Brodsky's Thompsonesque Trip Into The World Of Monetary Idiots Vs Krugman's Barbarians

Tyler Durden's picture

Submitted by Paul Brodsky of QBAMCO,

Speaking of monetary abstractionism, there has been recent talk of a fiscal gimmick called “The Trillion Dollar Coin,” in which a platinum coin valued at $1 trillion would be created by the U.S. Mint for the Treasury Department. Treasury would then rid itself of its pesky fiscal deficit in one fell swoop by simply keeping the coin on deposit at the Fed.

The TDC idea is a marvel of political imagination and public ignorance (and so it seems to have legs!). As with most clever illusions, the TDC is based on sound logical footing, one in fact we have argued in favor of: asset monetization. But there is a fundamental difference separating the Fed monetizing Treasury’s gold to devalue the dollar, followed by a re-pegging of dollars to gold at the higher fixed exchange rate (our idea), and assigning an arbitrary value to an asset no one else is allowed to own.

After declaring the coin to be worth $1 trillion there would be no market-based discipline. In its aftermath, twice or half the amount of global platinum could not be exchanged in the marketplace for double or half the amount of dollars. (It is reminiscent of the Weimar Germany scheme to back Papiermarks with agricultural land. Brilliant! Er, but how do its users exchange the money for the land?) Not only would it be difficult to value extant platinum, it would be almost impossible to value anything in the world (at least in dollars).

Once the coin were struck, it would become obvious to the global marketplace – producers, consumers, savers, investors and trade partners – that future global purchasing power would be left exclusively in the hands of the US Treasury. Treasury would be able to simply outbid everyone on the planet for everything.

We suspect the Japanese Ministry of Finance would soon mint a ¥100 trillion pair of chopsticks and put them on deposit with the BoJ. They could then purchase most if not all of the oil on the market today for future consumption! We are confident oil exporters would not raise their prices because they would have the magic chopsticks as collateral. And why wouldn’t all the world’s treasury ministries simply create priceless flux capacitors and use them to create all the taxes needed to self-fund their governments? (To do so Ben Bernanke would have to hand over its proprietary technology – the Fed “has a technology called a printing press…”)

Obviously, the TDC idea is a political ploy with a targeted mission: to rid the US Treasury of its debt ceiling, which is an increasingly frequent and embarrassing public reminder of government ineptitude. Everyone knows government-led de-levering is not a serious threat. However, the irony of the scheme and its MMT (Modern Money Theory, is espoused by imaginative economists technically proficient in double-entry bookkeeping and deficient in confidence that free marketplaces can provide accurate valuations) / liberal Keynesian promoters could not be more delicious. The scheme exposes the forty year-old charade, otherwise known as the global monetary system, better than any mind-exercise we have been able to come up with.

As we considered the plan, Hunter S. Thompson’s observation sprang to mind: “in a world of thieves, the only final sin is stupidity.” Though the TDC idea would work from an accounting standpoint, it seems awfully unlikely Americans and the rest of the world would let the US Treasury enjoy a very visible monopoly on fraudulent monetary accounting.

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andrewp111's picture

Krugman is giving Obama the MSM's clearance to mint the TDC. Obama does not do anything without approval from the MSM. He is their sock puppet.

Buzzworthy's picture

"Obviously, the TDC idea is a political ploy with a targeted mission: to rid the US Treasury of its debt ceiling, which is an increasingly frequent and embarrassing public reminder of government ineptitude."

One correction, if I may.  The debt ceiling is not so much reminding us of ineptitude as it is reminding us that debt is the natural condition of fiat currency.  Every time we breach it that truth becomes evident.  For this reason I LOVE THE DEBT CEILING

traderjoe's picture

Not all fiat is debt-money like the FRN. See the United States Note.

km4's picture

What a sham i.e. a bullshit attempt of  quasi gold standard to interleave with dollar fiat currency that is printing out of control 

gimli's picture

Does anyone know if the price for platinum blondes be affected?

otto skorzeny's picture

how bout Minnie the Moocher's diamond car with a platinum wheel?

nmewn's picture

They would hold less value, in fiat terms, zero one trillionth of a chopstick ;-)

Yen Cross's picture

Hey, My Friend. Don't you ever under-estimate yourself! a smart man you are, I'm in your debt.  I'm sure there is some JEW in my family.

