There’s a lot of laughter about this, but the proposal is not altogether different from what the U.S. is doing already in slow motion. The key difference between simply minting trillion dollar coins and the way the debt scam is currently done is as follows:
If the U.S. Government prints x number of trillion dollar coins today, tomorrow you would wind up with a North American version of the Zim buck.
That would be bad—for a while. It would shock people and immediately cause severe dislocations.
The current debt financing system, however, is much worse and insidious in the long term. It’s a nightmare that is increasingly being forced on future generations. The process moves much slower than the overnight creation of a Zim buck, but unless one happens to take an interest in these matters, one probably wouldn’t notice it. For the average bewildered adult, life, in general, goes from bad to worse.
In short, the process looks like this:
The piece below states, “Creating money out of thin air is hardly a solution.” And everyone laughs. HAHA. But that’s exactly what the Federal Reserve is doing.
The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
Still, the outdated notion of never-ending buyers for U.S. debt is perpetuated by many.
The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit. Similarly, the Fed is providing preferential credit to the U.S. government and covering a rapidly widening gap between Treasury’s need to borrow and a more limited willingness among market participants to supply Treasury with credit.
So, laugh all you want about a trillion dollar coin.
In effect, the same scam has already been implemented.
What if the threat of a voluntary default by the United States could be erased by simply turning one tiny scrap of platinum into a coin?
That’s right. No debt ceiling problem. No bickering in Congress. No market jitters. The only thing needed is for the Treasury Department to mint a platinum coin with a face value of $1 trillion.
Of course, this is not going to happen. Creating money out of thin air is hardly a solution. It could lead to even more concerns from those worried about inflation. Critics of the Federal Reserve’s monetary easing programs would likely be apoplectic if the Treasury Department trumped Ben Bernanke’s “helicopter drop” by minting a trillion more new dollars.
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