Latest serious idea for fiscal-crisis solution: IOUs

posted at 1:21 pm on January 10, 2013 by Ed Morrissey

Well, thank goodness we’re taking the issue seriously.  It’s difficult to conceive of a sillier proposal than the trillion-dollar platinum coin, but it’s not as if some people aren’t working hard at it.  National Journal reports that a new suggestion involves government scrip — IOUs, in other words:

The $1 trillion platinum coin seems too wacky; the 14th amendment too risky. But could IOU’s be the solution to an impasse on raising the nation’s borrowing limit?

Yes, and President Obama should publicly adopt the idea, Edward Kleinbard, a University of Southern California law professor and former chief of staff to Congress’s Joint Committee on Taxation, argues in a Thursday New York Times op-ed. If lawmakers can’t reach an agreement before the nation hits its debt ceiling–which could happen as soon as next month–then Obama should have a backup plan of issuing IOU’s in place, Kleinbard argues.

“[Obama] should threaten to issue scrip—’registered warrants’—to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.”

Kleinbard is hardly the first to propose the idea. Slate’s Matt Yglesias suggested it in early December. And New York Times Op-Ed columnist and Nobel Prize winner Paul Krugman argued for such IOU’s on Monday, though he called them “Moral Obligation Coupons.” In Krugman and Kleinbard, the idea has found two prominent proponents.

Tagging Yglesias on this might be a little unfair.  He mentioned it as an option in December, but argued that the platinum-coin trick was a better path, which he continued to do on Twitter today:

James Joyner at OTB asked a good question, however:

The IOU approach has more of a precedent, although not necessarily one that commends it.  California began issuing IOUs in 2009 in response to what is really the same problem — politicians not being able to deal with the reality of spending a lot more money than what comes in.  The distribution of the IOUs wasn’t exactly an egalitarian model, either:

People who get California IOUs People California pays in cash
Grants to aged, blind or disabled persons University of California
People needing temporary assistance for basic family needs Public Employees’ Retirement System
People in drug prevention, treatment, and recovery services Legislators, legislative employees, and appointees
Persons with developmental disablities Judges
People in mental health treatment Department of Corrections
Small Business Vendors Health Care Services payments to Institutional Providers

The IOUs stopped when the California legislature passed one of its series of budget compromises that wildly overestimated revenues while increasing spending. Each of the next three years, the state ended up having to revisit the same problem, without addressing the underlying cause — excessive spending and liabilities, especially in its pension obligations.

The argument for IOUs is that people will feel secure in the fact that they’ll eventually get paid.  Well, that may make the people issuing the IOUs feel good, but unless those payments come almost immediately to contractors who receive them, it’s going to be a disaster.  They can’t pay their own vendors or employees in IOUs, and if the debate drags on for any length of time, these contractors may end up closing their doors or furloughing personnel — especially if the distribution resembles California’s.

Maybe we should start addressing the actual problem, which is that the Obama administration is on track to spend a trillion or more dollars more than it receives for the fifth straight year.  We just gave Obama the tax hike he wanted, and which he promised would solve a large part of the problem.  How about working on the spending side now, and eliminate the need for coin tricks or federal scrip?

Addendum: Speaking of coin tricks, Gabriel Malor has a lengthy post at AOSHQ that looks at the legality, constitutionality, and advisability of the option.  Read it all, but here’s his conclusion:

The final question is probably the easiest: no, it’s not a good idea.

Some economists, Paul Krugman foremost among them, insist it will not lead to debilitating inflation because QE 1, 2, and 3 didn’t lead to bad inflation. That’s not so much a guiding economic principle, but an admission that they’re not sure what’s happening, but it hasn’t been that bad yet. But there’s more to consider than just inflation.

Pulling a platinum coin out of thin air is likely to lead to a credit rating downgrade whether we continue to pay our creditors or not because it signals a serious problem with U.S. government finances. It also sets a terrible precedent. And, of course, the very point of the platinum coin trick is to push our day of reckoning further into the future when we’re going to be less likely to deal successfully with our spending problem.

Megan McArdle had a particularly noteworthy rant about the merits of the platinum coin trick yesterday. I encourage you to read it.

