The government can mint two platinum coins, declare they are worth $1 trillion each, deposit them at the Fed, and then move the money directly into Treasury accounts.
Don’t laugh! Economists are actually endorsing this harebrained idea:
…the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
“I like it,” says Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”
In theory, this is much like having the central bank print money. But, says Gagnon, the U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t create any extra inflation. And if it did cause problems, the Fed could always counteract the effects by winding down some of its other programs to inject money into the economy.
Oh, well that would be ok then. Isn’t the idea just peachy?
I’d say the country’s “in the best of hands” but it would hardly be original sarcasm.
Unbelievable.
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13 responses to “Did you know?”
“Unbelievable.”
Not – sad to say.
We’re going to be hearing lots of wacky ideas like this. Now that voters chose to tax and spend without limit, the only option is to print money to cover the deficit. Washington will be looking for any excuse as a fig leaf.
The FED already does this. It buys Treasuries with money borrowed from the treasury. They’ve been buying 2/3 of the issues for some time now. This is identical to the coin idea, but less shiny.
‘The Simpsons’ has beaten them to the punch! In an episode a few years ago, the Fed prints a $1 trillion dollar bill and hands it to Mr. Burns for safekeeping. He steals the bill and then naively hands it to Fidel Castro who steals it from him.
If two coins are good, why not four or eight or a thousand coins?
In theory, this is much like having the central bank print money. But, says Gagnon, the U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t create any extra inflation
The first half is exactly correct.
The last half seems wrong; it wouldn’t create as much inflation as increasing the money supply by “printing” two trillion dollars worth of money and throwing it into the economy, but it would surely be inflationary, because to “spend” the Government has to transfer money to other entities, and thus it necessarily increases the money supply if there’s no matching debt.
It’s still a pathetic fiction that “we can just keep spending and nothing will happen because of it”…
Would vending machines in government buildings have to be reprogrammed to accept a $1 trillion coin? If its legal tender, would I be able spend it at a post office to buy a stamp?
In theory, this is much like having the central bank print money. But, says Gagnon, the U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t create any extra inflation.
Gagnon is not the sharpest tool in the shed. “Existing levels” are a huge problem — and that’s always the problem. It’s not like Zimbabwe and the Weimar Republic went into hyperinflation because they were buying everyone yachts and caviar. Hyperinflation is always a result of a failure to cut spending.
[…] Can’t Go On Posted on December 11, 2012 11:30 pm by Bill Quick Classical Values » Did you know? The government can mint two platinum coins, declare they are worth $1 trillion each, deposit them […]
Why platinum which has real wealth? Some nickel and silver paint should suffice.
If its legal tender, would I be able spend it at a post office to buy a stamp?
They will have to hire trucks to bring you your change.
You will have to hire an army to go to the post office.
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