Economists love old grandpa coin act as fiscal-cliff solution, or something

posted at 10:31 am on December 7, 2012 by Ed Morrissey

When I was a very young lad, my grandfather used to amaze me by magically pulling coins out of my ear (and telling hilarious-but-terrible puns, but that’s another story for another day).  At that time in my life, I figured Grandpa was making me richer from money out of thin air.  How was I to know he was teaching me the kind of economics that would thrill the intelligentsia forty-five years later?

If President Obama wants to avoid an economic calamity next year, he could always show up at a news conference bearing two shiny platinum coins, each worth . . . $1 trillion.

Okay, that sounds utterly insane. But some economists and legal scholars have suggested that the “platinum coin option” is one way to defuse a crisis if Congress cannot or will not lift the debt ceiling soon. At least in theory.

It sounds utterly insane because, well … it is utterly insane.  Apparently, acts of insanity are totally legal in the US, though, as long as they’re committed by a Treasury Secretary:

Enter the platinum coins. Under current law, the Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.

Under this scenario, the U.S. Mint would make a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.

“I like it,” said Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”

In theory, this is much like having the central bank print money. But, Gagnon said, the U.S. government would simply be using the money to keep spending at existing levels, so it would not create any extra inflation. And if it did cause problems, the Fed could always counteract the effects by winding down some of its other programs to inject money into the economy.

There’s nothing obviously problematic about it, except for the fact that we’re going to devalue world’s baseline currency by about two trillion dollars.  How exactly can that avoid stoking inflation?  It creates money that hasn’t been in circulation before, and it spends it almost immediately based on the completely artificial valuation of a couple of coins in a vault.  If it didn’t fund new spending, no one would need to create the coins and the artificial value of them in the first place.  The spending done under the debt limit comes from the sale of bonds, which may be a bad way to run government but actually have some future value based on a commitment from the Treasury.  The two coins are a bad parody of that process, and it won’t be long before bond investors discover that the joke is on them.

And it’s not as if this solution hasn’t been tried in the past.  In the 1920s, facing crushing debt and war-reparation obligations, the Weimar Republic in Germany did exactly the same thing: printed money to pay off their obligations.  They just didn’t do it with cool-looking platinum coins.  It destroyed the savings of the middle class, created massive poverty and a flight from German currency, and set the stage for the takeover by the Nazis a few years later.

These are the kinds of ideas that arise when governments go bankrupt, politically if not financially.  How about some real solutions, like reducing spending to FY2000 levels as a percentage of GDP and reforming the tax system to fund government appropriately?  Steven Crowder asked a few people about the options on the table in his latest vox populi, and ended up discovering that some Democrats may want to check in on their party’s policies:

Update: Added a bit more to the first paragraph after the second excerpt.

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but the overall tone is, “look how ignorant these ‘low information voters’ on the other side are.”

Alpha_Male on December 7, 2012 at 11:08 AM

Leftists and their supporters are notoriously stupid. You can check polls for the more exact information about the idiocy of the people who voted for the Indonesian Dog-Eating Retard. Of course, anyone who even thinks of voting for a guy who is dumb enough to publicly utter something such as “profit AND earnings ratios” – which shows that he’s a retard who couldn’t break 420 on the math section of his SATs – clearly must be an idiot. But … maybe they were enticed by Barky’s promise that ObamaScare would “reduce premiums by 3000%”?

Get a brain. Well, that might be asking too much. Get a brain stem.

ThePrimordialOrderedPair on December 7, 2012 at 12:06 PM

Hey, Fat Cat, Al Sharpton: Pay Your “Fair Share”!

1. Al “Resist We Much” Sharpton owes the IRS $2.6 million in income tax, and nearly $900,000 in state tax.

2. In 1993, pleaded guilty to a tax-related misdemeanor to avoid prosecution on 2 tax-related felonies.

3. The IRS has filed, at least, 12 tax liens against Sharpton and his organisations.

4. Sharpton’s National Action Network owes $883,503 it owes in federal payroll taxes.

5. The IRS slapped liens on Sharpton himself in the amounts of $538,652 and $359,973 in just 2 years.

Yet, Obama seeks “counsel” from Al Sharpton on raising taxes on the “evil rich.”

Hucking fypocrites.

Resist We Much on December 7, 2012 at 12:07 PM

Murf76 on December 7, 2012 at 11:57 AM

You have to admit it’s pretty funny that these “morons” are self admitted Democrats. Pretty sure that is Alpha’s real bone of contention.

Cindy Munford on December 7, 2012 at 12:08 PM

Alpha_Male on December 7, 2012 at 11:21 AM

Brilliant response to multiple posters pointing out your hypocrisy on Lenno, Michael Moore, Tina Fey, John Stewart, Stephen Colbert – ignore them and repeat the same stupid non-sequitur you posted before.

Troll.

peski on December 7, 2012 at 12:08 PM

I guess we have to congratulate the Left and their minions in the media for a job well done, it makes me want to commit a felony.

