[ garth ] svens Small Business earns 2 cash back on every purchase, every day woohoo so thats ten security gators, right . Put them on my spark card why settle for less . Testing hot tar. Great businesses deserve great rewards [ male announcer ] the spark Business Card from capital one. Choose unlimited rewards with 2 cash back or double miles on every purchase, every day whats in your wallet . Heres your invoice. Good morning from new york. Im chris hayes. President obama said american troops in afghanistan will shift to a support role by spring and by the end of next year americans war in afghanistan will be over. The flu is now reached epidemic levels according to the centers for Disease Control although it may be peaking in some parts of the country. Right now, my story of the week. The magic coin. Odds are by now you heard something about the trillion dollar coin ideas that thanks in part to others has managed to catapult from the margins of the internet to the center of beltway conversation. The idea first proposed in 2010 by a george jrnlg lawyer commenting on a blog under the screen name beta wolf has received endorsements from a number of members of congress. On wednesday white house spokesperson jay carney fielded a question about the proposal from our own chuck todd. Follow up on debt ceiling. I know your position hasnt changed. Do you have a position on this trillion dollar coin business . I would simply go back to what i said. The option here is for congress to do its job and pay its bills. Bills that have already been racked up. Will you totally rule it out . You can speculate about a lot of things. But nothing needs to come to these kinds of, you know, speculative notions about how to deal with a problem that is easily resolved by congress doing its job. Okay. Sure. But if congress doesnt do its job, heres how the coin would work. Republicans are once again threatening to hold the debt ceiling hostage as they did in the summer of 2011. They will not raise the amount they can borrow. Were already slated for european levels of austerity this year. If no deal is reached, the u. S. Has to start stiffing its creditors, deciding how to prioritize payments which will cause markets to freak and Interest Rates to spike. Enter the coin. It turns out there is a subsection of the u. S. Code called dominations specifications and design of coins that includes the following profession. The secretary may mint and issue platinum coins and proof platinum coins in accordance with such denominations may prexrip from time to time. The original intent of this legislation is to give the secretary of the treasury latitude to issue kmemtive coins for collectors but the plain meaning of the statute is clear. They can issue a platinum coin in any domination as the secretary of the treasury designates. The idea of trillion dollar coin advocates is the president would direct the treasury to mint a trillion dollar coin and deposit it in the bank account if he Federal Reserve and we have a trillion dollars more in the bank and we dont have to worry about the debt ceiling. If this sounds surreal or magic magical, you are not wrong. Its bizarre enunprecedented. Even if its illegal, it seems to run against our expectations of how the government does and should behave. Its the kind of thing that justice isnt done. But that is the entire point. Behavior of individuals is constrained by the formal rules, implicit prohibitions that are not spelled out but just not done. And what they have excelled at in the era of obama is exploiting the gap between the two. Theyve made a habit of doing the thing that just isnt done. Requiring a 6 o vote majority for every procedural vote wasnt done. And then republicans did it. Refusing to confirm any candidate for an open position because you object to the positions very existence just wasnt done but Senate Republicans did precisely that with the newly kree aed Consumer Protection bureau. And most clearly before the summer of june 2011, they didnt use the debt ceiling as a bargaining clip to extract ransom and they didnt credit default as a means to gain political leverage. The president is reticent to meet this degradation of previous norms with ideas of his own. But there is no way to unilaterally maintain norms. Once theyre gone, theyre gone. The only way to produce a new set of healthy norms is do some innovating your own. Idea spookz republicans because it is so out of character and would gleefully and violently their own expectations of how democrats play the game. The National RepublicanCongressional Committee is ballistic on the idea railing against the coin. Nrcc chair greg walden says they have rushed into the fray. The last thing we need is for the treasury to just simply mint a new coin made out of platinum that would weigh 44 Million Pounds if tied to the value of platinum. That would sink the titanic. The only problem here is that he completely n lly misunderstae idea, a new trillion dollar coin wouldnt be made of a trillion dollars of platinum. Its really just an invention. John kenneth once said the process by which banks create money is so simple but the mind is repelled. The same can be said of how our government creates money. The simple truth it is creates money out of thin air. Someone at the Federal Reserve punches in a number in a spread cheat and more money. And in moments of crisis, this monetary magic that helped the u. S. Avoid catastrophe. This cartoon from