According to this article, an economics professor came up with the idea of minting some platinum coins to pay back debt–coins worth $1 trillion a piece. The president would order the coins to be deposited at the Fed, which would somehow positively affect the Treasury and allow spending levels to be maintained.
The article says, “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.”
The claim is that this would not cause inflation. But regardless of printing fiat money or minting it, the inflation is unavoidable, right?
Mr Gagon is completely wrong. Inflation is the creation of money and/or credit not backed by savings. Where are the $2 trillion in stuff used to backup the value of these coins? The article shows a Trillion Dollar Zimbabwae note as well which means exactly the same thing.
Price increases are not inflation. Price increases are a symptom of inflation.
Oooooh wow this is a good one. This is like the super hypothetical example because someone is actually advocating this. The reason why this might not actually cause inflation is because no one could actually exchange that for anything. What the hell are you going to buy for a trillion dollars which you can’t divide into anything? Indeed I think that the better question is what would the 17 coins do exactly? Who are they going to give them to? If you own a share of a coin then the shares would be massively inflationary, the money supply would more than double… So what happens to the coins? If the fed made the 17 trillion dollar coins then… What? You have to pay off your debtors to pay off the debt but they can’t because there’s way more than 17 debtors with way less than a trillion dollars a piece.
Price increases can be avoidable. If people stop using the currency then prices will not go up at least in the short term. What is not avoidable is the negative effects this kind of economic foolishness will have on the Economic Calculation. Do you think that dropping 2 trillion in new money into the Fed coffers will not result in some multiple of that in loans? Who will get this loaned money? What will the government do with the money it loans into existence?