Cindy Munford on December 7, 2012 at 12:02 PM

I think the same thoughts every time I see a news story on the MSM that clouds the truth, or someone driving around with an 0bama bumper sticker on their car.

Just remember, there are cameras everywhere.

UltimateBob on December 7, 2012 at 12:09 PM

Cindy, no need to do that. We just need to work on message.

Bmore on December 7, 2012 at 12:16 PM

There is no such thing left of center that is “alpha”.

John the Libertarian on December 7, 2012 at 12:17 PM

War is coming…get prepared

dirtengineer on December 7, 2012 at 12:20 PM

If you’re going this route, why not make each one worth a septillion dollars? We’ll be able to pay our entitlements for the next million years! Hooray America!

Good Solid B-Plus on December 7, 2012 at 12:23 PM

So you’re telling me that Steven Crowder puts these videos together because he’s a comedian looking for a laugh, and not because he has a political agenda?

Alpha_Male on December 7, 2012 at 11:13 AM

Are you telling me that stand-ups like Louis C.K., Patton Oswalt and David Cross don’t have an agenda when they write their material?

Jon Stewart is a comedian. Do you think his material is written with a specific agenda in mind? How about Bill Maher? Last I checked, he defines himself as a comedian as well.

Good Solid B-Plus on December 7, 2012 at 12:27 PM

You know it and I know it but does Alpha Male know it? May I point out that that is obviously a name picked for irony since all he ever does is whine like a girl.

Cindy Munford on December 7, 2012 at 11:05 AM

Well, in the crowds he travels in, being the alpha male is not that big a deal.

Akzed on December 7, 2012 at 11:13 AM

Actually it means he’s a ‘top’.

slickwillie2001 on December 7, 2012 at 12:28 PM

Under this scenario, the U.S. Mint would make a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.

A couple of problems with their end-run around congress.

1. The platinum coins have to be bullion or proof platinum coins, not everyday ordinary coins.
2. Bullion coins aren’t normally used to pay for anything, they are created to be a store of value, not spent. Their value is also based on their precious metal content.
3. The reason that 31 USC says that the Secretary ‘may prescribe from time to time’ the value of the coins is because the price fluctuates, nothing more.

No one is going to believe that those two coins are worth $2 trillion. As the FTC says, The seller’s appraisal might be inflated.

These guys are actually economists….

Patriot Vet on December 7, 2012 at 12:30 PM

You’re right… “scum” is a little harsh, and I regret using that word. But I absolutely stand by everything else in my post. The difference between these three and Leno (or others that might do these “man on the street” style interviews) is that Leno is a comedian; it is purely for comedic effect. These guys are political activists.

Alpha_Male on December 7, 2012 at 11:08 AM

I believe Ed already corrected you, but yeah I’m a Comedian. I also never misrepresent my agenda like a Stewart or Colbert. I’m pretty honest in that my views/history are an open book.

Also, probably not a good idea to call somebody “scum.” I know you’d never do it in real life, but still.

… Beta, meet Alpha.

StevenCrowder on December 7, 2012 at 12:32 PM

Come ON people – don’t you see this as the PERFECT Cloward-Piven solution?

Obama and his minions can destroy the US economy by doing this. Weimar Republic, Argentina, Zimbabwe are the examples of what will happen.

This destroys the financial security of anyone who did the right thing by working and saving.

It creates a disaster of never before seen on earth magnitude precisely because there is NO ONE that can bail out the US. (We are not Greece with Germany to pay our bills. We have no Germany.)

This is Obama’s final solution. Gird your loins, people.

JustTruth101 on December 7, 2012 at 12:39 PM

It destroyed the savings of the middle class, created massive poverty and a flight from German currency, and set the stage for the takeover by the Nazis a few years later.

Which is why Øbama is considering it…

Odysseus on December 7, 2012 at 12:39 PM

Also, probably not a good idea to call somebody “scum.” I know you’d never do it in real life, but still.

… Beta, meet Alpha.

StevenCrowder on December 7, 2012 at 12:32 PM

The chances of that clown calling somebody “scum” to their face is about the same as the lottery. This poster should have named himself Junk-Mail.

VegasRick on December 7, 2012 at 12:40 PM

Also, probably not a good idea to call somebody “scum.” I know you’d never do it in real life, but still.

… Beta, meet Alpha.

StevenCrowder on December 7, 2012 at 12:32 PM

There’s a lot these big-mouth trolls would never do in real life.

“Beta, meet Alpha.” Now, THAT’S funny!

CurtZHP on December 7, 2012 at 12:40 PM

Which is why Øbama is considering it…

Odysseus on December 7, 2012 at 12:39 PM

Considering it????? Implementing it would be correct.

VegasRick on December 7, 2012 at 12:42 PM

And why stop at 2? Let’s print sixteen of those bad boys and voila– we’re debt free!

Why didn’t we think of this sooner? Surely there can’t be any consequences to such an easy plan!

