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A Challenge to Business Insider and Huff Post
Two liberal Emags have been pushing for the "Platinum Coin" as a solution to the upcoming debt ceiling crisis.
Adding to the push by the liberal media, the White House is sponsoring a petition to “force” the Treasury to issue a coin for a trillion or two. I want to barf at this talk.
In my opinion, there is no substance to the coin solution. In theory, it does resolve the debt limit issue that is just months away from a crisis. But that would be a terrible outcome for the country. Any chance at achieving fiscal discipline and a sustainable debt path would be lost.
Yesterday, the Fed indicated that it was closer to ending and reversing QE than had been previously been thought. If you believe the Fed (I don’t), then you should expect QE to end before the end of the year, and the long process of unwinding the Fed’s balance sheet will begin. But if a coin is used to replace the bonds the Fed has in inventory, the Fed will be powerless to reverse QE. The coin makes prior QE permanent. I see that step as the ultimate “fold” on responsible monetary policy. It’s a cheap way to avoid the country’s “Speed Bump” on explosive debt creation.
Bottom line: The coin is a phony solution to a real problem.
BUT
I want to say in print that I will support the coin concept with all of the resources I can bring to bear. I will write about it, I will sign petitions, I will march on DC, and I will put up money to support the cause.
BUT
My support is conditional on a minor revision of the “plan” spelled out by Huff Post and Business Insider. My plan:
- Three coins are issued. Two for $500B; the other for a cool $1T. I would use these coins to extinguish $2T of debt.
- The $2T of debt reduction would be sufficient to bridge the country to 2015. As a result, the country would benefit from two years without a self-induced financial crisis. The $2T buys the country breathing space through the bi-elections. My coin solution would take politics out of the process for a much needed 24 months.
Like it so far? Now, the key difference between BI/Huffy and me:
- A $500B coin would be given to the Federal Employee Retirement System (FERS).
- A $500B coin would be given to the Military Retirement Fund (MRF).
- The $1T coin would be given to the Social Security Trust Fund (SSTF).
The government Trust Funds (TF) for FERS, MRF and SSTF are holding a whopping $4.6 Trillion today of government IOUs. My plan would reduce that by less than 50%.
The debt held by the TFs is more of an accounting entry than a real debt. The bonds held by the TFs do not, in any way, secure the promises that the government retirement funds have made to current and future beneficiaries. The benefit payouts are set by Congress; they can be changed at any time. The existence, and the size of the TFs, has nothing to do with benefits. Period.
I believe that my proposal is a substantial improvement to the one being pushed by the liberal media. It achieves everything that those folks have been pushing for. It does that without tying the Fed’s hands, or creating the risk of future inflation. What’s not to like with that result?
There is not one chance in a million that the likes of BI and Huff Post would go for this. These outfits do want to see the pesky debt limit problem disappear, but they LOVE Social Security.
My challenge to Arrianna Huffington, Henry Blodgett and Joe Weisenthal is to step up to the plate, and make a real stand on the coin. Do the “right” thing. Do the “smart” thing. Mint your coins; buy the time you think we need, just put those coins of yours in the tills of America’s Trust Funds.
My bet here? I never hear from Arianna, Henry or Joe. Their base of readers would crap in their pants over my suggestion. The readers would rip those Mags apart with criticism. Those “influential” supporters of the coin plan that BI keeps referring to would run away in droves. Those who want coins are also pregnant with their support of SS. BI and Huff Post can’t do the right/smart things. If they can’t do the right things, they should just fold their cards on the coin idea.
Note:
I wrote about using a coin to extinguish federal debt owed to Social Security on 10/31: How To Eliminate $4.5 Trillion of Debt.
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FIRST EVER POST HERE: VIRGIN NO LONGER.
Sure 1555 platinum spot now is worth 1 trillion. I love it! Bring it on! As a matter of fact, that means that any gold I might have would be worth lets see...1.2 Trillion per ounce! Hell, I'll pay off the national debt and take all the NGM out to dinner now if they would do that! Then, i would go on a spending spree!
If Platinum is worth 1 Trillion per ounce, then GOD ALMIGHTY... How much is silver worth!!!
This is getting rediculous. I wish things would crash now.... PM's go through the roof and I could start buying my house and all other items scott free... Of course, this assumes I even own PMs..
Virgin - no longer!
I busted your " up arrow" cherry!
To the Treaury/Fed, platinum does not hold the fear that the idea of gold does.
Reminds me of Potemkin villages.