lincolns time shows and fdr ditched the Gold Standard to get us out of the great depression. They were about as ridiculous as a trillion dollar coin then. There are rules that guide legal tender. What makes money valuable is social convention, a norm. We all agree its valuable so its valuable. The genius of the trillion dollar coin isnt it provides much needed leverage against a foe unincumbered, it illustrates the uncomfortable reality of modern capitalism. Money is nothing more than a shared illusion. Its a kind of magic. Is it good magic or bad magic . Were going to ask my panel right after this. Announcer meet jill. She thought shed feel better after seeing her doctor. And she might have, if not for kari, the identity thief who stole jills Social Security number to open credit cards, destroying jills credit and her dream of retirement. Now meet amanda. With a swipe of her debit card, she bought some gas. And an allexpensepaid trip to hawaii for ben. Ben is the identity thief who used a device called a skimmer to steal her information from her card to open a fraudulent account. 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You have so much to protect, and nothing to lose when you call lifelock right now and try 60 days of Identity Theft protection riskfree. 60 days riskfree use promo code onguard. Order now, and get this document shredder, a 29 value, free call or go online now. [. ] joining me at the table is heidi moore, dylan glenn, managing director of guggenheim partners, stephanie helton, professor of economics of missouri kansas city. And joe weisenthal, one of the earliest and most outspoken evangelists for the trillion dollar coin started the mint the coin hash tag. I promoted it. Ive done this monologue about the coin. When i got to the table you said that gave me goosebumps. You said it was chilly. So let me start with you. Let me start with the skeptics here. Heidi, you wrote this piece. You think this is a ridiculous idea is everyone is getting trolled. Which is selfevident. But i think kind of to take it to the base, it sounds like, okay, here the thing. Congress is not going to default. Congress is not allowed to not pay its debts. So when you say we are going to create an imaginary coin to face your imaginary default, its like im going to take my nerf bat and ruin your super soaker. This is not real and the deficit is real. We can be talking about education, programs that are going to be cut and were not doing it. The realness lets establish the realness here first. If they do go over if they dont vote to raise the debt ceiling, there will be consequences. Absolutely. Theres no disagreement about that, right . Clearly. Yeah. One of the arguments that republicans and sort of apologists for the house gop frequently make is that well, you know, this whole idea of a default and weve taken ten times more revenue every day than we pay in Interest Payments which is not technically true. There are days we dont take in as much revenue as there are Interest Payment thats day p its a discussion about whether were going to pay past promises or not. Lets say we werre not going t default on the system, were a rich country debating are we going to honor our promise thats weve already made which is already preposterous. Its not this super soakernerf thing. Its a real threat of not paying our bills. This is a real situation. It is a real threat . You know, i think that it certainly not a threat that is priced into the market today. So the market is pricing it in but this is a bluff . I think the market thinks its a silly conversation in washington. Im not talking about the coin. Im talking about the republican im saying its in response to the idea that republicans would take us through a partial default. Let me be an apologist for the congressional majority here. Fire away. I think the markets, governments around the globe would like to see the United States government be responsible and i think that responsible thing is figuring out a way to not give an additional credit card to a child that is already spent to its borrowing limits without putting in place some sort of regime that changes habits. But every time i hear this from someone and particularly someone who does work in Financial Markets, you have to give me a coherent account of why that is not being priced in right now. Everyone will go around saying you have to have long term deficit reduction. Trsh r treasuries are trading real Interest Rates. But at some point the music stops. You have to give an account why they are not pricing the proper risk of debt. First and foremost, i think markets are smart enough to know this is the currency of the world and so on and so forth. Second of all, if, you know, if the policymakers in washington, d. C. , arent grown up enough to come up with a scheme that enables us to meet our current obligations which everybody around this table and everyone in the country knows we will, but at the same time be responsible in the future on new obligation thats we take on, you know, then theres a problem. Talk about this responsibility and talk about the role that currency plays in this. I think the idea of the trillion dollar coin is interesting and important and its from a game theory perspective, you have two people playing chicken. It allows one side to make a kind of similar bluff that other side can. So it sort of weirdly gives us equal leverage. So it gets to something profound about whether or not dylan is