Nethicus on December 7, 2012 at 11:05 AM

Are you quoting Maddow or Sharpton? I know if wasn’t Mathews, because he would say “Obama is brilliant! This is why we elected him, he’s SO MUCH smarter than the rest of us. I’m tingling all over.”

JustTruth101 on December 7, 2012 at 12:43 PM

I believe Ed already corrected you, but yeah I’m a Comedian. I also never misrepresent my agenda like a Stewart or Colbert. I’m pretty honest in that my views/history are an open book.

Also, probably not a good idea to call somebody “scum.” I know you’d never do it in real life, but still.

… Beta, meet Alpha.

StevenCrowder on December 7, 2012 at 12:32 PM

You mean you never claimed you were unbiased? (gasp) shocking! :)

melle1228 on December 7, 2012 at 12:46 PM

Hmmmm, where did Alpha Male go?

Cindy Munford on December 7, 2012 at 12:49 PM

These highly-edited videos from scum like Steven Crowder, Jason Mattera, and Jesse Watters are the epitome of conservative dishonesty.

Alpha_Male on December 7, 2012 at 10:48 AM

It’s a wonder how the epitome of conservative dishonesty could have been practically invented by ultra-liberal Michael Moore.

Axeman on December 7, 2012 at 12:57 PM

Better yet! Why not make the coins in lower denominations of $50.00–$100.00- $500.00 and $1000.00 denominations and sell them on Home shopping and E-bay. At 22,000 coins per hour The US Mint could generate 1.1 million per hour in $50 coins , 2.2 Million in $100 coins , 11 million in $500 coins and 22 million in $1000 coins for a total of $36.3 million per hour. Or $317.1168 billion dollars a year in new fake money.

Now I see the problem. The Government needs 5 more fake money machines to keep up with their spending addiction.

jpcpt03 on December 7, 2012 at 1:10 PM

http://www.fordhamobserver.com/re-ann-coulter-an-open-letter-to-bill-oreilly/

You can make your political arguments and still be truthful.

Alpha_Male on December 7, 2012 at 11:21 AM

That impressed you? Wow. Let’s see. We can pick out parts of Ann Coulter’s speaking and writing that we don’t like and tie them into “scary” events that have no provable relationship to her. However, if you ask Pete Singer about his promotion of infanticide, he has a lot of words to say behind it.

And the most it says about Watters is give credence to the idea that you both decided to take it the same way. She thought it was to “paint a simple enough picture of a complex situation for your viewers to swallow.” Wow. No complex picture of Fox News viewers. It simultaneously denies to others leeway it wants to make for itself.

That impressed you. The same summary judgment restated. That impressed you?!

Axeman on December 7, 2012 at 1:15 PM

I believe Ed already corrected you, but yeah I’m a Comedian. I also never misrepresent my agenda like a Stewart or Colbert. I’m pretty honest in that my views/history are an open book.

Also, probably not a good idea to call somebody “scum.” I know you’d never do it in real life, but still.

… Beta, meet Alpha.

StevenCrowder on December 7, 2012 at 12:32 PM

More importantly, Steven, would you, as Pete Singer would, have a lot of words that you would say about how you conducted your interviews?

The Fordham student who impressed Alpha by basically having the same conclusion on Jesse Watters’ segment, faulted Watters for describing Pete Singer, noted proponent of infanticide, a proponent of infanticide, because Singer had a lot of words that he has written and said in support of infanticide.
(As if it were a likelihood that Singer had just taken up a t-shirt sporting the slogan “Hey, let’s go kill some infants!”)

Axeman on December 7, 2012 at 1:21 PM

People who legitimately argued about the ignorance, racism, violence of the Tea Party based on a rare sign somewhere in the crowd, really can’t be taken seriously about unrepresentative samples.

Axeman on December 7, 2012 at 1:24 PM

There’s a lot these big-mouth trolls would never do in real life.

“Beta, meet Alpha.” Now, THAT’S funny!

CurtZHP on December 7, 2012 at 12:40 PM

Haha thanks. I think that I have a pretty strong track record of going toe-to-toe with people to their face. I also don’t hide behind an anonymous username.

If I called someone a “scumbag” online, you can bet I’d call them that anytime.

StevenCrowder on December 7, 2012 at 1:37 PM

Me thinks “Alpha” Male still has some issue to sort through after Crowder’s take on Lena Dunham. I know I sure had some urges after watching that!

MNHawk on December 7, 2012 at 1:43 PM

The conversation Steven had with those folks is the exact ones I have had for years with my friends. Their choices are almost all Republican (and they know it) but they still vote for Democrats.

Why?

Simple. They are told Republicans are evil in popular culture and they don’t want to be thought of as evil.

Sad state of affairs.

goflyers on December 7, 2012 at 1:49 PM

Will we get our own version of nazi take over or the same old same old? FEMA has their camps ready, the first brown shirts have graduated, and they’ve bought plenty of ammo(they think). Now all we need is a good old fashioned crisis to get the ball rolling. Something on the order of a fiscal cliff ought to do the trick. Yippee ki yay!

