Solution to debt-ceiling standoff: A trillion-dollar platinum coin?

This is the same as printing trillions of dollars devaluing everyone’s savings.

Who doesn’t see this as a problem?

Galt2009 on December 7, 2012 at 12:55 PM

True, but it’s also the same as borrowing trillions of dollars, never paying it off but instead rolling it over and folding interest into new debt. Which is what we’ve been doing for decades – unrelenting credit expansion.

Sovereign money is not a bad idea. It is only inflationary if the production of currency exceeds the growth in GDP. If GDP grew 4% then the federal government could, theoretically, emit $600 Billion in new currency instead of borrowing it. If a 2% inflation rate was targeted, then we could spend $900 Billion in new sovereign currency that year.

As it is, the Federal reserve emits more than that in unbacked currency each year for the federal government to borrow at very low interest, and remits that interest back to the US Treasury. So we’re kinda printing anyway. But if the federal government issued currency directly instead of borrowing from the Fed then that leaves the Fed, facing continued credit contraction, a net currency extractor.

Last year the Fed printed $800 Billion for the federal government to borrow. If the government issued that money directly as sovereign money then the Federal reserve would have issued $800 Billion less in banknotes. The amount of inflation would be the same. However, if the federal government was Constitutionally restricted to issuing money not to exceed economic growth AND prohibited from borrowing (except the sale of war bonds) inflation would be in check and Bucky would be saved.

shuzilla on December 7, 2012 at 2:15 PM