What I really don't grok is why so many people think they have to say something fundamental about such moronic ideas.
Is it really only because they can't look into the face of reality? That they prefer to invent complicated fairy tales instead?
Just incredible.
Brad Plumer's WaPo blog shows incredible ignorance about the banking and monetary system. Anyone that believes this BS should move to France.
http://confoundedinterest.wordpress.com/2012/12/09/strange-days-print-tw...
Henry Blodget, now there's a reliable source for ideas
Am I missing something? Didnt FED print a lot of such coins to rescue derivatives market, Wall Street? Isnt FED already buying a big percentage of our treasury debt and then giving us back the interest paid on this "debt" - hardly real debt.
The crazy thing is that while we ridicule monetization, which has not lead to inflation, not even 70s levels, let alone hyper-inflation, our govt happily lends to pensions, private parties, foreign countries. Governemnt spending: defense, medicare, Soc Sec etc is no more or less inflationary if funded by FED monetization or by lending to third parties...so why lend to third parties at all? Shoot, the FED prints money, gives it to big banks at nearly zero percent interest, to keep their investors whole, and then banks buy our Tbills and our govt pays the banks interest on the Tbills?!?!? Giving banks safe and steady profit on their high volume transactions funded by the FED "discount" window....how is this better than coin to keep taxes down or current FED printing and buying our debt directly and then returning the interest to us?
Truth is neither liberals nor conservatives say what data driven, non-mainstream economists know, private fractional reserves banking creates most of the money in economy and it's the inflation or deflation of private debt that drives general inflation/deflation. On top of banking debt, there is the whole shadow banking of derivatives that creates even more money.
Money creation is not bad per se, despite my grave issues with big money/Wall Street etc, I think money creation via fractional reserve lending (or other better means) can and has actually been a net good thing for developed economies. Two issues I have with it are the 1) monopoly of money creation we give to private, non-transparent entities, so they get all the benefit of interest and none of the harm of defaults (FED will always rescue) and 2) because volume of money lent is their means to profit, banks will inevitably get carried away, not just lending into productive, value producing ventures (that can afford to pay interest back from improvements in value/efficiency they create) but banks will also lend into speculative asset bubbles/ponzi schemes (that can only afford to pay interest by new suckers coming into market and increasing price of asset, not by income stream from asset), but meanwhile make basic goods, like oil or housing sky-rocket in price/percentage of wages.
Money creation already happens, even fiscal conservative MISH agrees and non-mainstream economists like Steve Keen show, private debt swamps govt debt, private debt creates the bulk of our money supply. Lending preceeds reserves, banks simply lend money into existence, collect interest on it, then when loan paid, money is gone, but interest is in their pocket.
Lets be grown ups and admit the obvoius, money creation already happens on massive scale, much more massive than any debt our govt is now ringing up.
Since money creation, or destruction, already occurs via private fractional reserve and shadow derivative market, since this is allowed and we already live with all its infaltionary and deflationary effects, why not direct it to things that will help whole economy, create jobs, alleviate need for social safety net? Build infrastructure, fix our electricity grid, have fiber optic internet going to every nook and cranny of the nation, invest health research private compnaies dont see profit in, further our energy indepence in any manner we see fit. Instead, right now, money creation and its profits are directed to wasteful, parasitic ventures that enrich a few elite skimmers.
Money creation happens, chaotically, at the whims of a few elite. Putting it hands of democracy means it could be directed towards the common wealth. Doesnt mean we have to abandon great tool of private markets, but we could be more like Germany, whose community public banks serve the communities and local private business who do great in global economy, rather than Wall Street sucking out parasitic profits for nothing.
Joke is on us, we argue about trillions in govt spending, $50 less in our twice-weekly paychecks due to FICA tax cut discontinued, and shaving $100 off of grandmas $1000 Soc Sec check... while Wall Street creates much more money in derivative market and laughs on way to Hamptons.
"The crazy thing is that while we ridicule monetization, which has not lead to inflation, not even 70s levels, let alone hyper-inflation,"
Patience! hyper-monetization has a time delay; Weimar Germany did not collapse instantaneously upon starting to over-print, it took a couple of years before it all fell apart. Our economy and debts and (un-deserved faith and credit) are far larger , and will take longer to implode.
"Joke is on us, we argue about trillions in govt spending, $50 less in our twice-weekly paychecks due to FICA tax cut discontinued, and shaving $100 off of grandmas $1000 Soc Sec check... while Wall Street creates much more money in derivative market and laughs on way to Hamptons."