In short, the platinum coin trick an unnecessary idea and a bad one, but it is not, as some have argued, unconstitutional or illegal.

These are all reality-avoidance tricks.  Reality will not be evaded that easily.

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Comment pages: 1 2

Have they run out of dichromium trioxide to paint dollar bills with?

Archivarix on January 10, 2013 at 1:23 PM

Why not just use the Weimar Republic Mark instead?

Flange on January 10, 2013 at 1:25 PM

Paul Krugman argued for such IOU’s on Monday, though he called them “Moral Obligation Coupons.”

Just when you think the man has conquered his delirium.

ROFL, what a clown.

Bishop on January 10, 2013 at 1:26 PM

Maybe they can tax private gun sales?

http://www.weeklystandard.com/blogs/biden-hints-outlawing-unregulated-private-gun-sales_695080.html

http://newsbusters.org/blogs/nb-staff/2013/01/10/eric-holder-gun-owners-should-cower-shame-smokers

These two tyrannical ideas make about as much sense as the IOU or the trillion dollar coin idea.

NO GOD, NO COMMON SENSE in our Federal government today.

PappyD61 on January 10, 2013 at 1:26 PM

Because the IOU’s worked so well with Social Security. /s

txsurveyor on January 10, 2013 at 1:26 PM

Why not just use the Weimar Republic Mark instead?

Why not just sign an EO to proclaim Monopoly Money as legal tender.

hawkeye54 on January 10, 2013 at 1:27 PM

Just when you think the man has conquered his delirium.

ROFL, what a clown.

Bishop on January 10, 2013 at 1:26 PM

You actually thought he had conquered it after THIS???

The Orson Welles’ ‘War of the Worlds’ Paul Krugman Edition Stimulus Programme:

“If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.”

- Paul Krugman, theorising how a manufactured crisis about how an alien invasion threat would bring a worldwide recovery

Resist We Much on January 10, 2013 at 1:28 PM

This discussion may really accelerate the decline of the dollar. The only reason why our currency holds up is because we “believe ” it to have value. The more of a joke our dollar becomes as a result of these stupid discussions of possible “solutions ” the more investors will place their wealth into hard assets. Good job, D.C.

Weight of Glory on January 10, 2013 at 1:29 PM

So – you’re essentially going back to the gold standard…only you’re now using your own fiat currency as the basis. So it’s a new secondary fiat standard currency.

Absofrickinlutely brilliant. I can only dream of being this smart some day.

CycloneCDB on January 10, 2013 at 1:29 PM

These people have all the willpower of a heroin addict. They are NEVER going to stop spending regardless of what madness is required to get their cash fix.

sharrukin on January 10, 2013 at 1:31 PM

The Fiscal Facts of Life

Resist We Much on January 10, 2013 at 1:26 PM

you take the good
you take the bad
you add an ugly mooch
and there you have
the facts of life
the fiscal facts of life

GhoulAid on January 10, 2013 at 1:33 PM

Banana republic.

nobar on January 10, 2013 at 1:34 PM

So it’s a new secondary fiat standard currency.

Absofrickinlutely brilliant. I can only dream of being this smart some day.

CycloneCDB on January 10, 2013 at 1:29 PM

And of course fiat means Fix It Again Tony Treasury.

Flange on January 10, 2013 at 1:34 PM

What’s the difference between and IOU and calling someone and telling them, “I do not have the money now, but I will pay you some day.”

WashJeff on January 10, 2013 at 1:34 PM

Wonder if these slugs would fall for me sending in an ‘iou’ 4/15 on the taxes we have to pay?
L

letget on January 10, 2013 at 1:34 PM

Jedi mind tricks…

PatriotRider on January 10, 2013 at 1:35 PM

Has anybody considered cutting spending? Sounds crazy, but I hear that it works.

Mark1971 on January 10, 2013 at 1:36 PM

Why not just sign an EO to proclaim Monopoly Money as legal tender.

hawkeye54 on January 10, 2013 at 1:27 PM

Hasbro’s contribution to Obama campaign coffers was too small.

Archivarix on January 10, 2013 at 1:37 PM

That most people regard the IOU as more sensible than the coin shows how weak public understanding of the monetary system is.

