I did so yesterday in a satirical post Krugman Supports the $1 Trillion Coin; Why Stop There? I Support the $1 Quadrillion Coin.
In response to the above article, I have received several emails wondering where the money comes from. For example reader Tom writes ...
Hello Mish,Fictitious Accounting Entry
Thank you for your hard work and honest voice in producing this blog, I follow it daily. There is something that I do not understand in the platinum coin proposal. Where does the treasury come up with the trillion to purchase the platinum? Is this money printed from thin air? If the treasury had a spare trillion to purchase platinum they would not need to give it to the fed, simply use the trillion to finance more worthless deficit spending, a blatantly bad idea given the very low return we are now experiencing on stimulus.
Thanks,
Tom
Hello Tom.
The proposal is nothing but a fictitious accounting entry. There is no trillion dollars. Certainly the treasury would not buy a trillion dollars worth of platinum. Indeed, that would be impossible, at least at today's pricing.
Rather, the proposal was to take a coin (size is irrelevant), and stamp "one trillion dollars" on it.
Questions of legality have arisen as noted in my article.
It's important to note that Krugman (correctly) never proposed spending the coin. It would take an act of Congress to spend it.
Thus, the proposal was to value the coin at one trillion dollars simply as an accounting entity. In other words, the Treasury would take a coin worth essentially nothing, that could not be spent, and value it on the books as one trillion dollars.
Accounting Fraud
My personal opinion is that it would be fraud to place a one trillion dollar value on a coin that could not be spent (in this case, because the money was already spent. In higher denominations, the money would not be spent until Congress authorized such spending).
Regardless, actual future spending would be precisely what Congress authorized to be spent, no more no less.
No Inflationary Effect
There would be zero inflation as a result of minting such a coin. Indeed, it would not cause inflation if the Treasury minted a 1,000 quadrillion coin. This is an important point.
Debt Ceiling Nonsense
The entire exercise is to avoid another nonsensical discussion about whether or not Congress will bump up the debt ceiling. I say "nonsensical" because we all know that Congress will indeed cave in and bump up the debt ceiling.
On that score, Krugman actually has a point. However, (ignoring legalities and accounting fraud) there certainly is a huge need for discussion in Congress about the deficit and debt levels.
That is why I am against the coin idea even if it is legal (which I doubt).
However, in case I am legally wrong, I repeat what I said earlier (the treasury should mint a one quadrillion coin), simply to highlight the absurd nature of the idea.
With that, I repeat my proposal for this picture on the front of the coin.
The back of the coin should be equally obvious.
Paul Krugman Prays for America.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Addendum
Here are a few thoughts from Pater Tenebrarum at Acting Man
I would point out though that whether it is inflationary depends on the precise mechanics of the operation. Congress could limit spending according to whatever it decides, so it need not be inflationary. But that depends on an unknowable future. As a rule, once government bureaucrats discover "innovative" financing methods, they try to make use of them to the hilt. The whole debate is actually a great illustration of the utter absurdity of our monetary system.When I suggested minting a quadrillion dollar coin would not be inflationary, it was under my stated provision that Congress would still limit spending to amounts authorized. Of course, monetizing a trillion dollars every year is in itself an inflationary practice in isolation (with or without mind games involving platinum coins). The coin is irrelevant in that regard.
Pater catches the key point of both my articles in his concluding sentence "The whole debate is actually a great illustration of the utter absurdity of our monetary system." And that is precisely why I proposed Alfred E. Neuman on the coin.
