The stroke of brilliant political brinksmanship has met its end. The plan to cover authorized expenditures the require raising the debt ceiling with a trillion dollar coin has been nixed by the Federal Reserve.
If the Fed won't play ball then it doesn't really work. An administration determined to finance the government via platinum coin seigniorage over the objections of the Federal Reserve Board could probably find a way to do it, but a high-profile fight with the Fed would drastically undermine any market reassuring properties of this means of avoiding default.This weakens the Obama administration's bargaining position over the next round of hardball budget negotiations.
Here is a little thought experiment. Do what the banksters do with the acquiescence of Treasury and The Fed. But first, context:
Banks in general are supposed to use market prices when they tell investors how much the vast majority of the bonds and stocks and other financial assets they own are worth. That's called mark-to-market accounting. But when market prices aren't available or reliable, banks are allowed to use internal models or their own judgment to determine how much a security is worth.Why can't "mark-to-make believe" work as well for the Treasury as it has worked for the banks? Fannie Mae and Freddie Mac are littered with crap mortgage-backed securities. It is paper, after all, that reflects some value of the underlying asset. The Fed has shown a willingness to accept MBS in exchange for a cash infusion. There is a precedent for this idea.
"any junk will do"Wasn't that the premise of the trillion dollar coin all along?
