Friday, January 11, 2013

A Trillion Dollar Coin?

I joined the sensible club many years ago and was taught not to fall for weird arguments.

So,up to now, I have ignored this concept of making a trillion dollar platinum coin as one of the weirdest.

But it appears many in the so-called sensible economy are letting the idea fester in order to gauge opinion as to whether to actually make it happen.

Yes, it could happen? Surely not. Am I missing a trick here. Am I actually in the Matrix after all?

This from the Business Insider today: "Today White House press secretary Jay Carney was asked about whether The White House saw the coin as a viable option, and rather than shooting it down he just evaded the question. The response from the media has been unanimous: Carney left the door open."

Here's how this idea would 'work'. The US Congress has to raise the debt ceiling above $16 trillion dollars by the end of February otherwise the US will default on it's monetary obligations. Read 'end of the world'.

Mr Krugman, a Nobel laureate in economics, and once also a member of the sensible club, says this, "By minting a US$1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling - while doing no economic harm at all."

The Treasury secretary, Mr Geithner, has the authority to mint platinum coins in the denomination of his choosing. Meant for commemorative products, US law grants Treasury permission to "mint and issue platinum bullion coins and proof platinum coins", which would allow the Treasury to get around legal limits on printing money to pay the bills.

Depositing it would technically pay down US debt, buying time before the country reached the limit on it the debt ceiling again. (courtesy Stuff.co.nz).

This would not be wise. It appears the money men in control are desperate to solve the mathematically unsolvable problem of debt increase. Are these white shoe boys trying to hood-wink us while they believe they have some credibility and trust left.

Shame on them.

Not that many won't want to let this happen because of their vested interest in keeping this debt sham going. Remember, as I have said many times, when you print money, those at the top of the receiving pile get use of it first to by cheap assets. When the money flows to the plebs, we get inflated prices.

If they do go ahead with this and cannot sell it properly to the market, trust in the system will disappear. An unintended consequence of apocalyptic proportions.

By the way, joining the sensible club is free.

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