of government, Obama should do if the Court says he can't mint the coin and it's the only way he can avoid default?

letsgetitdone's picture
Submitted by letsgetitdone on

As I say below, consols can be used if the Court decides against the coin. However, it's not the case that the legislative history excludes the interpretation we now place on the law. First, the language of the law is very explicit. Second, the primary person who drafted the law was actually Philip Diehl Director of the Mint at the time. Phil says that the Law doesn't exclude HVPCS options and on the contrary clearly implies them, and also correctly points out that every singe law has implications not explicitly stated by the legislators in the Law itself.

letsgetitdone's picture
Submitted by letsgetitdone on

for that. he could just use consols to get all the money needed.

CMike's picture
Submitted by CMike on

I did see your post here with that one and the three other options to minting the platinum coin which you listed. I only agree with your option #4:

[U]sing the authority of the 14th Amendment to keep issuing debt in defiance of the debt ceiling, while declaring that the debt ceiling legislation was unconstitutional because it violated the 14th Amendment in the context of Congressional appropriations passed after the debt ceiling mandating deficit spending.

Asserting any of the rest would be a president crossing the Rubicon to singe the Constitution, yet again, an act which, no doubt, would be followed by a "don't believe your lyin' eyes" insistence that he has always stayed encamped north of that river.

letsgetitdone's picture
Submitted by letsgetitdone on

See a new one I have coming up that analyzes the likelihood of the options. Bottom line on 4, is that it does singe the constitution, because the consol and platinum coin options are, in fact legal. As for the PC option, it's conceivable that it would invalidated by the Court, but not for singeing the constitution; just for violating the intent of the law, which is not the same thing in this case.

albrt's picture
Submitted by albrt on


If Obama minted a platinum coin he wouldn't use it to pay down the debt, he would give it to Jamie Dimon so Jamie Dimon could buy more bonds and receive more free interest payments. Then Obama would go back to strategizing about how to align himself with Republicans to screw poor people.

I am pretty sure the Supreme Court can muster at least 5 votes for that arrangement.

Submitted by lambert on

In that politically, at least, Obama becomes his own Galtieri, crowing himself like Napoleon.

That said, I guess I'd rather see Obama not cave in on a policy I believe is legal (the coin) rather than have him do a cave like Gore did in election 2000, after a less politicized court than we have today decided not to allow him to take office.

And in the chaos that followed, I'd rather take on one person, Obama, than take on an institution, the Court, with whoever's pulling their strings concealed. It's always easy to fight a visible enemy. (I'm assuming Obama would mint the coin solely for power-seeking purposes; public purpose would not enter in. The issue is who would you rather fight for public purpose after the deed was done one way or the other?)

I grant this is an "Alea iacta est" moment, and outcomes can't be predicted. So maybe it's just best to fall back on what one thinks is right, and I really am persuaded (with many others) that minting the coin is entirely legal.

NOTE The coin entered mainstream discourse, so it's "on the table" as it were. Suppose we did regard minting the coin as taking advantage of a loophole rather than following the clear letter of the law. Doesn't Congress's failure -- correct me, here -- to introduce or pass legislation to "correct" the loophole indicate that the letter of the law is clear, as coin proponents insist?

letsgetitdone's picture
Submitted by letsgetitdone on

Why would Wall Street take the risk? They can't control the reactions of various publics to another crash. One could collapse their whole system. On the other hand, if they avoid a crash, but impose more austerity in a stagnating economy, then they can continue the evolution toward plutocracy with very little risk to them.

letsgetitdone's picture
Submitted by letsgetitdone on

Naaah! They like sure things. You know the kind of thing they have with the control frauds, with no possibility of getting prosecuted. They don't like risk. The masters of the universe are more risk averse even than politicians.

Submitted by lambert on

1. The control frauds ultimately did crash the system. The C*O class as a whole escaped retribution, but not all individuals did.

2. The elite is subject to factional infighting and different factions may place different bets. A hedgie who bet on default might well do what was politically necessary to bring that about. If the Kocks bet on default, and backed it, and Soros bet against it, and backed it, who would win?

3. "Mistakes were made."

4. Traders most certainly do like risk. And so do some executives, Corzine for example.

DCblogger's picture
Submitted by DCblogger on

Of course it is like killing the goose that lays the golden eggs, but all of disaster capitalism is based on that. For the members of the "government of national unity" and those connected to them there would be great wealth. They could take people's bank deposits, like what happened in Cypress. They could steal all the public lands, just as is happening in Detroit. For 100 or so people there would be great wealth.

Alexa's picture
Submitted by Alexa on

chance that I'll be "struck by lightening" this week, LOL!

Seriously, I don't know that much about some aspects of this issue, but it sure sounds like the print corporatist media shills and hacks believe that it's pretty much "all for show."

I heard approximately 25 reporters interviewed during a 3-day period this past week on The Press Pool.

And a few of them even wrote "pablum" (that they were on the program to discuss) hyperventilating in an "Ezra Klein" way about the fiscal crisis.

Yet each one agreed, when all was said and done, that this was mostly "posturing" on the part of politicians.

Politicians of all stripes know that they must provide PBO "cover" to strike a Grand Bargain.

And Mark Warner heads the "Gang Of Eight"--so he would be very much inclined to want to "give cover to PBO." (Since he's one of the biggest backers of striking a Grand Bargain).

IOW, they must help create the "optics" of a hostage-taking scenario.

More than one reporter laughingly referred to the Dem and Repub "antics" as part of a major "fund raising" gimmick by both parties. The reporters cited hyperbolic emails that both Dems and Repubs were shooting out to their bases, as evidence of this.

BTW, enjoy your "pictures" over at NC. ;-)

hyperpolarizer's picture
Submitted by hyperpolarizer on

I work for the kleptocracy (I am an engineer, and large corporate kleptocrats actually do do things other than steal, although they do plenty of that); and it is my view that the sober minded kleps, in fact, like the system they have how, which works well for them, and they are frightened of uncontrollable consequences in the event of default.

People like the Kochs probably think they could hire private security contractors like Blackwater (or whatever has taken its place) to take control and maintain order; others like the Jeff Immelts of the world are arguably less sanguine about their ability to manage the possible chaos in the aftermath of a default. There also gets to be a question of whether or not basic things like agricultural production are disrupted.