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I propose calling the Trillion Dollar Coin a ‘Gresham.’

By: Moe Lane (Diary)  |  January 8th, 2013 at 05:30 PM  | 

RESIZE: AAA

Mostly because calling it a ‘friedman’ is just a bit too obscure to be proper black humor; calling it a ‘keynes’ actually maligns a guy who would be freaking out over what Obama’s done to his economic policy*; and calling it a ‘fiat’ will cause people to confuse it with the car**.

Anyway, basic details here (H/T Jim Geraghty): if you’re not familiar with what’s going on, essentially there’s a movement among the innumerate wing of the left-pundit class to have the President ‘pay’ for the debt ceiling by having the Treasury mint a platinum coin or coins (that last bit is usually carefully not emphasized) of one trillion dollars apiece. The government deposits the coins, they use the money to pay their bills…

…and then we have to deal with the sudden influx, and I mean sudden, of money that’s equal to a significant fraction of our existing money supply. I’m not an economist in any way, shape, or form: but even I know where inflation comes from: it comes from too many dollars chasing not enough goods. Suddenly creating a trillion dollars doesn’t create a trillion dollars’ worth of actual wealth – and ‘wealth’ is the nebulous, non-quantifiable thing that backstops a country’s fiat money. When the Federal Reserve announced that it was going to increase the money supply by $40 billion a month (which will do in two and a half months what the supporters of the trillion dollar coin want to do in an afternoon) people worried about inflation. How do you think a sudden shock devaluation is going to impact the economy?

Moe Lane (crosspost)

PS: I have had it pointed out to me that the supposed intent of this scheme by its backers is not to put more money into the system, but to magically reduce the debt, thus allowing the government to borrow another trillion dollars without hitting the debt ceiling. Yeeees, and it was the intent of Prohibition to curb public drunkenness, not create, support, and foster an organized crime network that persists to this day. The truth is, until the government stops deficit spending, a scheme like this will have the practical result of yanking another trillion dollars out of the luminiferous aether*** and throwing it into the economy. I’m not the government; I’m not obligated to pretend that our politicians will voluntarily pay back the debt that we’re racking up.

*As I understand it, John Maynard Keynes always insisted that the government should save up the money in good times that it spends in bad ones. Oddly, politicians don’t like to do that one.

**Admittedly, you could argue that calling it a gresham is even more obscure, but at least this way we can quote ‘bad money drives out good’ at people and hope that somebody will get the message.

***Yes, I know that such a thing does not actually exist. That’s part of my point.

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COMMENTS

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  • kipling

    Move over Zimbabwe! Mr. Obama, the leader of the fee world, will be second to none.

  • Thomas_Hauber

    At 40 billion a month, it will take the Fed 25 months to generate 1 trillion, not 2 1/2 months!

  • kmtierney

    Just call it the MacGuffen or the Deus Ex coin. I want Obama to do this. Sure, it would probably destroy our credit rating, destroy treasury bonds, and spook the hell out of business markets, but let’s be honest, all this is gonna happen anyways.
    And it would finally show in very stark terms how serious they are about trying to resolve ANYTHING.

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    Better go pull all the cash out of my bank accounts. I’m going to need toilet paper someday soon . . .

  • runner12

    Good grief! I thought this was a joke when I first read this. If you need any further proof that the Left has serious problems where their brain is supposed to be, look no further than this idea.

  • Tbone

    Moe was an English major.

  • PowerToThePeople

    Not sure why you young bucks are so anxious for the stupidity to occur. If anything you should be screaming nonstop at the top of your lungs for financial responsibility and not giving up the fight till you either win or lose.

    It is painfully obvious to me few if any here know what a real depression is like. I am not quite old enough to have gone through the great depression, but I am old enough to have had a mom who did, saw what the aftermath did to so many, heard her stories about how they had to survive and die ( many died folks), saw the pics of the abysmal living conditions, and saw the scared mentality of the depression survivors. It is something we should never desire to go through again and the constant calls for leaping over the cliff or hoping Obama makes a coin that will devalue our dollar so badly millions will drop into horrible poverty in a matter of days is the wrong approach.

  • Tbone

    I think it is actually the incarnation of the proverbial Plug Nickel.

  • gunnyg2002

    I’d rather call it a Krugman. Both are as useless as ethics to a Democrat.

  • romeg

    There was, once upon a time, an urban legend or myth of fantasy that the clever way to avoid either getting blown up on an airliner or having your flight hijacked that you could pack a fake bomb in your luggage. After all, what are the odds that there would be TWO bombs on the same aircraft carried by two different passengers? Pretty clever, no?

    Well no. Actually it is an utterly stupid idea and betrays an ignorance of mathematical chance that escapes most sophists who promote this kind of thinking. This idiotic bit trickery is of a piece with the logic commonly known as “The Sequester”, the event that nobody wanted so a deal would have to be struck to avoid it. It worked brilliantly, didn’t it?

    This is how the Obama administration operates: they take some parlor trick, blow it up into a policy statement and pretend it is statesmanship or Solomonic Wisdom.

