Posted on 12/09/2012 10:31:28 AM PST by whitedog57
The Washington Post had interesting article about solving the debt ceiling “crisis.” The author recommended that Treasury produce two-one trillion dollar platinum coins and deposit them at The Fed.
“I like it,” says Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”
Actually, Mr. Gagnon, there are a few problems with it.
1. Moral hazard. The President orders trillion dollar coins to be produced, then gives one each to campaign donors and other party favorites (note that I did not mention our current President by name since this would be a temptation of any political party or President).
2. The Fed. Like it or not, The Fed has helped keep the inflation rate down near 2%. This is because our monetary system relies on banks to make loans to consumers and business get the money supply circulating through the financial system. Without money circulation, there is little inflation … and little economic growth.
Growth in bank-held loans and leases in positive (above the red line of 0% growth) but still below the historic levels (pink line). So, it is difficult to generate inflation when bank lending is below historic levels.
Of course, student loans have skyrocket along with auto loans. Mortgage loans are still trending downwards (although this is a combination of lower purchase mortgage originations and household defaults on their mortgages.
So producing trillion dollar coins and depositing them at The Federal Reserve Bank of New York (NOT the Board in DC!) is the same as Treasury printing an additional $2 trillion of money. And if anyone suggests producing those trillion dollar coins and giving them to households or friends of the Administration, please take a money and banking course at your nearest college or university.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
These kind of games with the system just demonstrate how the ruling class doesn’t care about the rules, and doesn’t mind rubbing our noses in it. It’s akin to Caligula naming his horse as Consul.
They are already printing 40 bil (B) a month ( almost 1/2 tril [T] annually)anyway, whats a few bil more?
This idea is madness.
It would lead to a collapse of the US dollar.
Stop Spending.
(and buy American)
This suggestion is also akin to the monetary policy advice Dr. Faust and Satan gave the Holy Roman Emperor (and we know how that turned out).
“Take the name of a rare element ... Remove the letter ‘O’, change the 3rd letter to ‘U’ and then rearrange — you will get the name of another rare element. What are they? (Hint: Neither are gases)”
Why don’t they just call ‘em “magic crystals,” it’d sit better with the hippies...
They’re going to do that in effect anyway, may as well just do it and get it over with in a day. It’s just implementing QE3 in one step.
DUH, that’s change the third letter to A...
The appropriate metal to use for those coins is Iron Pyrite.
“Like it or not, The Fed has helped keep the inflation rate down near 2%.”
Somehow, I doubt the veracity of this statement.
Stupid. Better to print a single two-trillion dollar coin.
Well, the two percent number doesn’t include energy and food, but be reasonable. Who buys energy or food?
When that happens, congress will be backed into a corner. It can either impose a far more serious austerity program than we are currently considering with the fiscal cliff, or do something radical. I feel they will fear the mob and do something radical to appease the mob. What I think will happen is that they will demonize the Fed, and revoke the federal reserve act, and default on all debt to the Fed. Then congress will look to the treasury to print money directly, and that will start an inflationary cycle.
Yes, they could do something like print trillion dollar coins to give to the Fed, but it isn't like the Fed could take them to a bank and get change for them. Currency is a medium of exchange, and if there is no one to exchange a trillion dollar coin with, it is worthless.
The article misses the most obvious problem with the scheme — coins are minted, not printed.
s9 e20 the trouble with trillions
The same head in the a$$ liberals who voted for 0bama see nothing wrong with this.
The reason why it’s bad is diluting money = inflation.
But let’s just suppose that 2 is good. Then why not 3, or 33 or 5,000 or a trillion?
Madness. But then liberalism is an incurable breakdown of the thinking apparatus.
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