E Pluribus Absurdum

The Trillion Dollar Coin gambit has hit the big time, appearing in the leading paper of that company town known as D.C.:

[…] Obama could always just solve the crisis with a pair of magical platinum coins. Sure, that sounds preposterous, but Yale’s Jack Balkin argues that this is actually a perfectly legal strategy. Here’s the logic: Under law, there’s a limit to how much paper money the United States can circulate at any one time, and there are rules that limit how many gold, silver and copper coins the Treasury can mint. But the Treasury is explicitly allowed to mint however many platinum coins it wants and can assign them whatever value it pleases. So the Mint makes a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Federal Reserve moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations in the near term without issuing new debt.

This crap deads itself by simply asking one question: “what would stop the government from minting a 100 trillion dollar platinum coin then?”  Value has to have some form of grounding otherwise no one has reason to believe it, and if no one believes the value of something then the value becomes by default (no pun intended) zero.  The problem is not one of money (fiat currency can be endlessly created), but of value; there’s a point past which additional creation of currency strikes the big players in collecting it as reason to stop accepting it as payment.  You want to see where that point is?  Watch what happens when August 2nd comes and goes, the U.S. government will cross that line fairly quick.

Oddly enough, despite the oncoming creation of a fuckton of new “liquidity” as they frantically scramble to fill the now-obvious gaps (the structural issues with any institution that regularly spends 40% more than they have in resources doesn’t seem to be a popular topic for the various talking heads and pundits; their loss…), there is the inescapable fact exploding the assumptions on monetary policy that the state and its largest benefactors lean on for survival: there’s already plenty of money in the system.  It’s just concentrated in a few hands.  On purpose.  If the nature of political power were somehow to reverse itself, the resulting policy would be a massive claw-back from high finance (after all, they exist due to political favor anyway, and as a result their gains are morally equivalent to armed robbery, thus void).  The privilege, ideally, should simply be abolished, but barring that it would be completely justified to require fee for the service, and give the proceeds of it to those who were robbed in the first place.  That this isn’t a possibility shows why politics is a black hole.

+…hell if I know.

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About b-psycho

Left-libertarian blogger & occasional musician.
This entry was posted in economics, fevered barking. Bookmark the permalink.

One Response to E Pluribus Absurdum

  1. Todd S. says:

    Good commentary. Honestly, I hope they do something like that because I think more than a handful of folks (maybe even 6 or 7!) would finally wake up to the absurdity of the whole thing. Some of them might even join the ranks of those who say “no more”.

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