One of the ideas discussed during the fiscal cliff debacle in late 2012 and early 2013 to deal with the GOP's intransigence on raising the federal debt ceiling was the platinum coin trick.
The idea was pure genius. Using previously-granted legal authority, the Treasury would mint a platinum coin with a face value of $1 trillion and would sell that coin to the Federal Reserve which would then credit the U.S. government with the cash. That would eliminate the need for additional government borrowing any time soon and...presto...the White House's debt ceiling problem would go away.
The White House eventually said no to the platinum coin trick by saying that it didn't have legal authority to do the sale. It also became apparent when the administration rejected the other debt ceiling escape hatches like the 14th amendment that the White House's political strategy was to keep the pressure on congressional Republicans by making them deal with the one and only debt ceiling process: voting on it.
The news channels are only getting part of the story right about Ben Bernanke's first press conference today.
This is not an attempt by the Fed to provide additional information to financial markets; the Fed already communicates with them on a regular basis. In fact, that's always been the Fed's primary target audience.
The press conference is the latest piece of a strategy the Fed has been using to broaden its audience by going beyond financial markets and over the head of members of Congress by speaking directly to voters. It's based on two perceived needs. First, Bernanke told his staff over a year ago that the Fed had no choice but to talk to Main Street on a regular basis because, if it didn't, it was going to have to explain it's actions at the worst possible time -- after a crisis occurred. Second, as I've written about on CG&G over the past year, the Fed has a political bullseye on its chest and has no choice but to build public support for what it does and how it
This story in yesterday's New York Times by Binyamin Appelbaum about how Federal Reserve Board Chairman Ben Bernanke now plans to hold regular press conferences about Fed policies and projections is actually far more interesting and important than is reported.
My sources in the Fed told me almost a year ago that, in the wake of the criticism the Fed was receiving about its handling of the financial crisis, Bernanke had made a decision to speak publicly more often and to a much wider audience than either the Fed or he had ever done before. I was told that Bernanke had decided that he was going to have to talk to the public one way or another and, rather than wait for a problem to occur and then have to defend his actions to an audience that hadn't heard much from him directly, he preferred for the Fed to establish a rapport and talk proactively.
So Ben Bernanke, the Fed chairman, today explicitly justified the logic for another round of quantitative easing (or "QE2") to salvage our sputtering economic recovery.
On one level, what's striking about Bernanke's speech at a conference of the Boston Fed is how textured, detailed and unambiguous it is in trying to explain a decision the Fed won't officially make until at least Nov. 3. Bernanke acknowledges that consumer spending has been inhibited by a "painfully slow'' recovery, that job growth is too slow to make any real dent in unemployment through the end of next year and that inflation is actually running unemployment is coming down too slowly and that inflation is "too low" for the Fed's comfort. Then Bernanke spells out the implications for monetary policy, with the bottom line being that the time is right for QE2.