This is going to be a quick hit. But I thought I should put this out there now that the Platinum Coin idea has been rejected, something that makes this downside scenario more likely. The idea here is that we are in an interregnum period similar to the 1933-1937 period that will unfortunately come to an end. I’m going to spell this out briefly because it highlights my guiding macro thesis for the past few years on the US.
John Carney at CNBC has written a good column today detailing the Obama Administration’s negotiating position in the debt ceiling crisis. Obama does not want to use ‘The Coin’ or the 14th Amendment or any other tricks to keep this from spiralling out of control. The thinking here is that by just playing this straight, it will put pressure on Republicans to eventually cave – as they did when they raised income and payroll taxes at the beginning of the year, something they said they would never do.
John thinks that taking this approach is dangerous because it makes default a real possibility. I agree. Nonetheless, this is where we are. To be s