— Matt Yglesias (@mattyglesias) January 10, 2013

Everyone knows that a strong understanding of our monetary system leads one to conclude that minting trillion dollar coins is a good idea.

/sarc

gwelf on January 10, 2013 at 1:38 PM

Works great for Social Security. What could go wrong?

ROCnPhilly on January 10, 2013 at 1:38 PM

Besides, it’s what they will be doing for everything once china stops buying our debt. In the end, counterfeit is counterfeit.

ROCnPhilly on January 10, 2013 at 1:41 PM

1. Platinum Coin

2. IOUs

3. Nationalization of 401Ks

Only a matter of time before some “well respected” and “prominent” Leftist spews forth the idea…

visions on January 10, 2013 at 1:42 PM

This just shows how desperate and fragile the progressive coalition is.

Once the checks stop flowing to any of the progressive client groups then the infighting will start.

Progressives will do anything to keep the spending going and increasing. They will try insane “tricks” that will ruin the economy. Eventually they’ll resort to VAT taxes and even more explicit massive income taxation on the middle class.

gwelf on January 10, 2013 at 1:42 PM

1. Platinum Coin

2. IOUs

3. Nationalization of 401Ks

Only a matter of time before some “well respected” and “prominent” Leftist spews forth the idea…

visions on January 10, 2013 at 1:42 PM

We’re kinda there already. Some Dem politician in California floated that idea a few years ago. You know it’s coming. When they need money(the real kind, not trillion-dollar coins), they’re gonna have to get it somehow. First, we’ll probably see a wealth tax of some kind. But after that, they’ll have to raid 401ks.

Doughboy on January 10, 2013 at 1:44 PM

So let me get this straight – for people who work and contribute to society, you’ll refund their cash tax overpayments with IOUs that will never actually be redeemable.

And for those who sit on their fat @$$es and do nothng and pay less than zero taxes, you’ll keep sending them my cold hard cash. Does that sound about right?

CycloneCDB on January 10, 2013 at 1:44 PM

My only question is whether or not I’ll get trillion dollar coins or IOUs from SS by the time I retire?

gwelf on January 10, 2013 at 1:44 PM

Dumb & Dumber – IOU scene

RedRobin145 on January 10, 2013 at 1:45 PM

We’re kinda there already. Some Dem politician in California floated that idea a few years ago. You know it’s coming. When they need money(the real kind, not trillion-dollar coins), they’re gonna have to get it somehow. First, we’ll probably see a wealth tax of some kind. But after that, they’ll have to raid 401ks.

Doughboy on January 10, 2013 at 1:44 PM

As Thomas Sowell has pointed out several times the liberal policies that bring high inflation are a stealth tax on investments. All this cheap debt (and hyper regulation of the economy) that has helped to fuel out of control spending is already built on robbing your investments of their value.

gwelf on January 10, 2013 at 1:47 PM

And people PRETEND that this is any different than the platinum coin idea?

And I use that word “people” loosely.

connertown on January 10, 2013 at 1:47 PM

The left and communists have not been so emboldened since FDR…

mnjg on January 10, 2013 at 1:49 PM

Is this how it works?

The government spends billions on whatever it desires against your wishes, but gives you an IOU for what you’ve earned, saying, I’ll pay you back after I tax you enough to collect the funds to pay you.

Is that correct?

ROCnPhilly on January 10, 2013 at 1:49 PM

California flirted with IOUs as far back as 1990, when the state ran out of money for about a week while the legislature brawled over a budget. It was avoided when many banks and vendors voluntarily agreed to delay collection of payments from state employees.

I do think any federal issuance of IOUs would almost have to trigger an immediate downgrade of U.S. credit though, and this is what the Obamans are trying to avoid at all costs.

rockmom on January 10, 2013 at 1:49 PM

Besides, it’s what they will be doing for everything once china stops buying our debt. In the end, counterfeit is counterfeit.

ROCnPhilly on January 10, 2013 at 1:41 PM

70% of our new debt is being “bought” by the federal reserve. In other words we’re “printing” 70% of what we’re borrowing.