right about we have to responsibly pay off the debts. Hes not right. And the reason hes not right, look, we always we dont pay off the debt. We will never pay off the debt. What the u. S. Government does is redeem treasuries. And theres a difference. When you and i go into debt, we pay by transferring liability of a third party. When the u. S. Government issues debt, they dont transfer liabilities of anybody else. It issues the own currency to redeem the outstounding debt. They can never run out. The u. S. Government can never run out of dollars. They come from a United States government. They dont come from china. Were not going broke. Were not putting our children into bankruptcy. Were putting the Balance Sheet at work which is fine. We dont even need a coin, actually. Thats where we are. This is a way, by the way, i should explain to people were putting the federal Balance Sheet to work, we increased the money supply in different methodologies during the crisis. The trillion dollar coin idea and its fun because it has austin powers aspect to it is a way of doing sterilize what is called sterilizing easing throughout back door, right . Its a way to create an accounting mechanism that expands the monetary supply. It would allow the United States to put the Federal Reserves Balance Sheet to work for the rest of us for maybe a change. And so when we talk about the trillion dollar coin, nobody says whos going to bite coin, where are they going to get money to do it . This is your point in the opening. If the Federal Reserve is required to take the cane, they use the keyboard and they mark up the size of the treasurys account the same way the Federal Reserve pays for everything. Yes. The Federal Reserve does not have a bank account in any other bank. There is only one way they can spend and that is by creating money out of thin air. So were in the weeds now. If im hearing you at home and im even hearing you at the table now, if that that work, then lets make a ten trillion dollar coin and forget this fiscal cliff stuff and grand bargains. Lets just throw it in there, man. Why stop at ten . 20 trillion. Why is that why cant we do that . We can do that. Of course we can do that. There are rules. There have to be in order for our credibility, what the credit of the u. S. Government does, what it has always done since the creation by Alexander Hamilton is create credibility for a country that had none when it was born. If we dont treat our debt in a credible way if, we dont pay our interest on time if, we dont pay our bills, we lose the essence of what the entire government what all of our politics are based on. Youre talking about paying the debt. There are a few things. One of the things you is say way should have a discussion about our long term future. That is a discussion to have and we can debate how to allocate our resources. It is illegitimate to have that discussion arent debt ceiling. There are other ways we can establish leverage. It would not be great and would hurt the economy but we would not be risking our full faith in credit. People say we dont want to have this, specifically we dont want to have this conversation around the debt ceiling where there is this potential for a catastrophic effect. There are two ideas here. One is one i want to ask you if you think the kind of i want to get back to whether we think the republicans are bluffing, right . That is an poimportant part of this. I think this is important. Its like they say, the mind is repelled that can you create ten trillion out of air. This is a teachable moment. Lets teach on after the break. [ ship horn blows ] no, no, no stop humans. One day were coming up with the theory of relativity, the next. Not so much. But thats okay youre covered with great ideas like optional better car replacement from Liberty Mutual insurance. Total your car and we give you the money to buy one a model year newer. Learn about it at libertymutual. Com. Liberty mutual insurance. Responsibility. Whats your policy . [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. First this political question. Lets stipulate. I understand, like im aware this idea is bofrpgers. Sometimes bonkers ideas are right. Oftentimes theyre just bonkers. True. I also recognize if we know anything about the nature of obama presidency, it is an incredibly small conservative respect for institutional norms and a real, particular fli these kinds of procedural ways, just not real, like, innovative or outside the line. I think the odds of the white house actually ever doing this or threatening to do it are incredibly slim. I want to make sure this is clear. We do have this actual political battle that is coming up. It gets to the heart of what we are talking about when we talk about debt, when we talk about the debt ceiling and the deficit. Everyone throws the words around, right . This is the subject of every conversation on the beltway now. Deficitdebt. My sense is essentially no one knows what those words mean. What that thing is pointing to and what the implications of the meaning of that are. Before we get to that, dylan, on the political question, do you think i mean is the idea that we should all be thinking is the republicans are essentially hinting that theyll go, you know, cause a half shutdown but not really mean it. Here is john boehner on the debt limit fight essentially seeming to indicate maybe back off and hedge a little bit. He hedges noting he is not the ultimate lev