MONEY IS NOT CURRENCY, AND IT IS NOT DEBT. Wealth is not created by the government, and cannot be printed or wished into existence; it takes WORK, and is therefore not available to those who won't work. Wealth is STOLEN by the government, the bankers and Wall St., and all other con-artists who purport to provide "services" you don't want or need while taking your wealth for their own purposes.
"Money creation happens, chaotically, at the whims of a few elite." Possibly. Wealth creation happens at the whims of the many who work, and is destroyed by the whims of those who are not productive, if the productive aren't careful.
"It doesn't bother me that any jackass's vote is worth the same as mine. It bothers me that the votes of TWO JACKASSES are worth TWICE as much as mine!" (possibly near-misquote, vaguely attributed to Mark Twain, though I can't find it now).
You forget who is Krasting! A bond salesman.
well, at $1550 an oz, the $2 trillion coin(s) will weigh 1.29 billion ozs or around 4,000 tons
No one said the face value of such a coin would have anything whatever to do with the intrinsic value of the metal it was made from. That would be a return to a metal standard, which isn't under discussion by anyone who could do that.
They could use a coke can pop top and stamp "$ 1,000,000,000,000" on it, and it would be legal.
Just stupid. Because in the end, as now, not many could redeem that or make change without a whole lotta virtual printing by the fed anyway. So why bother with the coin step? Law? Our government thinks laws are only for us "little people".
I have an idea. The Treasury buys up every known copy of the Billy Ripken Topps card ( the one that says "fuck face" on the knob of his bat).
Then they pay some scientists to claim to have discovered that Billy Ripken is actually Jesus. List the cards on Ebay and presto! Everyone dives home in a limosine!
I hope they put Ronnie on it (like the old Dealer McDope paper money!).
better Alfred E Neumann
Too easy to mistake for a Kennedy.
Instead of a coin may I suggest a ring?
This one could be truly called "my precious".
Does that make the SCOTUS RingWraiths?
Well, it would certainly be able to rule them all.
I want them to make one now. We all know exactly how this turns out in the end.
Only shysters see any merit in the coin loophole. It's the ultimate dodge. Bruce, don't be a shyster.
Three coins, three cups, a black matt and a cardboard box. Put Mandrake the Great on the street and we'll have the deficit paid in no time.
lol, the three stooges in Monty python!
Hey!
Bruce - I suspect you are joking, indeed I hope so.
If not (please call your doctor and ask him to double the dosage)
Questions:
Double the dosage? We can't even get the psychiatrist to drink his own wine!
I'm joking, sort of. I think any coin is a dumb idea.
But if there is to be a coin, it should be issued to the TFs, not the Fed.
My plan is a slightly improved version of a stupid idea.
I think your amusing idea could be made more realistic (to reflect the fact that money should reflect stored work or potential energy to be used in the future) by insisting to the HuffPo idiots that the coin consist entire of anti-Pt atoms (to make it truly unique and thus worth 1T). The energy required to create even 1 gram of such anti-matter and the time required to do so, would create a whole new industry to build massive accelertors etc., magnetic confinement for storage etc. But that new industry would require new real capital and work which might be a bit of problem. However, no fundamental principles woulc be violated. And, of course, if one wanted to extract all that energy and work in the future one could simply expose the anti-Pt to normal matter and let E=m*c^2 do its mass to energy conversion thingy. Storing wealth in the form of anti-matter is certainly the way to go-chemical bond energy storage is so 20th century! Let's get this "alternative" idea started in the leftist community. Oddly, its actually more "reasonable". And if we should discover another galaxy consisting of an indebted civilization entirely made of anti-matter think of the possible mutural debt reduction possibilities! (Just remember shaking hands to seal any matter-anti-matter trading deal is fatal though the energy released could power both civilizations for years)
Glad to hear you haven't jumped the shark Bruce
"sort off" joking? Uh Roh....
The big revelation here is that you at least tacitly acknowledge that the Nobel-waiving Ivy League Krugmans (and their non-Ivy League, Nobel-less mini-want-a-be Weisenthals) of this world are imbeciles and/or propagandists, and that the rags they work for are petri dishes attempting to incubate stupidity organisms/viruses on something resembling an even larger scale.
Welcome back to the logic zone, Bruce,
Actually, where's all that Platinum supposed to come from?
Recycled catalytic converters.
By law the Treasury can assign any dollar value to a platinum coin; i.e. it's not based on the value of the base metal. The coin could be microscopic and be assigned a value of a quadrillion dollars. In all respects, the real world equivalence is repudiation.