As Mark Steyn likes to say – there isn’t actually an appetite or market for our bonds that supports debt spending habits.

gwelf on January 10, 2013 at 1:50 PM

Also, I think we really must begin a movement for the people to send IOUs as payment for our taxes in April if the Administration does this.

rockmom on January 10, 2013 at 1:51 PM

Anyone who thinks the economy isn’t just a big pile of IOUs hasn’t taken a look at the contents of the Social Security “trust fund” is recent memory.

Sgt Steve on January 10, 2013 at 1:51 PM

Wonder if these slugs would fall for me sending in an ‘iou’ 4/15 on the taxes we have to pay?
L

letget on January 10, 2013 at 1:34 PM

California taxpayers due a refund were included in the “received IOUs” group. Those who owed Sacramento were not given the IOU option. I will say this about communists – they take care of their power base. Notice the welfare cases were easily cast off – they’re only good for a vote or 10 per person. The union bribes ensure they are first at the trough.

Kungfoochimp on January 10, 2013 at 1:51 PM

Our country’s pretty much been doing this for nearly a century at least.

I’ll gladly pay you later – maybe – for a pork-burger today…

Logus on January 10, 2013 at 1:52 PM

Economics is hard.

Spending money, not so difficult.

Shy Guy on January 10, 2013 at 1:52 PM

If I had the trillion dollar coin could I exchange it for a trillion in gold from Ft. Knox?

Charlemagne on January 10, 2013 at 1:52 PM

Dumb & Dumber – IOU scene

RedRobin145 on January 10, 2013 at 1:45 PM

I can’t watch YouTube at work, but I know exactly what scene you’re talking about. It’s not a stretch to say that that’s pretty much how our politicians view all of these unfunded liabilities coming down the road. They insist that we’re committed to paying that money as if that’ll just magically make it happen.

Doughboy on January 10, 2013 at 1:53 PM

1. Platinum Coin

2. IOUs

3. Nationalization of 401Ks

Only a matter of time before some “well respected” and “prominent” Leftist spews forth the idea…

visions on January 10, 2013 at 1:42 PM

We’re kinda there already. Some Dem politician in California floated that idea a few years ago. You know it’s coming. When they need money(the real kind, not trillion-dollar coins), they’re gonna have to get it somehow. First, we’ll probably see a wealth tax of some kind. But after that, they’ll have to raid 401ks.

Doughboy on January 10, 2013 at 1:44 PM

401ks are not really FAIR.

Why is it fair that some that started off with so much “advantage” when those that have “so little” just need a “fair shake” and a “hand up”.

PappyD61 on January 10, 2013 at 1:55 PM

Only a matter of time before some “well respected” and “prominent” Leftist spews forth the idea…

visions on January 10, 2013 at 1:42 PM

It already has been spewed forth by “well respected” members of academia. The only thing left is to actually pass the laws to confiscate the IRA’s, 401K’s, and other retirement saving instruments. IMHO the only thing stopping this move is that the greatest concentration of wealth in 401K’s is held by lawyers. The dims would seriously inflame one of their primary support groups.

chemman on January 10, 2013 at 1:55 PM

Nobel Prize winner Paul Krugman argued for such IOU’s on Monday, though he called them “Moral Obligation Coupons.”

Why does this guy have a job, again?

Anyone who will owe taxes this year could just cut out the middleman and send in IOUs with your tax returns. Right? I mean, I would rather owe it to the government than beat them out of it.

ghostwalker1 on January 10, 2013 at 1:56 PM

3. Nationalization of 401Ks

Its been suggested. On the back burner ready when the time comes.

Spending money, not so difficult.

Writing IOUs for money you don’t have is even less difficult, so it seems.

hawkeye54 on January 10, 2013 at 1:56 PM

Hmmm….IOU’s (scrips) and pulling trillion dollar coins out of thin air…why didn’t I think of that years ago, hell, I could have retired by now!

I just sent all of my lenders an “IOU” and am taking the nickel I just hammered into the size of a quarter and stamped “trillion dollars” on it to deposit into my bank account! I’m rich now and will be retiring at the end of the week!/

Seriously though, this is absolute absurdity…but then again it is liberal/prog logic so I guess saying this whole coin/IOU thing is absurd is well, a bit redundant! Lord help us…

Liberty or Death on January 10, 2013 at 1:56 PM

First IOUs go to congress.
Then congressional staff.
Then to the WH and all its staff.
And then to the various Depts.