Kissmygrits on December 7, 2012 at 2:08 PM

War is coming…get prepared

dirtengineer on December 7, 2012 at 12:20 PM

I sure hope so!

The Notorious G.O.P on December 7, 2012 at 2:16 PM

P.S., I’m not a lefty.
 
Alpha_Male on March 16, 2012 at 7:32 PM

rogerb on December 7, 2012 at 2:28 PM

rogerb on December 7, 2012 at 2:28 PM

I wonder what he thinks he is?

Cindy Munford on December 7, 2012 at 2:40 PM

I just want to see them take one of these coins to the local bank branch and ask for change.

CJ on December 7, 2012 at 2:46 PM

And what do they do when the grocery store will only accept payment in Platinum Coins?

Another Drew on December 7, 2012 at 2:48 PM

Buy Wheel-barrow Futures!

Another Drew on December 7, 2012 at 2:48 PM

FEMA has their camps ready…

“Avenge Me!”

Another Drew on December 7, 2012 at 2:50 PM

Back when ATMs came out when I was a freshman in college, I used to fund my beer runs with I called “deficit spending.”

I would go the ATM, write a check payable to “cash”, deposit it, then withdraw the money. Then, all I had to do was be sure to deposit another check payable to “cash” every Monday, Wednesday, and Friday until I had money to pay off the initial to cover the first one. That was how it started.

How it ended, I would deposit a check on Monday for $250 to cover the $200 I took out on Friday. I would withdraw $50 and then deposit a check for $300 on Wednesday.

It all fell apart when I went on vacation and couldn’t do my deposits. I asked my roommate, a beneficiary of my deficit spending, to take up the task for me. He forgot.

So, a lot of smart people may think this is a great idea but it is a freshman trick. And let me tell you, the bank was not happy when they discovered it and immediately changed their ATM policy. And kicked me out.

sgmstv on December 7, 2012 at 3:09 PM

I’m laughing hysterically at this “reasoning”, because otherwise I would cry.

MidniteRambler on December 7, 2012 at 10:39 AM

Don’t stop at the article. Read the comments and you’ll see why we’re in the trouble we’re in right now. You’ve got people arguing that since the money is already spent and we’re simply setting debts that it can’t have an effect on inflation. I don’t believe that even Keynes himself would buy that crap. It defies reason.

DFCtomm on December 7, 2012 at 3:11 PM

rogerb on December 7, 2012 at 2:28 PM

I wonder what he thinks he is?

Cindy Munford on December 7, 2012 at 2:40 PM

A switch hitter?

Solaratov on December 7, 2012 at 3:15 PM

These people are much like some of my relatives.

They’re hard core Democrats, but esentially disagree with the entire Democratic platform (and agree with the vast majority of the Republican one).

krome on December 7, 2012 at 3:29 PM

I would love to have this Gagnon guy over for dinner one night, just to throw food at him.

ThePrimordialOrderedPair on December 7, 2012 at 11:56 AM

I loled. Indeed I did. Right out loud.

Thanks.

:-)

Solaratov on December 7, 2012 at 3:34 PM

Platinum isn’t valuable enough for these coins.
They will have be struck from unobtainium.

Dexter_Alarius on December 7, 2012 at 11:58 AM

Or cantbelievium.

massrighty on December 7, 2012 at 3:50 PM

This would be great except for all the effort that’s going to have to go in to retooling all the coke machines at treasury to accept trillion dollar coins.

Lost in Jersey on December 7, 2012 at 3:50 PM

rogerb on December 7, 2012 at 2:28 PM

I wonder what he thinks he is?

Cindy Munford on December 7, 2012 at 2:40 PM
A switch hitter?

Solaratov on December 7, 2012 at 3:15 PM

He claims to be a gay male.

kingsjester on December 7, 2012 at 4:02 PM

“Alpha”…and I use the term loosely…has a habit of “hitting and running.”

He won’t reply to you, Steven.

He’s not brave at all. Just a typical Lib Troll.

kingsjester on December 7, 2012 at 4:04 PM

Obooba will accidentally put one in a Coke machine, and then we’re all screwed.

Akzed on December 7, 2012 at 4:14 PM

Hell, let’s stamp out some brass coins, put $1000 mark on them, and pay out entitlements with them.

Anti-Statist on December 7, 2012 at 4:18 PM

And these are the people who make fun of “magic underwear.”

Huh.

disa on December 7, 2012 at 4:49 PM

Don’t stop at the article. Read the comments and you’ll see why we’re in the trouble we’re in right now.

