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May
24
2023

“Big Coin” — or Big Con?
Brian Maher

“Some ideas are so stupid that only intellectuals believe them” — as once noted Mr. George Orwell.

We believe there is vast justice in these words.

Perhaps we flatter Dr. Paul Krugman by labeling him an intellectual — as well label the sitting president an intellectual — or the prior president an intellectual.

Yet the shoe fits his foot with an infinite precision. And so he must wear it.

That is, the fellow harbors ideas so stupid… he can be nothing else but an intellectual. Example:

A debt ceiling “crisis” is upon us.

The Congress of the United States must soon locate its jack… and work the crank… until it elevates the existing debt roof.

This it must do to clear space for additional spending… else the humiliating spectacle of “default” menaces.

Treasury Secretary Janet Yellen estimates the national strongbox will be empty in scarcely one week absent a successful jacking — on June 1 or thereabouts.

The United States government would fall into arrears… broke, destitute, embarrassed.

And if the gentlemen and ladies of Congress cannot locate the jack? If the two sides cannot come to terms — and elevate the roof?

Dr. Krugman, intellectual, holds out the solution…

Stupid Idea

Dr. Krugman would have the United States Mint strike a single platinum coin denominated at $1 trillion.

$1 trillion!

Some wags have assigned it the appropriate label, “Big Coin.”

The Department of Treasury can stable this exceptional coin at the Federal Reserve. Uncle Samuel can then proceed to author checks against it.

A loophole within the United States Platinum and Gold Bullion Coin Act of 1995 grants it all permission.

This loophole authorizes the Treasury to mint platinum coins. It does not limit their denominations to a specified dollar quantity.

Thus the business would proceed under the color of law.

In theory the dollar denomination lacks all limits.

The existing debt roof need not be raised then — so long as the United States Treasury can draw upon this $1 trillion coin.

From the Horse’s Mouth

Do we misstate, exaggerate or distort the intellectual Dr. Krugman? We do not:

For those who don’t know what I’m talking about, there’s a law specifying which coins the Treasury Department may issue, and it gives the Treasury secretary essentially unlimited discretion in the design and denomination of platinum coins…

So here’s how it would go: Treasury mints a platinum coin with a value of $1 trillion. (No, it needn’t include $1 trillion worth of platinum.) It deposits this coin with the Federal Reserve, which adds $1 trillion to Treasury’s account at the Fed. The government can then draw on this account to pay its bills without having to issue new debt.

Affirms intellectual Laurence Tribe, professor of law at Harvard University:

“The statute clearly does authorize the issuance of trillion-dollar coins.”

Mr. Philip Diehl — former director of the United States Mint — has claimed the United States government can have its coin “within hours of the Treasury secretary’s decision to do so.”

Stamp the coin at West Point and it is but one helicopter’s flight to New York City and the Federal Reserve’s vaults at 33 Liberty St.

Yet consider the central travesty in operation…

A 930,232,558.14-Ounce Coin

Platinum presently goes at $1,075 the ounce.

“Big Coin” must harbor 930,232,558.14 platinum ounces to equal $1 trillion — else it tells a grand and hellacious fiction.

It perpetrates a fraud… and a mighty fraud at that.

Take in hand a 1-ounce coin.

Now expand it by nine hundred thirty million two hundred thirty-two thousand five hundred fifty-eight — point fourteen.

Can your hand house this monstrosity? Can any known structure house this monstrosity?

Only the interstellar intellect of Dr. Paul Krugman can house this monstrosity — his and other like intellects.

Why Limit It to $1 Trillion?

Yet questions springs immediately to mind. For example:

Why limit the coin-striking to $1 trillion?

If Congress can declare a $1,075 coin the equal of $1 trillion…

Can it not declare this curious coin the equal of $5 trillion? Or $18 trillion? Indeed… can not Congress declare it the equal of $31.5 trillion?

The United States government can retire its entire debt at a stroke.

Strike a $100 trillion coin and the United States would roll in clover for decades and decades to come.

Strike a $500 trillion coin and you extend heaven to every corner of Earth.

Recall: The United States Platinum and Gold Bullion Coin Act of 1995 does not restrict the coin’s dollar denomination.

Thus we offer you a proposal…

A $1,579,050,000 Jalopy

Our minions inform us that steel accounts for some 55% of the average auto’s weight.

They further inform us the average auto runs to 2,871 pounds.

Our auto therefore harbors 1,579 pounds of steel.

On the high end — on the high end — one pound of steel presently fetches $1 (differing steel grades go at different prices. For simplicity’s sake we will proceed under the $1 arrangement).

Our 1,579 pounds of steel will therefore fetch us $1,579.

We wish to sell you our vehicle for scrap. But we are dissatisfied with the limited $1,579 haul.

Yet we have been granted the magnificent power to determine steel prices. We have been made, in essence, king.

Thus we decree that one pound of steel equals $1 million.

To our everlasting glee and amazement, our $1,579 steel hunk is suddenly valued at… $1,579,050,000!

It can be yours at this very price. Are you ready to sign your name upon our dotted line?

We are reasonable of course… and willing to negotiate in the spirit of generosity so typical of us.

Now answer this question, please:

How does our proposal differ fundamentally from Dr. Krugman’s proposal?

Not Even Janet Yellen Agrees With Krugman

A less radiant intellect than Dr. Paul Krugman — Dr. Janet Yellen — has labeled the Big Coin business “a gimmick”:

I’m opposed to it and I don’t think we should consider it seriously. It’s really a gimmick… [It] is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt…

Dr. Krugman must certainly set the lady down as a sort of intellectual ox… an imbecile… a poor undersoul deaf to the music of the spheres audible only to such intellects as his.

He sizes Janet Yellen accurately of course — we hazard a thimble can house her cerebral capacities. But what of the good Dr. Krugman himself?

We have concluded that the fellow overguesses his own cerebral capacities by lots and lots.

Does he hear the celestial music, the music of the spheres? He does not. It is silent to him.

He hears banjo music. Yet he mistakes it for harps.

In fairness to the good doctor, the platinum coin option is not his preferred answer to the debt ceiling dilemma. He would have Congress simply raise the roof.

Yet he holds it out as an object worthy of legitimate consideration.

Recall: “Some ideas are so stupid that only intellectuals believe them.”

Regards,

Brian Maher
Managing Editor, The Daily Reckoning

 

 

Brian Maher is the Daily Reckoning’s Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master’s degree in Defense & Strategic Studies.

 

 

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