Jabberwock on January 10, 2013 at 1:57 PM

IMHO the only thing stopping this move is that the greatest concentration of wealth in 401K’s is held by lawyers. The dims would seriously inflame one of their primary support groups.

Hmm, for the right price I’m sure exceptions can and will be made for the select few.

hawkeye54 on January 10, 2013 at 1:58 PM

First IOUs go to congress.
Then congressional staff.
Then to the WH and all its staff.
And then to the various Depts.

Jabberwock on January 10, 2013 at 1:57 PM

Yeah…that won’t work for them, I’m sure.

ghostwalker1 on January 10, 2013 at 2:00 PM

Hey, now there’s a brilliant new “progressive” idea! Borrowing money from future generations…..

That’s never been tried before, has it?

UltimateBob on January 10, 2013 at 2:02 PM

When it all finally comes crashing down, you’ve lost everything, and your family is destitute, just remember who championed these stupid ideas.

Keep track of them. You and others may wish to have a chat with them and calmly explain to them why it didn’t work and why there was never any chance that it ever could have worked.

Maybe they will listen.

Maybe they won’t.

Maybe they’ll have one of their drivers drop you off at the bus station so you can travel back to your hovel…

ROCnPhilly on January 10, 2013 at 2:02 PM

Aren’t IOU’s from the General Fund all that is in the Social Security account other than current deposits?

Why is this news?

Tenwheeler on January 10, 2013 at 2:03 PM

Latest Next serious idea for fiscal-crisis solution: Platinum IOUs

Predicted headline for Ed’s next post on the subject …

ShainS on January 10, 2013 at 2:07 PM

That’s as good as money, sir. Those are I.O.U.’s. Go ahead and add it up, every cent’s accounted for. Look, see this? That’s the deficit. 16.5 tril. Might wanna hang onto that one.

AbeFroman on January 10, 2013 at 2:07 PM

Well, I’m going to ask for my govmint IOUs to be in $10 denominations. And then I’ll just take a few of them with me when I go to the store, pay my electric bill, put gas in my tank, etc. I’ll just hand over the necessary number of $10 IOUs, and the vendors can either take them to the govmint themselves or use them to pay off their employees and suppliers. Those suppliers can in turn use them to pay off their employees and suppliers, etc.

It’s a novel concept, I know.

CJ on January 10, 2013 at 2:08 PM

Say, if the evil rich would just pay their fair share in “moral obligation coupons” we would have some real revenue to put in the bank.

ghostwalker1 on January 10, 2013 at 2:08 PM

I’m tellin’ ya 0bama is going to try to get out of this situation by confiscating all our firearms and then selling them to his jihadi friends and the cartels.

LegendHasIt on January 10, 2013 at 2:11 PM

Hey, now there’s a brilliant new “progressive” idea! Borrowing Stealing money from future generations…..

FIFY. I don’t believe for a moment there is any consideration for re-paying future generations. At all.

hawkeye54 on January 10, 2013 at 2:12 PM

Can we use these IOU’s to offset the IOU’s we receive from the IRS?

This could become very complicated.

Cody1991 on January 10, 2013 at 2:12 PM

I’m tellin’ ya 0bama is going to try to get out of this situation by confiscating all our firearms and then selling them to his jihadi friends and the cartels

Nah, he’s gonna have ‘em redistributed as Obamaguns to selected local organized Neighborhood Watch organizations to keep us all compliant and obedient servants.

hawkeye54 on January 10, 2013 at 2:15 PM

These are all reality-avoidance tricks. Reality will not be evaded that easily.

For this administration, reality is a fictional concept.

sadatoni on January 10, 2013 at 2:17 PM

I will say this about communists – they take care of their power base. Notice the welfare cases were easily cast off – they’re only good for a vote or 10 per person. The union bribes ensure they are first at the trough.

Kungfoochimp on January 10, 2013 at 1:51 PM

Just goes to prove that when it all collapses in the coming economic cataclysm that the government employees and their unions will get the cheese that’s left, not Obamaphone Lady.

There will be plenty of wine and Kobe beef in the White House you can be sure.

wildcat72 on January 10, 2013 at 2:18 PM

Can we use these IOU’s to offset the IOU’s we receive from the IRS?