DFCtomm on December 7, 2012 at 3:11 PM

The way the comments read, it’s as if they believe waht they are typing…if they are being sarcastic or making a joke, they aren’t being clear enough or using /sarc tags. I think they really believe minting trillion dollar coins won’t cause inflation, or the fall or the dollar, and they say it’s not what weimar and zimbabwe did…we need to implement some kind of policy where idiots cannot vote. Perhaps a minimum IQ of 50, which is only mildly mentally retarded. And they only have to pass once in their whole life to have voting privilege.

JustTruth101 on December 7, 2012 at 5:40 PM

This guy Gagnon is an economist??? He says there’s no inflation because we are not increasing spending, only spending what we already are. But what about the bondholders, people, banks, and nations that are being paid off in Obamadollars? Aren’t they going to spend that money? Suddenly there’s $2T in circulation worldwide that wasn’t there last week.Of course the Fed has already printed $3T since ’09 so maybe Obama has offered a sacrifice to the gods of coin and they are protecting us from inflation.

xkaydet65 on December 7, 2012 at 5:50 PM

This guy Gagnon is an economist??? He says there’s no inflation because we are not increasing spending, only spending what we already are. But what about the bondholders, people, banks, and nations that are being paid off in Obamadollars? Aren’t they going to spend that money? Suddenly there’s $2T in circulation worldwide that wasn’t there last week.Of course the Fed has already printed $3T since ’09 so maybe Obama has offered a sacrifice to the gods of coin and they are protecting us from inflation.

xkaydet65 on December 7, 2012 at 5:50 PM

That’s not what their saying. They are saying since the government has already created 2 trillion in debt and spent it, then paying off that debt won’t cause inflation, and they are right the inflation has already happened. This is just a debt clearing mechanism. If it were a one time thing then it wouldn’t be inflationary, however we all know it wouldn’t be a one time thing. It would be the new “cool” method of funding the entitlement state.

DFCtomm on December 7, 2012 at 6:05 PM

The way the comments read, it’s as if they believe waht they are typing…if they are being sarcastic or making a joke, they aren’t being clear enough or using /sarc tags. I think they really believe minting trillion dollar coins won’t cause inflation, or the fall or the dollar, and they say it’s not what weimar and zimbabwe did…we need to implement some kind of policy where idiots cannot vote. Perhaps a minimum IQ of 50, which is only mildly mentally retarded. And they only have to pass once in their whole life to have voting privilege.

JustTruth101 on December 7, 2012 at 5:40 PM

JT101, you and Ed just don’t get it. These are the new real economists. They have the answers. They know what causes inflation, and have divided it up into different types.

The old form of economics is dead. It used what is known as a Quantity Theory of Money, or QTM. That’s totally old, man.

MMT is what the top economists believe now. It’s Modern Monetary Theory. It’s even got modern in the name.

As long as you are using the new ‘rules’ of MMT, this approach won’t do anything at all to inflation. Inflation will happen or not happen in accordance with the systems outlined in MMT, not using that old-fashioned conception of QTM.

Why would you believe in QTM? What are you, a quack? Do you believe in phlogiston and N-rays too? Get with the program!

No, it’s MMT as far as the eye can see. These top economists know the truth now, and the truth is MMT.

These aren’t amateurs, these are the best and the brightest. These are the “new wave” giants of economic thought. This has been worked out by top men.

Do you hear me?

TOP.

MEN.

Problem solved, wingnuts. You should be thanking them.

VekTor on December 7, 2012 at 8:04 PM

…they have no testicles!

KOOLAID2 on December 7, 2012 at 9:08 PM

And they get picked up by big conservative media outlets, such as Hot Air and FOX. And yeah, I’m sure it’s supposed to have a humorous element, but the overall tone is, “look how ignorant these ‘low information voters’ on the other side are.” It reinforces stereotypes about “libruls” that exist only in the conservative mind.

Alpha_Male on December 7, 2012 at 11:08 AM

Like Bill Maher and the main media do with the teabaggers, er the TEA Party folks.

I’m glad you got hammered, Fool and Hypocrite.

An Alpha_Male you are NOT.

Schadenfreude on December 7, 2012 at 10:38 PM

…they have no testicles!

KOOLAID2 on December 7, 2012 at 9:08 PM

Ed cut off the remnants of ‘Alpha-Male’s today. See further up.

Schadenfreude on December 7, 2012 at 10:39 PM

December 7, 1941 — a date which will live in infamy…

A date which will live in — Infamy?

Not if you’re HotAir.com — or Google — or Yahoo.

HotAir.com posts NOTHING on Pearl Harbor Day to commemorate the horrific Japanese surprise attack on the American Naval Fleet in port at Pearl Harbor leaving 2,402 Americans killed and 1,282 Americans wounded — many of them civilians.

Pathetic.

This website has gone to crap ever since Michelle Malkin sold out to the highest bidder.

HotAir.com — Guaranteed Soft & SquishyOr Your Money Back

FlatFoot on December 7, 2012 at 11:38 PM

the Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.

The value of one troy ounce of gold is almost equal to the value of one troy ounce of platinum. Adjusting the value of these platinum coins up for scarcity, who’s the buyer willing to pay a measly $1 trillion for one coin?

