Paul Krugman Talks to Bill Moyers About How to Speed Recovery -- And Why He Doesn't Want to Run the Treasury
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BILL MOYERS: I don’t understand that.
PAUL KRUGMAN: In a 1997 act amended in 2000 which covers issuance of coins and stuff like that. There's one clause that says that the Secretary of the Treasury shall have the right to mint and issue platinum coins in any denomination that he so chooses. Clearly, the intent was commemorative coins. You're going to strike a coin to commemorate whatever, Mother's Day.
But it doesn’t say that. And as far as legal scholars have been able to make out, there's no reason why the Secretary of the Treasury can't order the minting of a coin that says this coin is worth $1 trillion, which need bear no relationship to the actual value of the platinum in it. It has to be platinum, however. And walk that coin over to the Federal Reserve.
Deposit it in and have the Federal Reserve create a bank account for the federal government based on that coin of whatever. It could be one coin for $1 trillion, it could be a thousand coins of a billion each, whatever. And then the government can pay its bills by drawing on that bank account. And it's crazy, it's an accounting gimmick, but then this whole thing is crazy. And if that lets you bypass this nonsense about the debt limit, fine.
There are other routes. I mean, it's possible the government could issue coupons that look like debt and function like debt, but says, "No, they're not debt." They could say, "This -- we have no legal obligation to pay this. We are, in fact, going to pay it, but we have no legal obligation to pay it." That's another alternative. They could--
BILL MOYERS: This is what you'd call--
PAUL KRUGMAN: I'd call it moral obligation coupons.
BILL MOYERS: Moral obligation because the government is morally obligated to pay that at some point, right? That’s what--
PAUL KRUGMAN: That's right.
BILL MOYERS: --you mean by that?
PAUL KRUGMAN: Yeah. So, but it's a moral obligation. We can say it's not a legal obligation so that -- you know, all of this is of course, this is all word games. But then that's not to play games would be irresponsible at this point.
BILL MOYERS: So you would encourage, if you were Secretary of the Treasury, the president to call the Republican bluff?
PAUL KRUGMAN: Yes. I think, now, I think you probably don't commit to doing that until we actually hit the limit. You say what the president is now saying. There is no alternative but for Congress to do the responsible thing and raise this debt limit.
But you don't rule out these alternatives and you make sure that the Republicans know you haven't ruled it out so that it stands ready, and in fact it’s what you do. Hostage negotiations, you have to -- you have to have some credible alternative to giving into the hostage takers demands, and that's where we are right now.
BILL MOYERS: You've confessed before to an occasional sinking feeling that you can count on President Obama to wimp out. And that's your term, "to wimp out" when it matters.
PAUL KRUGMAN: Yeah. The 2011 debt ceiling fight was deeply disheartening because he should not have negotiated on the debt ceiling at all. Same argument as now. This is not how you do it. It is not a legitimate tactic of politics to threaten to destroy the country if you don't get what you want. And people who make that demand have no standing. You should not give them anything.