The Jumbo Coin

Jack Balkin, a constitutional law specialist at Yale, has written a very interesting article about President Obama's options to raise funds for the government and avoid a default if congress does not raise the debt ceiling. Balkin says that the Treasury cannot simply print more paper to create the money to pay the bills, since there are statutory limitations on how much currency is allowed to circulate at once. However there is no limit on coinage, and there is an arcane provision allowing Treasury to issue platinum coins in any denomination. Therefore "some commentators," according to Balkin, have pointed out that the Treasury could print two platinum coins worth $1 trillion each, put them in a deposit at the Federal Reserve and write checks on the deposit.

Another possible solution features the president selling the Fed a financial option to buy US government property for $2 trillion, which would give the money he needs to meet US government obligations, but with the option later expiring. Balkin says the "jumbo coin" and "exploding option" possibilities haven't been discussed openly because there may be unknown legal reasons they wouldn't work, and at any rate they could prove politically unpalatable -- meaning, in short, that these ideas sound absurd and even a public that is astoundingly credulous at times would have trouble accepting their actual implementation. Notably Balkin mentioned that investors could be terrified since "these devices could be used over and over again," and that degree of uncertainty could trigger a crisis of confidence that the tools are intended to avoid.

Ah, the word "device." The truth now becomes radiantly clear -- the old Shakespearean wisdom blazes before us -- that politics is at its very essence a form of drama. Drama includes farce, and we have now entered the land of cartoons. Congress erupts in a cloud of dust with fists and boots poking out of the storm, and congressmen attempting to smash each other with mallets. Obama, perturbed, picks up his red telephone and calls Geithner and Bernanke into his office. He orders them to procure the sacred platinum coins. Geithner is dispatched to speak to the US Mint, which begins the metallurgic process. The coins, hot off the press, are stamped, wrapped in a velvet cloth and placed in a special indestructible black box. Fifty black SUVs accompany Geithner to the Fed, where Bernanke opens the vault and carefully nestles the box in between the tin-man's heart and the scarecrow's brain. Obama begins writing checks. The US government is saved.

But then something terrible happens. Bernanke awakes in a cold sweat from a nightmare. He dreamed that a turkey stole his scone. He throws a jacket on over his pajamas while rushing downstairs, into his car and off to the Fed. He peeps into the vault to check on the precious coins and Lo! His greatest fear has come true, they are gone! Tripping over himself as he scampers to the red phone, he calls Obama.

"What's the meaning of this?"

"They're gone, Sir. I don't know what happened. They're gone."

"What? What're you talking about? Calm down, damn it, you sound like a madman. What happened?"

"The jumbo coins have disappeared."

Silence.

"Well, we'll have to make a couple more."

Meanwhile a mysterious seaplane takes off from Chesapeake Bay. The propeller whirs in the night air. A man dressed in black hands over a box of moon cakes to his partner, smiling and nodding.

Et cetera, et cetera.

The debt ceiling debate was foreseeable, in a fairly definable form, immediately after the Tea Party victories of the 2010 midterms. The directors of the republican factions revamped the script of the 1990s "Republican Revolution," which led to a budget crisis and government shutdown before Republicans gained a victory. The twist today is that the opposition party is in a much weaker position, and is attempting to make a much bigger gamble, since the credit of the US is ostensibly at stake. The controversy has intensified over the months under careful orchestration, and it has reached its climax according to a political schedule imposed by the actors themselves. The deadline is artificial, the default threat is mostly artificial, the scaremongering about a new global financial crisis is artificial. As in all stunts, stage tricks and special effects, someone could actually get hurt, but it is unlikely. If the Tea Party attacks too aggressively, and accidentally flings mud into the audience, then the audience will hiss it off stage. Better to compromise at the last minute, having played their craziness convincingly, without actually doing anything crazy.

What is clear from the jumbo coin scenario is that the executive branch is not without extraordinary powers. The real threat to the country may reside here. The plot: a president who resorts to an arcane and unprecedented stratagem -- producing magic tokens from within the cloak of his prerogative -- in order to deliver a nation whose credit is imperiled by the schemes of a monomaniacal faction. The alternate version: the ruling elite conspires across party lines to suppress the attempts of a small, inexperienced group of elected representatives to force the elite to adhere to their own rules and restrain their profligacy that is depleting the nation's coffers and adding tax burdens on the people.

Audiences in general seem to prefer the hero with a magic token to the rebel lawmakers with reformist zeal. A larger and larger share of the American public appears to be adopting this inclination toward the mythical, and in doing so joining the rest of the world. This is conspicuous because the United States was founded upon the latter plot, the plot of representative politics, division of powers and checks and balances. But the country has changed, and audiences now may not even recognize nominal obeisance to forgotten ideals.

In the final days, the rebels must act with utmost tact. If they push their bluff too far and cause damage, they appear as villainous saboteurs, losing the public's support. They also provide the occasion for the executive to set new precedents and create new tools to overrule them, counteracting their aims of limited government. There is at least some risk that they are inferior tacticians, and know not the law of unintended consequences. The danger of the jumbo platinum coin is that it can be produced ad infinitum. Better not to dare the Leviathan.