The Trillion Dollar Coin Delusion

When some of the most prominent pundits, economists and financiers, if not the intelligent ones, can opine positively on this idea, then I too feel entitled to offer my thougths.

The idea is, to be polite, at best asinine. No suspense in what my position is as you can see.

Here is the quick and dirty.

If treasury can mint a 1oz coin of platinum and declare it to be worth $1 Trillion Dollars, where do we stop?

The question is rhetorical of course because in the new normal governments are attempting just that. When Fractional Reserve Banking and Floating Exchange Rates no longer provide the lift to asset prices as they used to, then the monetary authority must intervene directly to buy assets itself which, of course, runs counter to the dynamic they are trying to save.

Moreover, anyone who still believes the West enjoys free markets and a capitalist economy should finally have the cob webs removed from their eye lids. Insidiously if deliberately we are reaching the logical end of what this monetary system has wrought and the statist slant of the electoral political process is finally revealed for the authoritarian centrally planned utopia most politicians worth their salt dream about.

A $1 Trillion Dollar coin? If that works, then similarly why not declare by fiat the value of real estate, the value of wages, or what the rate of unemployment is…. oh! Wait!


Tags: , , ,

3 Responses to “The Trillion Dollar Coin Delusion”

  1. josephbc69 Says:

    Greetings, Guido!

    As always, a thought-provoking read from your pen [OK, keypad].

    I’ve been thinking about this concept by turning it over and over to find new points of entry into its heart, and I think I finally found one, although there must be more.

    Let us say that one such coin is struck. Now it need not be gold [G] or silver [S] or even platinum [P], because in the end they all amount to the same, which is an object made from a material substance known to be a fixed, finite amount.

    Currency is only used by humans in their transactions. Humans in most societies over the past several centuries became accustomed to using currencies such as paper bills and base metals. I am told that the cost of issuing a new paper or plastic bill, even the newest highly complicated ones using intricate technical methods, is under five cents in the US and Canada, so it is clearly advantageous for federal governments to use these methods.

    What is crucial, however, is that the subject population must believe all such bills and coins are readily transferable in their values and will be honoured as widely as possible. What gives a currency its ultimate value is its acceptance in common daily buying and selling.

    Failure to secure confidence leads to a failure in perceived value. When I read Roman history at University in the early Sixties, I had one entire course devoted to the economic history of Rome as revealed in its coinage, which was of copper [Cu], iron [Fe], silver AG/S], or gold [Au/G]. Even then G was deemed the more valuable of these and accepted as such when it was first introduced. As time passed and Roman governance became weaker, the Emperors resorted to debasing first S, then G coins. These coins formed the basis for my textbook, A Numismatic History of Rome, by Harold Mattingly. He devoted a fair bit of space to recounting the reasons for the basement of coin currency.

    People accepted all the coins at first, however certain eras were more prone to inflation than others. People would carefully shave the edges of G & S coins, save the scraps, then melt them into small ingots to be sold to the minting facility. To get around this fractional debasement, the mints then began producing coins that either had edges milled w/transverse striations which immediately show any cutting, or they left the traditional smooth edge but inscribed a message on it, which also prevented shaving. My father gave me some modern Italian coins from the early 20th c, with inscriptions on their edges, continuing a 2000 year custom.

    The other method used to dilute coinage was to lower the purity of G & S coins. South Africa for many years added a bit of Cu to their Kruger Rand, which gave it a characteristically reddish-gold hue instead. Silver when mixed w/G created a new alloy, known as electrum, which can sometimes be found in a native state. This had better wearing qualities than pure G. “In Lydia electrum was minted into 4.7-gram coins, each valued at 1/3 stater (meaning “standard”). Three of these coins (with a weight of about 14.1 grams, almost half an ounce) totalled one stater, about one month’s pay for a soldier.” []

    If you extrapolate this amount of S coinage using today’s prices, it would appear that the soldier had about 1/4 oz S for his wages, about US$ 8.00 a month. Now THAT’S inflation! Of course the military supplied his clothing, food, and housing, but you get the idea that there’s been a marked discrepancy in valuation between then and now.

    [To be continued, if you wish]

  2. Patrick Donnelly Says:

    Seems to be an IQ test and to see who salutes it. Close to ridicule, but will enable some more millions to understand what money actually is …. I think the more this is bruited, the better!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: