Trillion Dollar Platinum Coin Is "Not The Solution" - PIMCO's Gross

Tyler Durden's picture

From GoldCore

Trillion Dollar Platinum Coin Is "Not The Solution" - PIMCO's Gross

Today’s AM fix was USD 1,669.50, EUR 1,258.29 and GBP 1,036.25 per ounce.
Yesterday’s AM fix was USD 1,663.00, EUR 1,269.37 and GBP 1,036.65 per ounce.

Silver is trading at $30.68/oz, €23.24/oz and £19.12/oz. Platinum is trading at $1,629.00/oz, palladium at $694.00/oz and rhodium at $1,150/oz.


Cross Currency Table – (Bloomberg)

Gold climbed $15.50 or 0.94% in New York yesterday and closed at $1,672.90/oz. Silver surged to a high of $30.926 and finished with a gain of 1.45%. The yellow metal was on track for a 1% weekly rise, after falling for five of the past six weeks.

Gold edged off in euros on Friday, following the European Central Bank’s decision to keep its rates unchanged.

Japan's gold market (TOCOM ) made news as benchmark Tokyo gold futures hit a record high of 4,820 yen a gram ($1,699.62 an ounce) after the yen dropped to a 2-1/2-year low vs. the dollar on expectations of more QE by the BoJ.

Japanese Prime Minister Shinzo Abe made has pushed increased jobs growth as part of the Bank of Japan’s directive as his government approved $117 billion of spending to revitalize the economy in the biggest stimulus since the financial crisis.

Abe is leaning hard on the BOJ to adopt a 2% inflation target at its January 21-22 rate review, which is double its current goal, and consider easing monetary policy again, most likely by increasing government debt and asset purchases, sources told Reuters.

Spain's first debt auction of the year was positive, as appetite for high-yielding assets improved.

PIMCO founder and co chief investment officer Bill Gross gives no credence to the trillion dollar platinum coin scheme.

Concerns over the debt ceiling have prompted Washington politicians and political and economic activists to argue that the U.S. treasury should simply use its authority to mint a platinum coin worth $1 trillion.


Platinum in USD, 2 Years – (Bloomberg)

Proponents argue the coin could be deposited at the Federal Reserve Bank of New York to cover the Federal government’s debts until and unless Congress raises the debt limit.

Gross acknowledges that they can do this and says it is not a novel idea as it has been advanced in the last several years.

However, whether Bernanke and Treasury in combination would jeopardise their standing with Congress by this type of "end run" ... no we "don't give it much credence."

We feel that such an action would not only jeopardise the U.S. Fed and Treasury standing with Congress but with creditor nations internationally - particularly the Russians and Chinese.

It appears to be a bit of a stunt by and may be a convenient distraction away from the substantive issue of how the U.S. manages to address its massive budget deficits, national debt and unfunded liabilities of between $50 trillion and $100 trillion. It may also be designed to create the false impression that there are easy solutions to the intractable US debt crisis - thereby lulling investors and savers into a false sense of security ... again.

Gross said that subject to the debt ceiling, the Fed is buying everything that Treasury can issue. He warns that we have this "conglomeration of monetary and fiscal policy" as not just the US is doing this but Japan and the Eurozone is doing this also.

Gross has recently criticised the Fed's 'government financing scheme.'  He has in recent months been warning of the medium term risk of inflation due to money creation and recently warned of 'inflationary dragons.'

Gross in his monthly Investment Outlook note to clients of the world's biggest bond fund, argues that the quantitative easing and near zero  interest rate strategies employed by central banks in the US, UK, Europe and Japan, China and Switzerland have the potential to permanently distort financial markets and create significant long-term inflation risks.

 

Gold in USD, 2 Years – (Bloomberg)

Incredibly, the world's most important central banks have issued more than $6 trillion dollars' worth of "essentially free" money into the global economy since the financial crisis in a misguided recovery effort that could erode stocks, bonds and currencies for generations to come.

"While they are not likely to breathe fire in 2013, the inflationary dragons lurk ... a case of quantitative easing," Gross wrote. The tactics, he says, "destroy financial business models and stunt investment decisions which offer increasingly lower (equity and investment returns). Purchases of 'paper' shares as opposed to investments in tangible productive investment assets become the likely preferred corporate choice."

Thus, PIMCO remain favorably disposed towards gold as an allocation in a portfolio.

On December 30, PIMCO tweeted @PIMCO:Gross: 2013 Fearless Forecasts: 1) Stocks & bonds return less than 5%. 2) Unemployment stays at 7.5% or higher 3) Gold goes up……

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS

Video: Silver To Rise Over 500% In Next 3 Years? - BBC

Gold takes breather; Tokyo gold strikes record high - Reuters

Gold Set to Snap Run of Six Weekly Losses on Demand From China - Bloomberg

COMMENTARY

Gross: Trillion Dollar Coin Not the Solution - Bloomberg

$1 trillion platinum coin hogwash – if it should happen, buy gold and silver - Mineweb

What will happen to the UK property market in 2013? – About Property

Growing risk of property defaults across the eurozone periphery – The Telegraph

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GetZeeGold's picture

 

 

Word up.....taking that much PT out of the market all at once would kill the economy.

bigdumbnugly's picture

and if something as ridiculously easy as this was the answer to our probs then why did it take these guys 17 trillion (at least) to think of it?

are they that slow?