That said, since the Treasury has the power to assign whatever value it pleases to the platinum coin, it should assign a value of $999 trillion and simultaneously eliminate all taxes.

“I like it,” said Joseph Gagnon of the Peterson Institute for International Economics. “There’s nothing that’s obviously economically problematic about it.”

This emperor economist has no clothes.

rukiddingme on December 8, 2012 at 1:02 AM

Don’t worry, the Mayan apocalypse will occur on December 21st then all of this will be purely academic.

rplat on December 8, 2012 at 7:32 AM

This website has gone to crap ever since Michelle Malkin sold out to the highest bidder.

HotAir.com — Guaranteed Soft & Squishy™ Or Your Money Back

FlatFoot on December 7, 2012 at 11:38 PM

That’s a fact.

rplat on December 8, 2012 at 7:59 AM

ALPHA Ed made you look ridiculously small. You were PWND.

CW on December 8, 2012 at 8:16 AM

Alpha_Male on December 7, 2012 at 11:13 AM

Are you telling me that stand-ups like Louis C.K., Patton Oswalt and David Cross don’t have an agenda when they write their material?

Jon Stewart is a comedian. Do you think his material is written with a specific agenda in mind? How about Bill Maher? Last I checked, he defines himself as a comedian as well.

Good Solid B-Plus on December 7, 2012 at 12:27 PM

Alpha’s the classic useful…well you know.

CW on December 8, 2012 at 8:18 AM

Geebus. I can only imagine what Alexander Hamilton might have said about this.
They didn’t cuss a lot back then, but I’m pretty sure he’d have some for this idea.

We’re being led by the insane. I cannot believe people think this can even be an option.

Badger40 on December 8, 2012 at 9:06 AM

But I absolutely stand by everything else in my post. The difference between these three and Leno (or others that might do these “man on the street” style interviews) is that Leno is a comedian; it is purely for comedic effect. These guys are political activists. And they get picked up by big conservative media outlets, such as Hot Air and FOX. And yeah, I’m sure it’s supposed to have a humorous element, but the overall tone is, “look how ignorant these ‘low information voters’ on the other side are.” It reinforces stereotypes about “libruls” that exist only in the conservative mind.

Alpha_Male on December 7, 2012 at 11:08 AM

I’ve had conversations with lots of liberals.
Most of them are like this.
I will also add that many conservatives are, as well.
The difference between stupid liberals & stupid conservatives is that conservatives have a mistrust of government & they do not want the government to take care of them.
Stupid liberals invite tyranny with open arms like a sheep cuddling up to the wolf that’s wearing the skin of his dead brethren.

Badger40 on December 8, 2012 at 9:14 AM

Crowder’s vids are great.
Peace Prize was a classic.

justltl on December 8, 2012 at 10:17 AM

That Crowder video, those frighteningly uninformed voters… it’s how Obama won.

Yakko77 on December 8, 2012 at 11:55 AM

How was I to know he was teaching me the kind of economics that would thrill the intelligentsia forty-five years later?

That’s funny Ed.

SparkPlug on December 8, 2012 at 12:35 PM

You know it and I know it but does Alpha Male know it? May I point out that that is obviously a name picked for irony since all he ever does is whine like a girl.

Cindy Munford on December 7, 2012 at 11:05 AM

Good one.

SparkPlug on December 8, 2012 at 12:44 PM

Another scenario mint 16 of those $1 trillion dollar platinum coins and pay off the national debt.

Dasher on December 8, 2012 at 1:23 PM

Dear God in heaven, help us – these people are quite literally insane.

Midas on December 8, 2012 at 1:31 PM

StevenCrowder on December 7, 2012 at 12:32 PM

Steven, not sure I ever saw you post here before – good to see you; excellent work as always.

Midas on December 8, 2012 at 1:35 PM

rplat on December 8, 2012 at 7:32 AM

I appreciate you giving me something to live for.

Cindy Munford on December 8, 2012 at 1:49 PM

You can make your political arguments and still be truthful.

Alpha_Male on December 7, 2012 at 11:21 AM

Yes, it can be done. Try it for once.

Midas on December 8, 2012 at 1:51 PM

That’s a fantastic analogy, by the way, Ed. Can’t wait to see Ramirez do a cartoon showing O doing exactly that; pulling a $1trillion dollar coin from behind the ear of an adoring fan, while the media/audience clap in amazement, begging him to do it again…

Midas on December 8, 2012 at 2:55 PM

but the overall tone is, “look how ignorant these ‘low information voters’ on the other side are.”

Alpha_Male on December 7, 2012 at 11:08 AM

Some things are just spot on. When the Dems under Bush controlled the House and the press was trying to blame the repubs for everything they found the majority of Dems thought the GOP ran the House. So yes sometimes these vids buttress the thoughts that dems are ignorant.

CW on December 8, 2012 at 4:45 PM

In theory, this is much like having the central bank print money.