    I have a better, cheaper and simpler idea: Just write a post-dated check drawn on the treasury and deposit in the Fed. If the deadline comes, write a new one and retrieve the old one. This can be done for a very long time.

  • ss396

    Issuing this coin will accomplish many things:

    1) destroy the US dollar;
    2) freeze the international credit markets against the US;
    3) drop the US bond rating by a couple of grades;
    4) drive most of the US economy underground (see #1 above), causing…
    5) dramatically reduced tax revenues;
    5) destroy the US export market, causing…
    6) lots of Longshoremen and Teamsters job losses;
    7) empty Ft. Knox (et al);
    8) loads of other neat stuff that I’m not bright enough to think of.

    But it will reduce the deficit.

    Full faith and credence – just words, I guess.

  • kowalski

    The United States Platinum Choom

  • kowalski

    You’re right. People think this is bad, but it’s not. It hasn’t hit the people shaping opinion yet, it really hasn’t impacted their families that much.

  • patsydecline

    It should be the smiling mug of Tricky Dick Nixon….the man who removed us from the gold standard allowing the Fed to begin the process of wealth transfer from the working class to the elites.

  • stevemaley

    I was thinking Krugmannerand.

  • WY_Cowboy

    No, can’t call it a Krugman. I just took a Krugman.

  • tngal

    Another coin? The silly Susan B Anthony’s were confusing enough. What is it about round shiny objects? Geez!

  • Dave_A

    No, because you don’t pay interest on a post-dated check…

    What we have been doing for years, is relying on something (world reserve currency status & the accompanying ‘unlimited, best-rate-availble line-of-credit’) that relies on something at least half our electorate has no interest in maintaining (our superpower status/economic world-hegimony – and that ‘half’ of course is the pacifist & isolationist elements) to fund our government

  • grumpyKoz

    I believe that a good plan for Obama would be to convert Private 401K plans into Platinum coins.
    Both will be sitting in the sidelines for future use, so it isn’t immediately inflationary.
    AND the 401Ks will be tapped slowly, such that we can bury the cost, like S.S., welfare, medicare and medicaid.

    In fact, if he just called them platinum IOU’s we might even take it better.

    So, keep you ears wide open, you WILL hear this plan sneaking it’s ugly head into the tent. BUT, by then, it WILL BE TOO LATE.

    We, the working/investing, citizens of U.S.A. will be unwitting investors of a few trillion $1Trillion coins.

  • brbr

    Re: “Not sure why you young bucks are so anxious for the stupidity to occur.”

    Because it is going to happen anyway; it’s a matter of when, not if. Just look at the per capita debt (especially per actual taxpayer). That debt cannot ever be paid back, unless it is by massive inflation. Obama is trying to keep the Ponzi scheme going until his term is up, and then the collapse can be blamed on the next guy. When you know it is inevitable, is it not better to make it obvious who the real culprits are?

    As pointed out, hitting bottom will not be a party. Death, disruption, and desperation will be quite likely. In the 1930s example, major political and cultural changes were brought about as a result, which most here would probably say went in a negative direction. If the collapse is delayed enough to camouflage the real cause, is it not more likely the attempted cures will move in a even more repressive and collectivist direction?

  • spandrel

    Kudos for giving Keynes his due. He wasn’t a tenth the spendthrift that he is often made out to be.

  • lawstudent

    The coin is a blown up story that is diverting attention from the real issues here. I don’t think the establishment republicans have the political will to shut down the government for an extended period of time, nor do they have the courage to impeach obama for circumventing the debt limit.

    The terrible fold on the fiscal cliff has left us drifting, and unable to extract the necessary concessions from obama. Now that he has locked in his middle class tax cuts, and raised taxes on the productive, he will call our bluff and raise the debt limit.

  • danilaw

    The Trillion Dollar Coin concept is not intended to put money into circulation.

    Any time anyone asks satirically “why not 100 trillion” or whatever, they are showing they don’t understand the Dem’s tactics with this trick.

    So be smart. Read what they’re trying to do. It is not a simple-minded “we’ll make a coin and pay our debt, free money, yay” liberal move. It is an accounting trick intended to bypass the House and let Obama avoid concessions.

    The coin goes to the Fed Reserve. The Fed transfers a trillion to the general fund, effectively raising the debt limit just as if Congress authorizes it. The treasury sells bonds just it would otherwise. The coin is sent back and melted down.

    The coin doesn’t enter circulation. There is no inflation. Everything happens the same way it would if Congress just surrendered and said “okay, no fight, we raise the debt limit.”

    Congress is going to raise the debt limit ANYWAY. The bond issue etc. will happy ANYWAY. These debts have already been racked up.

    The importance of the fight is to extract concessions. The importance of the Coin trick is to let the Dems get away without a fight and grab more power for the white house from the House.

    The trick may be illegal and unconstitutional – but it’s not entirely clear the supreme court wouldn’t roll over and play dead (cf Obamacare). However, the one good thing is that the trick looks like what it is: a desperate shell game by of a Chicago lawyer.