informationliberation
The news you're not supposed to know...




Austrian Economics: Understand Economics, Understand the World
The Century of the Self: The Untold History of Controlling the Masses Through the Manipulation of Unconscious Desires
The Disappearing Male: From Virility to Sterility

The Obama Deception: The Mask Comes Off
Operation Gladio: The Hidden History of U.S. Sponsored False Flag Terrorism in EuropeThe New American Century: The Untold History of The Project for the New American Century
(more)
Article posted Jan 10 2013, 4:50 AM Category: Economy Source: The Beacon Print

Krugman's Coin

By Alvaro Vargas Llosa

This would amount to a trillion dollar heist of purchasing power in the blink of an eye. It's so criminal it sounds just like something they might do. - ChrisPaul Krugman has made a tongue-in-cheek proposal that has set tongues wagging--having the U.S. Treasury Department mint a $1 trillion platinum coin in order to circumvent the federal debt ceiling. Actually, Krugman was not the first to propose this solution he himself calls "silly" but he has given it wider exposure.

In these weird monetary and fiscal times, no proposal is so crazy that it will be dismissed as such by everybody who is generally perceived as sane. Eventually, it may become respectable. There is already an initiative in Congress to prevent the government from printing the platinum coin (something which an obscure norm would allow it to do), while a petition to the White House in favor of the solution has gained some traction. If it gets 25,000 signatures, the White House will have to respond"Ķ

The tongue-in-cheek debate has so far centered more on whether it would be legal for the Treasury Department to use the coin, i.e. to draw checks on it once it deposited it with the Federal Reserve, than on what would actually happen. The main argument against the legality of this move is that only Congress could authorize the expenditure. But, given all we know about fiscal spending, can we really trust that Congress will not authorize the government to spend more money? We know for a fact that in 2000 fiscal spending amounted to 18 percent of GDP and that today it amounts to 24 percent. We have just witnessed a tortuous negotiation aimed at averting a "fiscal cliff" that produced a tax hike, not spending cuts. The perception is widespread that entitlements are the only problem. Actually, discretionary spending went up by 70 percent in the last twelve years. How can anyone who keeps their head above their shoulders be so sure that the Treasury would not be authorized, sooner or later, to spend the coin?

Of course, the coin would add to the already colossal monetary base (the Fedīs total assets are already nearing the $3 trillion mark.) The government would use the money presumably to buy back debt. Even if it bought debt from the Fed rather than from the market the money would end up in the market, as it were, because the Fed would use the proceeds to keep buying government bonds. We know this because continuing with asset purchases is official Fed policy! Although I guess initially the coin would be a liability in the Fedīs balance sheet as would any deposit, it would gradually become also an asset either because the money paid into the market by the Treasury would end up as bank reserves at the central bank or because the money would be paid directly to the Fed in order to buy back debt. The effect, either way, would be inflation.

I am, of course, sidestepping the funny issue of how the coin would be turned into many parts, but in an era in which the Fed does virtually anything it wants to do and in which money is an electronic rather than a physical thing I am pretty sure they would find ways to break it up fairly quickly. I am also disregarding the obvious disconnect between the denomination of the coin and the real value of the metal--$1 trillion translates into several thousand tons of platinum, not just a coin. But in the era of fiat money, when was that an issue?

Perhaps there is an upside to discussing this silly gimmick as if it were a real option. Many intelligent solutions to the monetary problem sound to mainstream opinion leaders and politicians too nutty to even consider right now. But the more crazy inflationary ideas (that include monetary fraud) come into respectable circulation, the greater the chances that apparently crazy anti-inflationary ideas, including the abolition of the Fed and the return of the gold standard, can be productively discussed. So long live the Krugmans of this world!





Latest Economy
- There Is No Real Increase In Insured Under Obamacare
- Americans Will Spend More On Taxes In 2015 Than They Will On Housing, Food, and Clothes [Pic]
- The Six Too Big To Fail Banks In The U.S. Have 278 TRILLION Dollars Of Exposure To Derivatives
- Bernanke's Courage To Print
- The Costs of Hysteria: How Economists Are Misleading The Public On Climate-Change Policy
- The Fed Has No Intention To Raise Rates -- Marc Faber
- The Gender Wage Gap—A Myth that Just Won't Die
- Venezuela Reaches the Final Stage of Socialism: No Toilet Paper









No Comments Posted Add Comment


Add Comment
Name
Comment

* No HTML


Verification *
Please Enter the Verification Code Seen Below
 


PLEASE NOTE
Please see our About Page, our Disclaimer, and our Comments Policy.


FAIR USE NOTICE
This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the DMCA and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.

About Us - Disclaimer - Privacy Policy



Advanced Search
Username:

Password:

Remember Me
Forgot Password?
Register

Documents: National Guard Ordered To Consider Americans As 'Enemy Forces' And 'Adversaries' - 04/17Video: Armed National Guard Troops Patrol Residential Streets in California - 04/17Cops Raid Cannabis Oil Activist Because Her Son Discussed Medical Pot Facts at School - 04/14Protecting The Vicious, Punishing The Virtuous: Marijuana Prohibition And Idaho's Prison-Industrial Complex - 04/19Massachussetts Cop Admits that Police Don't Really Care About Public Safety - 04/17Worse than Sandusky: School Cop Whose Job was to 'Protect' Students, Repeatedly Raped 22 Boys - 04/17Cops Charge Man With 'Destruction Of Police Property' For Bleeding On Their Uniforms After They Beat Him - 04/19Insane Video: Cops go to Wrong House to Make Arrest, Let Dog Out, Shoot at Dog in Crowded Area - 04/19

Man Follows Speeding Cop, Finds Out He Was Speeding To Buy PeanutsMission Creeps: Homeland Security Agents Confiscate Women's Panties For 'Copyright Infringement'Cop Shoots Couple's Dog, Threatens Jail For Trying To Save Dog's LifeSWAT Team Shoots Teen Girl & Her Dog During Pot Raid On Wrong HomeDurham, NC Cop Testifies Faking 911 Calls To Enter Homes Is "Official Policy"Indiana Sheriff Says US A "War Zone" To Justify New MRAP Military VehicleTampa Cops Surveil Pot Dealer, Catch Him Selling Pot, Raid His Home & Kill Him"You Just Shot An Unarmed Man!": Witness Says Police Shot His Friend With His Hands Up
(more)

 
Top