Thread by @rohangrey

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein I sent this explanation directly to Alex earlier, but might as well post here as well.

1. The program is intended to be a money-financed fiscal program - a term others have used (ie the Waters house financial services committee bill), but in their approach, "money financed

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein fiscal" means the treasury issues treasury debt, and the fed buys it up. That is regular debt-financed fiscal+QE Whereas this approach uses the Treasury's own parallel money creation capacity, which it has retained since the birth of the republic, to finance its own fiscal

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein spending. Not "Fed-supported deficits" or "Fed providing the money" or "helicopter drops as a last resort of monetary policy." Fiscal money for fiscal policy. If there is any negative fallout from the program, it will be born squarely by Congress and the Fed.

2. Economically,

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein there is little difference between financing via coin seigniorage and financing via debt issuance, but legally and optically/politically there's a big difference. Coins do not count under the debt ceiling or as part of the national debt. They do not count as 'borrowing' from

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein China/our grandchildren/the bond market and they do not need to be 'paid back'. That has significant effects on how these ideas are debated today (ie references to "taxpayer money," can we afford to be this bold, etc), as well as - critically - post-crisis. We saw after 2009 a

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein massive backlash against the large stimulus with the tea party, the simpson-bowles deficit reduction commission. Even Obama himself said in a 60 minutes interview that we are "out of money now". This time, by contrast, Minneapolis Fed president Neel Kashkari was on 60 minutes the

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein other day saying the Fed has an "infinite amount of cash" to help the banking system. Powell said the Fed's capacity to intervene is "unlimited" and told Congress to 'think big, fiscally." The point of using coin seigniorage is to make very clear that Treasury always has, and

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein has always had, this power internally. It does not need to ask the Fed permission or rely on the Fed's balance sheet to conduct money-financed fiscal policy. To do so would further entangle the two institutions in a way that is both unnecessary, and confusing to average people in

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein the sense that it invokes fear about a loss of central bank independence, when in fact coin seigniorage does nothing of the sort (the Fed retains complete control over monetary policy).

3. While it is entirely possible to simply pass a new law directing the Treasury to, for

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein example, create new digital dollars, or to remove the $300 million cap on the issuance of US currency notes, instead of issuing a platinum coin. However, the coin approach has three unique benefits relative to those options: a) the law is already on the books, which means this

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein isn't about some abstract, future possibility, it's about using existing legal authority, right now, which is far more concrete and changes the terms of the debate over the operations of this program from speculative to descriptive; b) the #MintTheCoin concept was floated years

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein ago, albeit in the different context of the debt ceiling shutdown, so there is already a social-psychological hook and some degree of familiarity that this proposal can build on, which helps get past the initial shock and incredulity many people have towards the concept; and c)

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein coins are metaphorically and psychologically simple to understand and discuss. They have a vivid imagery, aesthetic, and history to them that is simultaneously 'tangible', but also nominal, since we're obviously not proposing some 10 ton slab of platinum.

4) Some people argue

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein that the coin is a 'risky' option, but the actual sophisticated critics i've read acknowledge it is no more risky economically than regular debt financing, theres no additional inflation risk or anything like that. The only major risk is that it alters the public balance of power

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein between fiscal and monetary policy in a way that would lead the public to demand greater use of the public budget. I don't see that as a real substantive concern, that's just ideological posturing by people who don't want an informed electorate to understand the full capacity

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein available to their own government. As I mentioned above, the Fed retains complete control over its ability to conduct monetary policy regardless of the coin being minted, and even today with the Senate stimulus, there is a ~$400bn appropriation to Treasury to the Exchange

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein Stabilization Fund which is intended to capitalize a series of Special Purpose Vehicles (SPVs) set up by the Fed to engage in over $4trillion of lending to risky actors, for no actual technical reason other than that the Fed wants political cover from the Treasury so that any

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein initial losses will not be born by the Fed. So in my view, there is already plenty of unique and unprecedented entanglement and accounting games going on between the Treasury and the Fed, it just all happens to be going in one direction in a way that furthers the perception that

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein the Treasury is financially impotent and must always come begging to the Fed for support, when in reality, under the surface, it is the Fed that desperately needs support from the Treasury when it matters.

5) Finally, while there were some interesting debates over the legality

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein of the platinum coin option in the context of the 2011-2013 debt ceiling shutdown (I found them so interesting I wrote a law review article on the issue: papers.ssrn.com/sol3/papers.cf…), all of that is neither here nor there in this context, because Rep. Tlaib's proposal is to pass a

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein new law directing Tsy and the Fed to do it this way. Congress has absolutely plenary legal authority over monetary issues, so if it passed that law it would leave no doubt as to its intent or the scope of the relevant law, which is entirely different from the previous 2013 debate

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein over whether the Executive could use this law as exists on the books without additional direction from Congress. And it is worth noting that the Obama administration ultimately decided not to pursue the coin not because it would have necessarily been deemed illegal, but because

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein He explicitly wanted to keep pressure on his Republican opponents to buckle in the context of a budget negotiation, and the coin would have functioned as a pressure-valve by , taking the threat of unconstitutional default off the table. I personally think this approach - to put a

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein gun to the head of the American economy and threaten to pull the trigger unless the Republicans play ball - was very dangerous precedent to set, and highly problematic legally and politically (the Repubs also obv deserve their share of blame). But its neither here not there to

@TylerEvilsizer @AlexParkerDC @NeilShader @MarcGoldwein the current situation, or the reasons for preferring to #MintTheCoin over other ways to conduct money-financed fiscal policy.

/fin