No….the IRS only accepts our hard earned income, nothing less. Unless you are a megabillionaire like Warren Buffett, and can afford smarter attorneys than the IRS who can fend it off up for several years in a dispute on the amount of taxes owed.

hawkeye54 on January 10, 2013 at 2:21 PM

The funny thing is, I don’t remember Congress authorizing the executive branch to issue “registered warrants”.

Come on, chant with me…

D-FAULT!
D-FAULT!
D-FAULT!

Steve Eggleston on January 10, 2013 at 2:24 PM

Nah, he’s gonna have ‘em redistributed as Obamaguns to selected local organized Neighborhood Watch organizations to keep us all compliant and obedient servants.

hawkeye54 on January 10, 2013 at 2:15 PM

Run by the New Black Panthers?

Steve Eggleston on January 10, 2013 at 2:25 PM

hawkeye54 on January 10, 2013 at 2:21 PM

Yeah, I should have added the sarc tag.

“Rules are for little people because they must be kept in their place.”

~~~~~ Author Unknown (not really) ;)

Cody1991 on January 10, 2013 at 2:26 PM

Why don’t they put the platinum coin and an IOU in a can and Obama can kick it live on TV?

CW on January 10, 2013 at 2:26 PM

I kept trying to tell Dr. Melman that I was fine, and it was everyone else that was crazy. And I was right. I’m not taking any more calm down pills. And I’m going to start digging again. Cause U crazy. U all crazy.

Axe on January 10, 2013 at 2:27 PM

How does that old saying go…

Don’t learn the tricks of the trade; learn the trade.

Hey, Congress – and all you Dems and pudits and libs out there – instead of trying to fashion all of these work-arounds and cutesy options, HOW ABOUT DEALING WITH THE ACTUAL, FREAKIN’ PROBLEM!?!!

ss396 on January 10, 2013 at 2:28 PM

Now, are going to keep that coin or IOU in the lockbox?

Happy Nomad on January 10, 2013 at 2:30 PM

Run by the New Black Panthers?

La Raza, Muslim Brotherhood, SEIU, UAW, et al. His dream of a National Civilian Security Force (TM) fullfilled.

I’m sure that Barry’s admin has a list of the perfect and well qualified organizations and people for such a task.

hawkeye54 on January 10, 2013 at 2:31 PM

“Rules are for little people because they must be kept in their place.”

Barry’s admin and CONgress agrees.

hawkeye54 on January 10, 2013 at 2:33 PM

Can we use these IOU’s to offset the IOU’s we receive from the IRS?

Offset? Hell, I’m just going to send them one of those “Moral Obligation Coupons” and tell them I’ll get around to paying them when I stop needing stuff like a 70″ flatscreen.

Happy Nomad on January 10, 2013 at 2:34 PM

This might be the answer to our government spending problem. If the government starts sending out IOUs instead of paychecks to bureaucrats or cash to contractors then the government will soon find itself with few bureaucrats or contractors willing to work for it. But I doubt thats what our liberal countrymen have in mind.

It’s obvious what will happen. The government will decree its IOUs must be accepted for purchases made by the government and then our wise and kind dear leader will simply pick and choose who will get the IOUs and who will get cash. We wouldn’t want any of those corporations or rich people getting money, now would we?

Browncoatone on January 10, 2013 at 2:35 PM

when the end comes for this country, it’s not going to be pretty.

RedInMD on January 10, 2013 at 2:35 PM

Now, are going to keep that coin or IOU in the lockbox?

Happy Nomad on January 10, 2013 at 2:30 PM

You’re not paying attention. /
They will store it in a can.
/

CW on January 10, 2013 at 2:36 PM

Look, this is the administration we’re stuck with for the next four years, and, like it or not, we may as well accept the fact that they’re an incompetent bunch of knuckleheads who haven’t a clue how to get us out of this mess, only how to cast blame and create diversions like imaginary coins and now imaginary payments. Lord Almighty.

scalleywag on January 10, 2013 at 2:39 PM

Hey GOP; somebody get out there and proclaim that we can easily solve the debt ceiling limit by paying our bills in gold bullion from Fort Knox.

It’s ours, we have it, and it has value. For that matter, start selling Federal lands. And mineral rights. We have assets. If we’re going to talk about the moral obligation of meeting our payments, then we ought to discuss how to meet those obligations in real terms.

If the left soils their depends at the thought of repaying our debts with items of actual value as opposed to, say, more debt bonds backed by literally nothing, or by magic platinum beans, then we’ve finally framed the conversation properly.

