No coin

No coin trick. Treasury won't go for it; the Fed won't go for it.

The problem is that Obama now has no more options. He can no longer say to congressional Republicans: "I'm not arguing with you; I'm telling you..." In fact, congressional Republicans are now in a position to say those very words to the President.

Republicans do not negotiate. They must be bludgeoned into submission, and Obama has tossed away the bludgeon.

Make no mistake. This development means that Social Security is fucked. The people who tried to misinform you about the coin are all ideologues who want Grandma to have less money.

Krugman:

But as we all know, the last debt ceiling confrontation crept up on the White House because Obama refused to believe that Republicans would actually threaten to provoke default. Is the WH being realistic this time, or does it still rely on the sanity of crazies?

The thing is, the coin option sounds silly, but it clearly obeys the letter of the law. As far as I can tell, none of the other options — other than outright surrender — has the same virtue. Failing to pay debt service would be a breach of contract. Paying contractors, and maybe Social Security recipients, in scrip would violate the law, which says that they should be paid — not given IOUs.

Josh Marshall:

I think this is what the White House means by not negotiating. No way out. The President is saying “we’re not going to play that game anymore.” We’re not going to engage or be co-opted by your attacks on the country.

The problem is you’re dealing with people who simply may not flinch. Who may happily break what generations of Americans have spend centuries — literally centuries — building.

This is where I’m glad I’m not President. Because I don’t know what I would do if and when the Republicans really...like really force the first default in over 230 years of American history. But he’s drawing that line. The Platinum Coin just muddies it.

No, Josh. The coin gave Obama a way to avoid drawing a line which the Republicans will surely cross.

Matthew Yglesias:

Direct discussion of the platinum coin was a good reminder that many people, including influential media figures, appear to have no idea what money is or how the monetary system works. Apart from the shockingly widespread view that the value of coins is determined by their metallic content, there was a lot of insistence that creating money was somehow an act of "magic." In fact, the way all legal currency is created is that a government agency creates the money. Typically that's the Federal Reserve accommodating bank demand for base money. But all kinds of things can happen. Forget "Quantitative Easing." When the Fed does the thing that reporters call "raising interest rates" it doesn't pull an interest rate lever. It sells bonds on the open market in exchange for money. And when that money enters the Fed, it vanishes. When they "lower interest rates" they buy bonds on the open market in exchange for money. Where do they get the money? From nowhere. They just make it. That's money. Whether the electronic process of attributing more or less money to an account is accompanied by a little piece of platinum or not is wholly irrelevant.

Yglesias reflects a point I made earlier: The coin debate reminds us that money was always a surreal, abstract and arbitrary concept. Has been for thousands of years.

Digby:

But since they've thrown away their only bargaining chips before they even started, it's fair to say that anything they agree to from now on should be seen as something they wanted, not something they needed.

Joe Weisenthal at Business Insider:

On background, a Democratic aide in the Senate says: "it's certainly a strange negotiating strategy to go out of your way to decrease your leverage by taking options off the table."

The Agonist:

In fact, it sounds very like the Dem plan, from people who all earn more than the national average, is something along the lines of “The Republicans will blink first but even if they don’t and the economy tanks all the poor people who will get even poorer will blame them and vote for us, so where’s the downside?”

Me:

Obama destroyed his second administration before he even placed his hand on the Bible and took the pledge. He's going to make a deal with the most tea-stained zealots in Congress. He must want to make a deal. Both the Republicans and this administration have quietly agreed to give Social Security an anal probe, and the only point of contention is just how deep the probe should go.