Gyroscopic Investing

hoost wrote: I just read an article on the trillion dollar coin and thought it may be of interest here.

http://dailycapitalist.com/2013/01/09/t ... llar-coin/

Storm wrote:

hoost wrote: I just read an article on the trillion dollar coin and thought it may be of interest here.

http://dailycapitalist.com/2013/01/09/t ... llar-coin/

The article starts with an ad hominem on Paul Krugman.  Who, I might add, has been completely right about the lack of sufficient stimulus causing a slow recovery.  Then it moves on to postulate that if the treasury printed a trillion dollar coin, the purchase of treasuries would immediately stop.  How do you get from here to there?  It goes on to speculate that somehow printing a trillion dollar coin would cause hyperinflation.

Here's the thing:  We're not going to be handing out trillion dollar coins.  All of these austerity idiots simply don't understand that the coin is only moved from one building in DC to another.  It simply never enters circulation.  It's physically impossible for money to cause inflation if it doesn't get spent.

Sigh - these guys really don't understand much, do they?

Sigh - these guys really don't understand much, do they?

Like other progressives and independents, I have been discouraged that many old school liberal economists have had so little to say about financial reform, and the frauds in the banking system, even as they blindly pressed their case for more stimulus to be distributed without repairing a broken financial system that taxes the real economy with fraud.  It is 'whatever works' as they define and measure it. Justice and equity have no part in their calculations. They learned part of the lesson from FDR, but not the part that really matters, and that made him memorable.

They make themselves and their models willfully blind to the crony capitalism that exists between the Fed and Wall Street, and the manipulation in the markets, and the lack of any credible prosecutions for some of the most egregious financial crimes since the 1920's.  How many more scandals will have to be revealed before they end their denial?

But in grabbing this whacko platinum gimmick of overt monetization which typifies almost everything that is wrong about modern economics, and in stubbornly claiming that it can do no harm, while dismissing anyone who expresses concern as some economic Luddite, Krugman and too many others have shown the purblind ignorance of the ideologue who does not understand what is wrong, and why the people are becoming restless.

And they answer them with sophistry and derisive baby talk.  No wonder that economics is a disgraced profession. 

brickhouse,

The real point is that issuing a trillion dollar coin and spending the proceeds has nearly the same effect as issuing one trillion in Treasuries and spending the proceeds. It's the spending that matters, not how the money was created.

The 100,000 dollar bill was issued by the United States Department of the Treasury in 1934 and 1935 for official transactions. The government stopped using these notes in the 1960s.
The note was orange to gold in color and was printed on cotton paper. It featured President Woodrow Wilson on its obverse and the note's value and state title of the United States on its reverse.

The note was a gold certificate and the highest denomination of United States currency ever produced. Only 42,000 of these notes were printed, and none were ever issued to the public. When the government stopped using the 100,000 dollar bill in the 1960s, many were destroyed. Today, only a handful of the notes are known to exist, and all are in the hands of the United States Government. As a result, the notes are illegal to privately own. Examples are displayed in the Federal Reserve Bank of San Francisco, Bureau of Engraving and Printing, Smithsonian Institution, and the Federal Reserve Bank of Richmond.

Reub wrote: I have a piece of limestone rock that I am now valuing at 100 trillion dollars. Of course if anyone here is interested I might sell it to them at 10% off.

Philip N. Diehl, 35th Director United States Mint wrote:I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.

* In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8 ).

* What is unusual about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations.

* Moreover, the accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

* Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued”? or circulated and bonds would not be needed to back the coin.

* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

* This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

* This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

* Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

* Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.

Philip N. Diehl
35th Director
United States Mint
http://en.wikipedia.org/wiki/Philip_N._Diehl

Pointedstick wrote: I'm imaging a thrilling action movie that involves thieves stealing the coin in transit between the Mint and the Fed.

Gumby wrote: All I'd want to know is... who or what gets to be on the coin? Do they go through the trouble of creating a fancy design or do they just keep it simple if they are going to melt it anyway?

Simonjester wrote:

Gumby wrote: All I'd want to know is... who or what gets to be on the coin? Do they go through the trouble of creating a fancy design or do they just keep it simple if they are going to melt it anyway?

  are you kidding?  they will have a blue ribbon commission making recommendations to a committee with dozens of sub committee's to decide on a design and hire countless artist to create hundreds of possible final strikes which will be minted after the large custom minting machine is built (involving its own committees and review and contractor selection etc), and then subjected to several more rounds of review across a dozen more government agency's, all eventually resulting in the selection of a final coin which will be minted and meted down,,  and it will only cost a few billion dollars!! a real bargain in government spending

Storm wrote: It most likely stays in a vault the entire time (outside of the one transport) to avoid creating potential Michael Bay action movie scenes like PS was talking about...

Bean wrote: The coin is not an accounting gimmick, if it was then why don't we strike a coin that every year covers deficit spending and see what happens...