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