We’ve passed the point of no return when a journalist can write that sentence without elaboration.

“In theory”, this is much like having the central bank print money. In reality, it is having the central bank strike money.

But, Gagnon said, the U.S. government would simply be using the money to keep spending at existing levels, so it would not create any extra inflation

So the WaPo is literally suggesting without comment that creating a currency bill made of metal would not create inflation, which is a good thing because creating a currency bill made of paper would.

HitNRun on December 8, 2012 at 4:59 PM

HitNRun, that is not what WaPo is suggesting. The paper vs. metal distinction is irrelevant.

What is inflation? A general increase in the price level. What causes prices for goods and services to go up? An increase in demand for said goods/services, or a decrease in supply.

What does the creation of a trillion dollar coin (to exchange for the Fed’s current massive pile of treasury holdings) do to the demand of goods and services? Nothing, unless the Fed allows it to circulate. The Fed will just leave it in a vault, in place of an equivalent amount of treasuries. Whether that vault contains a 1 trillion dollar treasury bond or a 1 trillion dollar coin does not affect inflation. The distinction in chemical compounds of an item in a vault at the Fed does not cause demand for goods or services to skyrocket, or supply of such goods and services to decline.

The ONLY thing this does is allow the President to ignore the debt ceiling in a 100% legal way (as long as the Fed does not circulate the money from the coin).

jd3181 on December 8, 2012 at 7:53 PM

As soon as the Treasury tried to use part of the $2 Trillion dollars to pay off obligations, they would in effect start increasing the money supply by the amount of the obligations that they payed.

Before the coins, they would have had to borrow more money by selling bonds, which would have taken those dollars out of circulation. Those same dollars would have turned around and been used to pay off obligations. Money was pulled out of circulation, and then pumped right back in. No increase in the money supply.

With the coins, the Treasury would not sell bonds and take any dollars out of circulation first. Instead, they would use the declared value of the coins to pay obligations, sending dollars out the door. No money was pulled out of circulation, and then money was pumped into circulation, obviously increasing the money supply by the amount of obligations payed.

So in the end, it is not any different than printing greenbacks and giving them to the Treasury. It is just printing money, which WILL devalue the currency and result in inflation.

willamettevalley on December 8, 2012 at 7:56 PM

@jd3181, you are right it doesn’t matter if it is made out of metal or paper or marshmellows or pixie dust, but if the Fed does not circulate the money, by giving it to the Treasury to service the debt, then it doesn’t do anything to alleviate the debt ceiling issue.

willamettevalley on December 8, 2012 at 8:02 PM

… sure, it avoids technically “raising the debt ceiling”, but it doesn’t do anything to help the Treasury meet its obligations.

willamettevalley on December 8, 2012 at 8:05 PM

No chance of anyone ever printing their own trillion dollar platinum coin and flooding the system with fakes. Not like it would be cheap to make one, it would be made of a trillion dollars worth of metal, right?

astonerii on December 8, 2012 at 8:11 PM

… and if the Fed is technically storing the coins, but because of this handing $2 Trillion in cash to the Treasury, then the Fed has already circulated the value of the coins.

What is being suggested is that a loophole has been found to make the debt ceiling irrelevant. Instead of borrowing money, we print it, and therefore the debt doesn’t go up. Suppose that is true, it just means that Obama has found another way to steal power from Congress. He wouldn’t have to press for Congress to allow him to raise the debt ceiling as part of the fiscal cliff negotiations. He would just claim that power through this platinum coin loophole.

But no one should pretend that the money supply is not being increased the moment Treasury uses the money from the Fed to fulfill debt obligations, and that inflation is the ultimate result.

willamettevalley on December 8, 2012 at 8:18 PM

Oh, look! My dog just minted a new “coin” in the back yard! I value that at only $100,000,000. I’m rich!

crosspatch on December 9, 2012 at 12:45 AM

Hey, let’s just give China those two trillion dollar coins. Voila! No more debt. Two words, jeen yuhs.

Mojave Mark on December 9, 2012 at 7:35 AM

In theory, this is much like having the central bank print money. But, Gagnon said, the U.S. government would simply be using the money to keep spending at existing levels, so it would not create any extra inflation. And if it did cause problems, the Fed could always counteract the effects by winding down some of its other programs to inject money into the economy.

Isn’t this exactly what they did to create the real estate crisis? They manufactured a bunch of new debt and injected it into the economy, poisoning the market because it was hopelessly mixing debts that were going to be repaid with debt that couldn’t possibly be repaid. All those mortgage-based investments became worthless, just like our dollars will be.

Socratease on December 9, 2012 at 11:13 AM

I think that, in the end, this is the kind of thing it’s going to come down to. Democratic means will fail to reach a consensus on taxes and spending, and the only remaining “solution” is outright theft of wealth, which is what government-manufactured inflation really is. No need to tax all those retirement accounts, stock portfolios, and business accounts. No messy debates or bills or protesting voters. Just sign a piece of paper and devalue everybody’s money earned over multiple lifetimes, the country be damned. It’s also the ultimate rip-off by the elites, because insiders get to spend this “money” before it becomes devalued. (More gold bricks for me, y’all can go get wheelbarrows to carry your cash to buy bread with.)