    You have done a lot of good on Zero Hedge nmewn. I thank you for your understanding.  You are good at mind fucking people.

 You are a good person.

 

Curiously_Crazy's picture

You are good at mind fucking people.

You are a good person.

 

Now there's two sentences I never expected to see one after the other :)

Yen Cross's picture

 I pitty you. Curiously_Crazy

  I'll bet you can't find a friend?   Ever heard of "Golf Cadettes"?

Yen Cross's picture

 Solace/ nmewn ( I'm half Jewish) and damn proud.  I don't want world domination. My other Jewish friend and I exchange gifts during Christmas. He was Married to his beautiful wife in a Christian Wedding.

   I'm going to take all you morons out for a drink soon!

nmewn's picture

ROTFL!!!...fucking awesome!

We suspect the Japanese Ministry of Finance would soon mint a ¥100 trillion pair of chopsticks and put them on deposit with the BoJ.

I've got two...count them TWO!...500 trillion dollar flip flops!

I'm rich ;-)

andrewp111's picture

No need. The government of Japan is already going to cancel Treasury Bonds owned by its BOJ outright. That is the same as the trillion dollar coin without the coin.

gimli's picture

If it looks like a duck and is endorsed by Paul Krugman --- it's a platypus.

http://www.youtube.com/watch?v=S3MtqBSd3w0

chump666's picture

Those idiotic Keynesian maniacs will unleash hyperinflation, as their opinion of the barbaric relic (gold) will be bought up on mass as everyone (not just gold bugs, the WHOLE world) will go physical - as PMs will be used as collateral for debt by all countries, while currencies/bonds/even stocks collapse.  Oil will go bid the USD will be destroyed.  It will start a precedence of complete lack of faith in paper assets, including USTs.  They (the TDC crowd) will essentially provide hyperinflation in one swoop if the coin is minted.

There Joe smoke that one.  It won't happen for those reasons.

http://www.businessinsider.com/the-two-most-stunning-things-about-the-mo...

andrewp111's picture

Hyperinflation won't happen until Congress goes hog wild with the spending, doubles it and then doubles and doubles it again, all paid for with Seigniorage. In the near term, the TDC will make Obama a conquering hero. Mortgage rates will drop below 1% and interest rates on savings will go to -2% or less. Banks will start lending again, and we will have a recovery. The GOP House will get obliterated in the 2014 midterms. With Pelosi back in the saddle again, that is when the inflation fun begins.

Cabreado's picture

"Hunter S. Thompson’s observation sprang to mind: 'in a world of thieves, the only final sin is stupidity.'"

But stupidity is not a sin.

Intent gets close -- in latter stages even closer, as Intent is exposed...

but actions fit the bill; inaction in context as well, and that's where the attention must lie.

It is an easy concoction of Principle, Law, and Common Sense, all enabled by Humility.

Don't dare miss one part.

nmewn's picture

Perhaps he meant willfully stupid, not ignorance.

Great comment.

pdtrader's picture

What astounds me is that the geniuses in both the Treasury and the Fed, with all their daily exposure to markets, and their heralded educations, don't understand that nasty, little thing we call the "pricing mechanism". Much less how they're completely fucking it all up.

Who knew the catalytic converter on my car would one day be worth a cool mil?

A Lunatic's picture

Your platinum is still market value. See there's market value, and then there's "we're above the fucking law so you little people can STFU and get back to paying more taxes for less services or we'll cart your ass off to Gitmo" value. See the difference??

NeedleDickTheBugFucker's picture

It's generally accepted that gold and silver Eagles sell for a premium over spot.  However, the implied premium for a 1-ounce platinum coin valued at $1 trillion seems a tad rich given the current spot price of $1,602.90 / ounce.

chump666's picture

China will use a mega gold coin to back all their sh*t and there is most probably a lot piling up.  Russia uses their oil and gas, fixes the spot price and so on...

