Ron Paul has a plan! And - it's so "wacky" that it might actually work! It's also very easy, and simple: The Fed simply takes a match to the $1.6 trillion in Treasury obligations it currently holds on its balance sheet as a result of its various QE programs!
Ta-da! The government suddenly has $1.6 trillion in room under the debt cap, enough to last us maybe a couple of years. And the Tea Party will be placated since they hate the Fed, and love Ron Paul! Yea!
Surprisingly, Dean Baker, of the left-leaning Center for Economic Policy Research, thinks this idea is so crazy it just might work:
There are a lot of potential problems with this idea. Maybe most importantly, the Fed would lose a huge tool for eventually tightening monetary policy in the future — namely, the ability to swap its Treasury debt for some of the cash sloshing around the banking system. Eh, but they don't even know where the gold is, or that gold is even money.
Mr. Baker thinks there are ways around this problem and that Mr. Paul’s idea at least deserves a fair hearing:
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