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Friday, January 11, 2013

Paul Krugman "Coins Against Crazies": Just Who Is Crazy?

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."


- Paul Krugman, "Confronting the Malefactors" (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html), October 6, 2011

Paul Krugman is just chock full of wonderful ideas, including his past advocacy on behalf of Occupy Wall Street. Today, in a New York Times op-ed entitled "Coins Against Crazies" (http://www.nytimes.com/2013/01/11/opinion/krugman-coins-against-crazies.html), Krugman acknowledges that the US federal government's "revenue has fallen far short of spending," which in turn has demanded constant raising of America's debt ceiling. Regarding the debt ceiling, Krugman writes:

"If we were to hit the debt ceiling, the U.S. government would end up defaulting on many of its obligations. This would have disastrous effects on financial markets, the economy, and our standing in the world. Yet Republicans are threatening to trigger this disaster unless they get spending cuts that they weren’t able to enact through normal, Constitutional means."

Heaven help us if there should ever be spending cuts . . .

Which brings Krugman to a proposal that the federal government should mint a platinum coin to eliminate Republican meddling with Obama's spending spree:

"Here’s how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion (or many coins with smaller values; it doesn’t really matter). This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government’s account. And the government could then write checks against that account, continuing normal operations without issuing new debt.

. . . .

[I]t’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!"

Ah, yes, the stuff that Nobel Prizes are made of.

However, as observed by John Steele Gordon, writing for Commentary (http://www.commentarymagazine.com/2013/01/09/the-trillion-dollar-platinum-coin/):

"Platinum is currently selling for about $1,590 a troy ounce. So a $1 trillion coin would weigh 26,221 'troy tons,' which might present a bit of a transportation problem getting from the mint to the Federal Reserve. There is also the problem that nowhere near that much platinum has ever been mined since the metal first came to the attention of chemists in the 1740s. Last year a grand total of 211 tons was mined worldwide, almost all of it from South Africa, Russia, and Canada.

. . . .

So could the Treasury mint a coin, say the size of a silver dollar, out of platinum, and simply inscribe it $1,000,000,000,000? To do so would be indistinguishable, in a practical sense, from sending over new bonds with the face value of $1 trillion, as the coin would have an intrinsic value that would be only the tiniest fraction of a trillion dollars. That would violate Congress’s sole power to borrow money."

Mint the coin? I'm certain world financial markets would highly appreciate this stunt, which could cause instant collapse of the American economy.

But heck, why go to the trouble of minting a platinum coin when an autographed picture of Obama, inscribed with the amount of $10 trillion, should do the trick?

Thanks, Paul. Keep those lucid ideas coming!

2 comments:

  1. Do you think that a $20.00 bill has more valuable amount of material than a $1.00 bill? NO of course it does not- it cost the same amount to produce each one. So the "value" is symbolic not intrinsic just as that "coin" would NOT have to weigh blah blah. It seems Mr.Krugman has a much better understanding of this than Mr. Gordon AND YOU. Not to mention that sice congress has ALREADY spent this money, they should pay for it. The real fight is in the real spending that WILL happen in the future not the PAST. Too bad your Republican allies are as ignorant as you and Mr. Steele Gordon.

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    1. It's all "symbolic"? There is nothing "symbolic" about US debt, which now exceeds $16.4 trillion, and which will never be repaid. If US debt indeed reaches twice the size of the US economy by 2037, as the nonpartisan Congressional Budget Office is warning, those $20 bills are also going to be worthless.

      Were it up to you, would you really risk minting the coin? I'm sure Krugman wouldn't.

      And for the record, I was never a Republican.

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