TexasDan on January 10, 2013 at 2:44 PM

when the end comes for this country, it’s not going to be pretty.

Yup.

At a time not so long ago, the ideal vision of what the USA would be is Karen Webb.

The vision of our present, let alone our future, is looking more like Karen Lewis.

hawkeye54 on January 10, 2013 at 2:45 PM

Can we use these IOU’s to offset the IOU’s we receive from the IRS?

Offset? Hell, I’m just going to send them one of those “Moral Obligation Coupons” and tell them I’ll get around to paying them when I stop needing stuff like a 70″ flatscreen.

Happy Nomad on January 10, 2013 at 2:34 PM

Yes, I sent them a letter saying that I have referred their correspondence to Tim Geithner and Charlie Rangel stating that it’s always best to get advice from the “Top” and that I can only accept directives from those who are best informed to deal with the IRS.

Cody1991 on January 10, 2013 at 2:45 PM

….accept the fact that they’re an incompetent bunch of knuckleheads who haven’t a clue how to get us out of this mess….
scalleywag on January 10, 2013 at 2:39 PM

That erroneously assumes that they WANT to get us out of this mess.

LegendHasIt on January 10, 2013 at 2:46 PM

Hey, I remember scrips. Those were the things that the Colonies and/or Continental Congress issued to finance the war. Then after the war there was lots of debate between politicians and everyone else about honoring them, while lots of greedy people, mostly politicians and their lackeys, went around buying them up for ten cents on the dollar.

Then all of a sudden it was decided by politicians that these scrips should be honored for their full value.

Makes sense we should do it again.

Dusty on January 10, 2013 at 2:48 PM

I do love that this throws into sharp relief the value of the money we’re using to actually pay our bills right now. The government is going to send you a piece of paper; either one that says “Legal Tender” on it somewhere, or one that says “IOU.”

They’re both worth the same at this point. That should bother people. If someone worries that the IOU’s are worthless but thinks dollars issued on the basis of new debt are not they’ve got a serious disconnect.

TexasDan on January 10, 2013 at 2:49 PM

Can I pay my taxes in IOUs?

tommer74 on January 10, 2013 at 2:50 PM

That erroneously assumes that they WANT to get us out of this mess.

My assumption is that they WANT us so deep in this mess, it’ll be impossible to get out of it. They are working to see to it that we don’t.

hawkeye54 on January 10, 2013 at 2:50 PM

Seeing as how we have so many more borrowing vehicles now, I wonder where scrips would be placed in the line for haircuts. Anyone know, or is that merely a question of who is holding them at the time the barber shop opens?

Dusty on January 10, 2013 at 2:51 PM

RedRobin145 on January 10, 2013 at 1:45 PM

I love that scene.

tommer74 on January 10, 2013 at 2:52 PM

That erroneously assumes that they WANT to get us out of this mess.

LegendHasIt on January 10, 2013 at 2:46 PM

Yea, that’s pretty obvious when you listen to their idea of a serious “crisis solution.”

scalleywag on January 10, 2013 at 2:53 PM

“I’ll gladly pay you Tuesday for a hamburger today.”

Always worked well for Wimpy, right?

Marcola on January 10, 2013 at 2:53 PM

I wonder where scrips would be placed in the line for haircuts. Anyone know, or is that merely a question of who is holding them at the time the barber shop opens?

How long before bartering for goods and services becomes a standard practice?

hawkeye54 on January 10, 2013 at 2:54 PM

hawkeye54 on January 10, 2013 at 2:50 PM

Exactly.

LegendHasIt on January 10, 2013 at 2:55 PM

I get the biggest laugh out of the president saying Congress is the one who got us into this mess, Congress is responsible for getting us out, which is true. But it’s as if he’s saying he himself had no hand in the $16.4 trillion debt and he hadn’t taken a pen to any of the new spending bills. The man is truly insane.

scalleywag on January 10, 2013 at 2:56 PM

“I’ll gladly pay you Tuesday in 2023 for a hamburger today.”

Always worked well for Wimpy, right?

In keeping with modern trends. And who ever believed Wimpy was anywhere to be found on Tuesday, raise your hand……

Yeah, I thought so.

hawkeye54 on January 10, 2013 at 2:57 PM

How long before bartering for goods and services becomes a standard practice?
hawkeye54 on January 10, 2013 at 2:54 PM

OK, but don’t forget to pay your taxes, (in real money) on the full market value of those bartered items. That is actually the law. on any barter over $1.00 value.

LegendHasIt on January 10, 2013 at 3:00 PM

OK, some practical experience.

I am a retired Peace Officer who worked for the state. Back in the 1970′s [not long before my time], there was a budget fight and our crack legislature did not appropriate money to pay several departments worth of state employees. So the state issued just that kind of registered warrants in lieu of checks. They were denominated in US dollars, but were only backed by a promise that someday the legislature would get over its rectal-cranial impaction, and actually appropriate dollars to cover them.

In my county, we have a lot of state employees. Because the warrants were literally not checks, but were IOU’s with no set date of negotiability in dollars; the local banks and some stores only accepted them with a 15% discount. It was a functional 15% cut in pay. The banks could afford to take the risk of holding them until they would theoretically be honored. Not all businesses could. And they could not be used in secondary transactions, because then they would be circulating as currency and the Federal Reserve and Treasury are jealous gods.

Next pay period, there were real dollars. And the registered warrants were paid. And the employees were shafted 15%. As will anyone who accepts the Federal registered warrants, albeit the percentage is yet to be determined. It is key that the Federales will insist on debts being paid in actual dollars.

There is a tradition amongst some of our old timers/retired. Even though we are on direct deposit now, you don’t spend out of a new paycheck until you confirm that the state has actually put money in the account. Because you cannot trust them.

Will banks and vendors accept those warrants at face value when it is technically illegal for them to spend the face value until it is paid in dollars? Will there be discounts for Federal secondary scrip? How do you deal with the fact that most Federal payments are electronic, and therefore you are not sure if you have been paid in dollars or scrip? Actually, I expect that EBT/welfare payments will be made in negotiable form, because the consequences of the machines reading 000000 when the cards get swiped will be interesting.

There is no difference between printing those registered warrants and printing a’la Weimar. And the markets will not miss that.

Gresham’s Law is almost as inviolable as the limitation on the speed of light. And I will second Moe Lane’s suggestion that the Trillion Dollar Coin be named the Gresham, and if we go direct scrip instead of pseudo-valuable coin; they should be called Greshams.

And we can be sure that the goolie-less, gormless Institutional Republicans will smile and nod and go along with this.

Subotai Bahadur on January 10, 2013 at 3:05 PM

The IRS provides for fines of up to $75,000 if the unreported barters are reported within a 30-day window; $150,000 if filed after the 30-day window but before August 1; and $250,000 if they are reported after August 1.

LegendHasIt on January 10, 2013 at 3:07 PM

I always thought IOUs just got ya’ cracked kneecaps.

stukinIL4now on January 10, 2013 at 3:15 PM

In short, the platinum coin trick an unnecessary idea and a bad one, but it is not, as some have argued, unconstitutional or illegal.

Actually, the Pt coin trick is very arguably illegal. The law that all these lefties keep trotting out has a word in it that they keep ignoring – bouillon. A bouillon coin has a very specific definition in that it is a coin whose face value is based on the value of the material from which it is made and/or back by. In other words, a trillion dollar Pt coin has to either be made of a trillion dollars worth of market-value Pt metal (definitely way too big to be put in a vending machine) OR the US Mint has to be paid a trillion dollars of something (dollar bills, gold coins, etc) in order to mint this coin. Obama can’t borrow a trillion to make the coin (a la the debt limit problem) so unless he’s got some spare gold bars lying around the White House (Obama’s stash?), then the entire idea falls apart.

Not to mention that both Treasury lawyers and US Mint lawyers would have to sign off on this dubious deal and I can’t think of anyone who would put their reputation on the line for this nonsense….

powerpickle on January 10, 2013 at 3:20 PM

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