Not only will there be hyperinflation overnight, but war the next day.

It's an insane idea.  But hey, the top are losing their minds.

Matt's picture

They need to make the coin out of an exotic alloy that requires the Large Hadron Collider or some other impossibly complex machinery to make, and then call it an Unobtainium Coin and tell people they used all of the Unobtainium on Earth to make that one coin. If it has the percieved rarity of there being only one ounce in the world, then they have a better chance of convincing people of its $1 trillion value.

However, if you are going to do it as a one-time thing, to maintain faith in the system, you might as well give it a higher value, like $100 Trillion, so it offsets all of the United State's unfunded liabilities as well as the national debt.

Or just make it out of Platinum and tell everyone it is Unobtainium. 

They could even have a rigged auction with shill bidders, with the heads of central banks from all over the world bidding on the world's only ounce of Unobtainium.

Then, for stimulus, they could detect that there is an ounce of Unobtainium on Mars that requires a human mining team to extract.

Zgangsta's picture

With all this talk of a trillion dollar platinum coin, I'm shocked that idiots haven't sent platinum futures soaring.

dragoneyes74's picture

Every once in awhile something happens that is so insane I get stuck staring at the screen in a prolonged, dazed confusion, until finally I shake it off, turn off all my electronics and take a walk in nature to forget that I'm a human for awhile.  The fact that this Trillion Dollar Coin idea is being endoresed by people not in a mental institution is one of those times.  

 

jldpc's picture

What makes you come back and look again? Cus it really is that ridiculousssssssssssssssssssss. Now here is a helpful suggestion. forget the gold and silver bugs; they are too heavy in large quantities. Go forth and collect all of the coke, opium, and other low weight psychotropic drug you can find - ask any mexican on the street where to go and what to ask for and how much -and store the maway carefully. When the shit hits the fan, there will no longer be laws that matter; and you can trade them for water and food for you and your family. Almost everyone will need them to overcome the extreme disbelief that God's protected America has failed, er gone down the flew. In the end not a bad way to go, and saves ammunition to produce the same result. Die Happy!!

traderjoe's picture

I love the idea:
1. The idea of a sovereign country borrowing money from a private banking cartel - that creates the money for free - at interest and with the collateral of your productive labor is odious.

2. Therefore we must default.

3. This is a default under our current system.

Default! Throw off the mental bonds of debt-slavery.

Anyone that wants to pay back our national debt is still a slave to our current monetary paradigm (or a shill like the author).

Default. Abolish legal tender laws. Print United States Notes. Freegold and silver.

Yen Cross's picture

 If I were a teacher---  Every one of you bitchez< DESERVES AN (+AAAa) 

 S&P Central; out.

Vincent Cate's picture

I think we are at a point in history where it is important to really understand hyperinflation.  To help with this I have written a Hyperinflation FAQ:

http://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics....

Joe moneybags's picture

Very nice presentation in your blog, Vincent.  Your consideration for those skeptical of hyperinflation, like me, is appreciated.  And your 30 possible signs of hyper-inflation initiation are useful.  Thanks.

Big Slick's picture

Very nice treatment of hyperinflation Vincent.  I notice you deviate from question form for a few :) I think you are being a bit hard on yourself:  If you can't predict the exact timing then you are no help to investors!  Your article is a tremendous help!

Joe moneybags's picture

Every economic system, from barter to Keynesism to Communism, is man-made.  The rules are simply that to which the parties involved agree.  Right now, the entire world, from China to New Zealand, practices the unlimited sovereign debt model, as well as fractional reserve banking and fiat currency.  Despite the jokes and punditry, the U.S. will get away with whatever scheme it wishes to continue unfettered government debt creation.

andrewp111's picture

Damm straight. The USA's ability to print money is really derived from our military power.  The value of the dollar comes from our ability to say what is in the world. As long as we are supreme world dominator, we get to say what is.