Any ‘economist’ that gives this theory any credence should forever have their statements on the subject memorialized and repeated whenever their name is mentioned in public.

Socratease on December 9, 2012 at 11:28 AM

The inmates are now running the asylum. There is no other way to put it. This is insane and our Government is insane.

At some point Americans are going to have to realize that our form of Government is failing and that the Federal Government is simply a bad Government. Better, maybe, than say the Government of Iran, but still very bad. When did this happen? How did this happen?

Many of our State Governments are as bad or worse than America’s bad Federal Government. Look at California, Illinois, and most other Democrat states. Terrible, anti-prosperity high-tax states. But the fools keep voting for it. Our system of Government is failing. Or has failed.

Rogervzv on December 9, 2012 at 12:37 PM

willamettevalley, the reason why there wouldn’t be inflation is because the Fed would NOT be giving any cash to the treasury. This is because the Fed already has trillions of dollars of long term treasury debt. It would just be “canceling” the existing treasury debt (or in effect, swapping the mechanism for recording such debt from a paper/computer treasury bond to a platinum metal “quasi treasury bond”). The only thing this buys the government is the ability to issue more real treasury bonds, since there is only a limit on real treasury bonds (not platinum metal coins that the Fed and Treasury would treat as bonds but aren’t actually bonds).

As long as all the Fed did was give back the treasury bonds and did not circulate the coins, and as long as the treasury and Fed treated the coins as equivalent to the treasury bonds they were swapped with, there would literally be no change in anything that circulated. Inflation wouldn’t go up, because not one person would have one dime extra to spend on one product (other than the Fed, which in this scenario wouldn’t let the coin out of a vault).

There IS a limit to this, however. This can only happen with absolutely no effect as long as the Fed has treasury bonds it can swap with these coins. And that can only happen up to the value of the Fed’s current collection of treasury debt (which is several trillion at the moment). Once the Fed runs out of existing treasury debt to swap with these coins, then the Fed would have nothing to swap, and it would have to give cash to the government (which as you point out, would circulate and could cause inflation once used by the treasury to pay bills).

jd3181 on December 9, 2012 at 4:47 PM

jd3181 on December 9, 2012 at 4:47 PM

Are you even remotely educated?

astonerii on December 9, 2012 at 6:22 PM

It destroyed the savings of the middle class, created massive poverty and a flight from German currency, and set the stage for the takeover by the Nazis a few years later.

You say that like it’s a bad thing…… /s

Seriously, that’s their plan. They want that to happen. Though, they’re already a lot further along without that level of economic woe than the NAZIs were.

GWB on December 9, 2012 at 6:24 PM

astonerii on December 9, 2012 at 6:22 PM

Perhaps a little too educated. And not nearly as smart as he is educated.

GWB on December 9, 2012 at 6:26 PM

@jd3181: OK, the article doesn’t state anything about the Treasury department using the platinum coins to buy back the Treasury bonds that the Fed currently holds. It appeared to say that Treasury would simply deposit them at the Fed and would then be able to pay off it’s obligations for the next couple years. I assumed that when the Treasury withdrew money from their account, it would be in the form of cash (the Fed would keep the 2 Trillion dollar coins and let Treasury withdraw cash from its account instead). I still believe this scenario would be exactly as I described in my previous post, and increase the money supply.

However, you could be right and Fed allows Treasury to use the coins to pay off $2 Trillion in Treasury bonds (has the Fed really bought up that much in Treasuries?!). Then the Treasury could issue the bonds again to borrow another $2 Trillion without affecting the money supply, but rather increase total amount amount of debt without increasing the total amount of Treasury bonds issued that is legally limited by the “debt ceiling”.

I suppose, but can the Fed really keep the $2 Trillion coins on it’s balance sheet forever? The Fed used to keep less than $1 Trillion in assets on its balance sheet TOTAL, before the financial crisis in 2008. What happens when the Fed needs to pay down some of its liabilities, when banks get to the point they aren’t leaving huge reserves in the Fed system? What does it do with the coins then? The Fed has to have some liquidity too. Doesn’t it have to either circulate the coins at some point or have the Treasury go ahead and print up some new paper bills for the Fed to use (increasing the money supply at that point), or use the coins to buy more Treasury bonds later after the debt ceiling is raised (at which point the Treasury would need to destroy or hold the coins forever, if they are not going to affect the money supply). In this latter case, all the coins did was temporarily side-step Congress raising the “debt ceiling” (even though the debt was still increased).

Ultimately, we are either talking increased debt or increased inflation (or both) until Washington gets serious about reducing planned levels of spending.

willamettevalley on December 9, 2012 at 8:08 PM

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