What amuses me most about this is the simple fact that since the thirties we operate not on the gold or any other standard to fix the value of our money. The only thing backing our money, and that of pretty much the rest of the world, is the good faith of the government that issues the money. Money is now bits in a computer, a mathematical entity stored in a database, as far as our savings, our checking. For every thousand dollars I disperse electronically each month, I probably spend less than a hundred in actual physical currency, if that much. What a hoot it would be if the thriller I am finishing were to happen, and a nuke set off an EMP that fried electronics nationwide, destroying all banking and financial records stored on computers. And people wonder why I have paper copies of all my financial transactions, demand all bills in paper, and paper bank statements, including my tax reforms back to my teens.
In other words, we are a fiat money supply. Our money is worth whatever we claim it is, and what people can buy with it is influenced by the supply and how much the we flood into circulation via the Fed.
What is really hilarious is the caption picture the GOP put out with a giant platinum coin sinking the Atlantic.
The picture was apparently featured on NRCC Twitter account.
And of course, the Faux Noise Nutwork hasn’t figured out that the only reason coins and currency are worth anything is because we say they’re worth something. This screen shot from Faux Noise Nutwork on the issue:
Like, man, it is scary when you have to explain to them that it costs five cents to mint a penny, but also about the same to mint a quarter. And if their cartoon response had any meaning, I would not carry 100 dollar bills around because they would either weigh to much or be so big I would need an artist’s portfolio to carry them around.
It is truly tragic to watch the continuing decline into militant ignorance foisted on its viewers by Faux Noise. It is honestly a threat to the stability of the nation, IMHO.
In other words, the money we issue and deposit with the Treasury and issue via the Fed is worth exactly whatever we say it is.
The GOP realize that minting the coin is actually a legal option, and are already trying introduce legislation to prevent it. Needless to say, like everything touched by or spoken by the GOP, I am opposed to this bill. Apparently its author and the GOP feel it is more important to continue to hold the economy hostage to their insane Kabuki Debt Theater, and other magical illusions.
More of the blind leading the blind. Either way Treasury only spends what’s authorized by Congress. And all the coin does is shift interest expense from the Treasury to the Fed.
Illogic is clearly a adaptive trait for holding office. As they say in Church, it’s another mysteriously rushed contradiction wrapped in an enema…
U.S. Rep. Greg Walden (R-Ore.) today announced plans to introduce a bill to stop a proposal to mint high-value platinum coins to pay the federal government’s bills.
“Some people are in denial about the need to reduce spending and balance the budget. This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution. I’m introducing a bill to stop it in its tracks,” Rep. Walden said.
I have to say I find this whole discussion hilarious, and revealing of the base ignorance of how things work. But then, this should come as no surprise after the last few decades, when economic facts and reality and CBO statements are routinely ignored, science is dismissed, global climate change is ignored because apparently Al Gore was fat and invented the Internet, and freedom of religion has come to mean everyone must worship as the most extreme right wing evangelicals or be executed if gay. kicked out of the military for not worshipping right wing Jesus (Google “Dominionists in Military”, or at the least rot in hell.
I shared these thoughts on the platinum coin with a friend who is far to the right of me on the political spectrum, and was interested at his response, which I share below.
Yup. The platinum coin isn’t specie any more than the rest of our coinage is. It’s basically a bus token, having value only because the bus company will take it. The reason it has to be out of platinum is that there is a loophole in the minting laws that forbid the Treasury from minting money to monetize debt. The loophole says the Treasury can issue platinum coins — in ANY denomination — basically as collector items, like for the Olympics or the Mars landing or something like that. But, using that loophole, they could issue such coins — probably billion-dollar coins — and deposit them in the Fed. The Fed then shows the deposit in bits in a computer, and the Treasury could issue checks against it. In which case they have increased the money supply without the Fed’s involvement, which, without the commemorative coin loophole, is illegal.
Current money in the system, which is the sum of all currency, coinage, and credit, is now about 45-1/2 trillion, which is the same as it was five years ago before the crash. (While the Fed has issued a lot of money, and the government has borrowed a lot of money, they have just kept up with the shrinking private debt, which is shrinking due to massive deleveraging. People and companies are paying off their debt.) So, If the Treasury were to issue a couple trillion-dollar coins, the result would be 2/45.5, or about 4% inflation above what inflation would be otherwise.
Here is a quote from an article on the origins of the idea of the platinum coin at Talking Points Memo.
Political elites won’t shut up about the trillion dollar platinum coin.
For over a week now, pundits and power brokers — including members of Congress, a Nobel Prize-winning economist, a former director of the Congressional Budget Office, and two former U.S. Mint directors — have engaged in an animated public discussion of a bizarre-sounding premise: If the Republican-led House holds the country’s debt limit hostage to its policy demands, President Obama’s Treasury Secretary should order the Mint to produce a large-denomination platinum coin — it has to be platinum — and, once deposited at the Federal Reserve, use the funds to meet existing financial obligations to creditors, vendors, contractors, seniors, and so on.
Its origin can be traced back to the comments section of a blog.
An American lawyer writing under the pseudonym Beowulf first explained the platinum coin concept in the comments section of a post titled Repeat After Me: The USA Does Not Have A ‘Greece Problem’, written by Marshall Auerback and published on a blog called The Center of the Universe.
And here is the closing paragraph from the blog being pointed to as the origin of the idea. It speaks directly to the false and arbitrary nature of the supposed debt limit fiscal crisis, the supposed fiscal cliff, which is nothing but an arbitrary and meaningless buzz word dreamed up by the GOP to continue to strangle and try to kill good government.
Let’s repeat this for the 100th time: the US government, the Japanese Government, or the UK government, amongst others, do NOT face a Greek style constraint – they can just credit bank accounts for interest and repayment in the same fashion as if they were buying some helmets for the military or some pencils for a government school. True, individual American states do face a fiscal crisis (much like the EMU nations) as users of the dollar, which is why some 48 out of 50 now face fiscal crises (a problem that could easily be alleviated were the US Federal Government to undertake a comprehensive system of revenue sharing on a per capita basis with the various individual states). But, if any “lesson” is to be learned from Greece, Ireland, or any other euro zone nation, it is not the one that Mr. King is seeking to impart. Rather, it is the futility of imposing arbitrary limits on fiscal policy devoid of economic context. Unfortunately, few are recognizing the latter point. The prevailing “lesson” being drawn from the Greek experience, therefore, will almost certainly lead the US, and the UK, to the same miserable economic outcome along with higher deficits in the process. As they say in Europe, “Finanzkapital uber alles”.
After fulling informing myself on this idea of minting the platinum coin and depositing it and making an accounting transaction to deal with the debt limit, I have come to the conclusion not only is it not a specious idea, it is a good idea, which I think President Obama should undertake if the GOP continues their terrorist hostage taking of the American economy.
Even Nobel Laureate Economist Paul Klugman has been meditating on the significance of the Platinum Coin story.
The platinum coin discussion has moved with startling speed, from an idea nobody took seriously (and which, as I’ve mentioned, senior officials were unaware of just last month), to assertions that it’s ridiculous and illegal, to grudging acknowledgment that it’s almost surely legal coupled with strained attempts to dismiss it as an option nonetheless.
We really do need to come to grips with Republican extremism. The question is whether refusing to use this escape hatch is the place and time to do that.
I like epic confrontation as much as the next guy, and probably more so. And if I were Treasury secretary — which mercifully is not going to happen — I’d be very cagey about the coin, the coupons, and all that until the day is really upon us, without ruling them out. But we need a strategy to deal with the crazies if they really do prove irredeemably crazy, which seems all too possible.