Acidtest Dummy's picture

Will it be in English, "One Trillion Dollars," written out, "$1,000,000,000,000," or (my favorite) scientific notation, "$1018"

 

 

AU5K's picture

Typical liberal idea.  "Solve" a problem, but utterly unable to see 1 step further and what the unintended consequences might be.

knukles's picture

Address the symptom, not solve the problem

AE911Truth's picture

Look at a Gold vs Dollar chart for the last 100 years. It is obvious where the trend leads. The Dollar goes toward zero, and Gold goes toward infinity.

The Trillion Dollar Coin scheme exposes the forty year-old charade, otherwise known as the global monetary system, better than any mind-exercise we have been able to come up with.

The world needs to understand the scam and this puts the scam clearly in everyones face.

Then paper currency dies, and real money (Gold and Silver) comes back into use.

And the debt gets paid.

What's not to like.

Mint 600 of these $1T coins so the $600T derivitive complex can unwind.

Lastly, every obligation SS, MediCare, etc., gets paid.

This is the end result. We can make it happen now or watch it happen later.

Just like FOFOA said.

Yen Cross's picture

 Yuk Yuk Joe Bob. Isn't this redundant?

Silvertrader's picture

I don't know about the price for platinum blondes, but it could perhaps do some good to the price of platinum. I often trade platinum online using CFD

BlackVoid's picture

"it seems awfully unlikely Americans and the rest of the world would let the US Treasury enjoy a very visible monopoly on fraudulent monetary accounting."

It is already fraudulent as of now and nobody cares!

WhiteNight123129's picture

A new organization is born, called the Vancouver Market Chopstick Association, which ensures delivery of chopsticks under the Vancouver Good Delivery Standards. 

Hong-Kong would surely peg the HKD to the chopstick. I guess next is JPM amassing gazillions of naked chopstick shorts. People would use their credit card to buy chopstick in order to bankrupt JPM. People could demand to be paid in chopsticks around the globe, which would severly contrain the world[s forests. Burning chopstick would a federal crime, and governments in Asia would have to start training station to re-educate their people to eat with knives and forks or with their bare hands. The accumulation of chopsticks in the central banks would start to create some serious issues of logistics. The Lumber trading association would take over the role of the IMF and BIS, as well other world lender of last resort due to their large control over the supply of chopsticks.

IT THINK WE HAVE A WINNER PLAN HERE! 

lindaamick's picture

Personally I am happy to see the Platinum Coin Proposal.

It might serve to wake up a greater number of people/countries to the fact that the US really operates in virtually the same manner AS IF there were a Platinum coin but the complex smoke screen surrounding that fact keeps the majority in the dark about what is really happening. 

A coin brought into existence out of nothing give a tangible example of what has been going on for a long time.

Downtoolong's picture

Which is also why the Central Banks and TBTF banks are starting to quietly oppose the idea too. It would blow their scam and remove their profit loop in the present system of money creation out of thin air.

awakening's picture

Tell me I'm not the odd one out: "Bring it on, mint the f---er already and get this shit started already. FFS!"

Afrispaans's picture

Flash forward fifty years: After mounting public insurrection and under white-hot diplomatic pressure, the US Treasury is finally forced to allow US citizens and foreign officials with vested interests to inspect the the 36 TDCs sitting in a vault at a secret location, currently underpinning the entire economy. The coins have been horribly disfigured, as successive Treasury administrations have been "recycling" their currency: small slivers have been shaved off the edges and added to the melt for the following TDC. Over the years this process has been repeated. The last coin minted, number 36 (the one used for the photo ops) is in "mint" condition, but as one inspects coins from previous years one notices that the older the coin is, the more debased. There is hardly anything left of the first TDC by now. The Treasury explains that, using nano-cutters, this process can be continued infinitely, as Xeno's paradox states that there will always be more coin left.

AE911Truth's picture

This would not be the first time the US Government conned the world into trading real stuff for worthless promises.

http://www.courthousenews.com/2011/12/05/41930.htm

RazvanM's picture

Why wouldn't the mighty US of A decide to pay off all the debt with that coin? 16 fucking T and this is it! The ultimate QE.