time has a good article on the debt ceiling.

[littlewolf]

http://business.time.com/2013/10/05/three-not-so-crazy-ways-out-of-the-debt-ceiling-crisis/

1. The Trillion-Dollar Coin: This idea, first raised by Jack Balkin, a Professor of Constitutional Law at Yale Law School, takes advantage of a loophole in the law which allows the Treasury to mint platinum coins without limit. The purpose of the law is to allow the creation of commemorative coins, but there’s nothing in the law that would prevent the minting a coin of any value. Therefore, to get around the debt ceiling, Balking suggests minting two platinum coins worth $1 trillion dollars and then just depositing them at the Federal Reserve in order to write checks based on the value.

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2. The 14th Amendment: Another potential option is for the President to declare the debt limit unconstitutional because of in the 14th amendment. It states, ”the validity of the public debt of the United States, authorized by law . . . shall not be questioned.” The 14th Amendment was written to prevent Southern congressmen from threatening to default on U.S. debt unless the Confederacy’s debt was paid off too. University of Baltimore Law Professor Garrett Epps has argued that this amendment basically makes the debt limit unconstitutional and would allow the Treasury to continue to issue bonds without Congress’ approval.


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3. Premium Treasury Bonds: While the previous two strategies for obviating the debt ceiling were prevalent during the last debt-ceiling showdown, the idea of issuing so-called “premium” Treasury bonds is newer. The idea was first raised earlier this year by Matthew Levine at Dealbreaker. Understanding the idea requires knowing a little bit about how bonds are sold. Bear with:

Bonds have both a “par” value and often times a different price at which a bond is actually sold to the public. Normally this is because interest rates can change pretty quickly: Say I want to issue a bond for $100 at a 4% interest rate, but a few weeks later, when I actually get around to issuing the bond, interest rate rises to 6%. To sell my 4% bond will require selling the bond at a discount to par–somewhat less than $100. The opposite would happen if interest rates falls to 2%. If I’m selling a 4% bond in a 2% environment, I’ll be able to garner more than $100 in that environment.
So how does this apply to the debt ceiling? The debt ceiling law only applies to the face value of bonds issued, rather than the actual value of the money raised. So when past Treasury debt expries, the Treasury Department could simply roll it over into bonds with much lower face values but that bring in higher revenues and pay out higher interest rates, allowing the total debt of the U.S. to continue to rise while still staying within the debt-limit law.

more at the link

[russspeakeasy]

1. Interesting article...Thanks for posting it.