That's it! $1 quadrillion coin! Cash it in, divi it up between all of the working Americans. We all go shopping, BOOM the economy goes wild. 150,000,000 Americans with $7,000,000 in their pocket!
Man I should be the Bernank...????
Why stop at a quadrillion when we could mint the universe's first googolplex coin?
paper
Nice one Vendetta!
DavidC
well in the end the coin isn't backed by anything so its only worth something to someone else if they will accept it in payment. this money goes right into the economy (if you give it to retirees) so its wildly inflationary, and if you don't spend i right away, it will lose value pretty quickly, a 1T voucher today might only be worth 500B in a few months, and virtually nothing by 2015.
but i've got an idea for a financial business, i buy up the SSN benefits of the people in the system for a lump sum. i'll pay you two years worth of SSN payments lump sum, and then your monthlies come to me. of course i have to discount you at the prevailing interest rate (plus), just kidding, but at what rate would you discount two years worth of benefits, for a lump sum payment, if the coin plan were put in place?
Toss in a free cyanide pill to sweeten the deal.
Bruce why do you even give the time of day to these left wing propaganda machines?
BI's founder is DoubleClick founder and big time Obama supporter (Kevin P Ryan) also founded Gilt.com
Common investors in both HuffPo and BI is good ol' Super Dem Ken Lerer who co-founded Huff with the Arianna creature
from the archives of the NYT
And then there is Henry Blodget http://www.sec.gov/news/press/2003-56.htm
I totally agree. It's like pissing the ocean. It's like farting in a hurricane! These left wing troglodytes won't smell or hear anything Bruce is going to say. Ugh on to the next post.
Bruce Ask yourself - what is fiscal disipline ?
Its disipline to maintain mainly private banks claims on wealth.
We live in a world without final international settlement.
What other choice do you have ?
Economies (see europe) cannot have negative money supply for too long as soon they become non economies.
(Ireland has had a negative money supply for 4+ years now as it lost 100~ billion of bank credit , not replaced by national credit but by fiscal debt which we must pay interest on to mainly external players )
The coin is not much different to what lincoln did (greenbacks) - the only major difference is that he was expressing domestic coal in a internal monetary form.............
I do agree that this time is very different.
So we replace IOU's with IOU's we are really serious about this time.
Well, on a long enough timeline, that coin will not only be worth a triliion dollars someday, but even more.
When I give anyone a Silver Eagle, I point out that this is a real dollar, and someday, will be worth more than all of the paper dollars combined.
"Any chance at achieving fiscal discipline and a sustainable debt path would be lost." - You sound like a proponent of the Status Quo?!
Let them have the 1T coin, let them eat humble pie!
Of course there is zero difference between printing a big number on piece of paper than a small piece of metal. Both are backed by nothing.
Why only issue one or a few coins? Open that Pandora's box and why not extinguish the entire debt and abolish taxation? Why let a little pesky thing like hyperinflation stand in the way of progress? Also I vote the coin be made of zinc, or recycled plastic.
Foreign investors may be dumb as rocks, but I believe even the functionally brain dead would notice such overt money printing, but hey I've been wrong before.
Since all will print in lockstep, there will be no safe havens. You either front run or you're done.
Bruce,
As an investment professional, I assume you know how to do analysis supporting your thesis. I see very little of it in this post.
Why are you proposing exactly this amount? Why not to issue more coins to replace all IOUs in the government funds/SS? Why not to issue even more and cut SS tax?
Why to give just 2 years of political relief? Why not 4 or 6? Because if it works for 2 year, it presumably should work even better for 4 or 6. More than that, we can order the fed to buy let's say another 2-4 trillion of US treasuries, then substitute it with some coins, and then cancel! All of the sudden, we do not have debt problem, debt limit problem, and political problem. Plus, enough liquidity to support all types of economic activity. Plus, we can cut some taxes.
So, as you mention you would support the idea on certain conditions, please, clarify how you come up with the exact amount of coins and the best ways to utilize them.
$2T would get us through the next election.
$2T is less than half of the TF assets, I do not want to wipe them out, just cut them by a significant amount.
To do more at this time would not be necessary. So that is how I got to 2T.
I hope you folks understand that what I'm suggesting has not a ghost of a chance of actually happening. I just wanted to make fun of BI and Huffy for their stance.
I know they could not support my proposal, they are conflicted with other issues. So they would have to back off (was my hope).