... no need to answer.

trav777's picture

Gross is just pissed because he can't find the yield he thinks he's entitled to.

He probably very loosely understands that growth produces yield but he hasn't figure out why growth isn't happening.

So, like a lot of people here who are unwilling to confront mental third rails, he constructs scapegoats to blame to avoid having to face a really uncomfortable truth's ramifications.

Blame tax policy, blame sunspots, blame a miasma...it's all the same. 

fonzannoon's picture

Trav I think you have it all wrong with Gross. He has been saying forever that bonds are toast. He also thinks stocks are toast. He confronts those third rails very logically. He expects lower returns going forward. However since he is competing against zirp he can provide you with the cleanest smelly asshole or whatever his stupid slogan is.

francis_sawyer's picture

Your comment bolstered Trav's argument

~~~

"Gross is just pissed because he can't find the yield he thinks he's entitled to" [smelly assholes notwithstanding]...

fonzannoon's picture

I don't think he is pissed at all is my point. He is the biggest beneficiary of this environment. He is loving this.

francis_sawyer's picture

I don't know... The image in my mind is some wealthy dude in Las Vegas who can get all the hot babes he wants, then is forced to move to Bulgaria... He's not as happy, even though he's still getting the best tail in the room...

fonzannoon's picture

Maybe. Who the hell knows anymore. if i were him all i would care about is aum. 

alangreedspank's picture

If the state forces interest rates in one way or another to its advantages and forces you to use the currency they are fiddling with, expecting good returns is not asking too much.

Snakeeyes's picture

Why not a billion, million, gazillion dollars?

http://confoundedinterest.wordpress.com/2013/01/06/pennies-40-ton-trilli...

The scariest thing is the bypassing of the Constitution and  Krugman thinks this is cool!

Matt's picture

The obvious risk to minting a platinum coin (that is not 40,000 tons) is the risk that they will do it again and again in the future.

The only way this program can work is if there is some way to ensure that it cannot be repeated as desired. 

If the coin was said to be made of a rare element such as adamantium, vibranium or unobtainium, using the only ounce on Earth, and thus setting a precendent that any other such coin must be a fraud, then maybe you could CONvince at least the general public and prevent a mass run out of USD. Actually, all that matters is what the algorithms believe, right?

AE911Truth's picture

The face value has nothing to do with the intrinsic value. The asserted value of our fiat dollar IS a fraud. The Trillion Dollar Coin is a truthful open admission of the fraud.

 

TruthHunter's picture

Just be patient eventually a little copper coin with Lincoln,s picture

 

on it will be worth a "Trillian" dollars.

Acet's picture

Keep in mind that the suggestion was not to make a coin with enough PT to be worth a Trillion, it was to make a coin made out of PT (any size) with a face value of $1 Trillion - in other words an FRN only printed in PT rather than paper or copper.

The reason for this complicated construct is legal: the Mint is already legally authorized to make celebratory coins with whatever face-value they want as long as they're made of platinum.

 

Mad Mohel's picture

They should mint the trillion coin(s) out of petrified Bernanke turds, because we all know that sonofabitch is full of an endless amount of shit.

Acet's picture

I suspect that there is no law that would make a coin made out of petrified Bernanke turds to be legal tender, even if made by the US Mint.

I might, however, make for an interesting collectible, in which case we could truthfully state that something good came out of the whole Bernanke thing.

ricky2's picture

Stamp "Federal Reserve" on anything and they'll say it's worth something

logically possible's picture

Bernanke turds and hostess twinkies as currency, Hmmm.

BullsNBeers's picture

Roumor has it that Obama will be forging it in the fires of Mt. Doom.

AE911Truth's picture

It is a small (e.g. one Troy Ounce) coin with a face value of $1T.

 

Acet's picture

Trillion Dollar Platinum Coin Is "Not The Solution" - PIMCO's Gross

Duh!?

tuttisaluti's picture

We could also take a stone or a sea shell and print a trilli on it.

GetZeeGold's picture

 

 

Throw some glass beads and whiskey (aka firewater) in there and you might have something.

francis_sawyer's picture

mmmmmmmmmmmmmmmmmmmmm!..... Firewater

asteroids's picture

Of course it's "an end run around congress". How about Obozo stops screwing around and actually gets a budget. Something as president he has never done!

 

Beam Me Up Scotty's picture

He won't produce a budget, because it would actually show how much bigger the budget deficit would really be if he had his way.  These Keynsians have insatiable spending desires.  In fact, I would say infinite spending desires.  They are like the person who buys a lottery ticket and dreams about all the homes and cars and vacations that they would buy if they won the lottery.  They will never answer the question "how much spending is enough", because no matter how much was spent, it's never enough.

Thats why, IMO, if the debt ceiling is eliminated, inflation will finally come.  Whether he does it by executive order, or by minting a trillion dollar coin (because one coin will just be the start of many which will be minted on ever shorter half lives), once the spending cap comes off, spending will go parabolic and so will inflation.......and gold.

ricky2's picture

HANG THE BERNANKER!!!! (go ahead and string up Geithner while you're at it too...)

laomei's picture

Meh, it's quite literally the same exact thing, it's a loophole and nothing more.  If the GOP wasn't full of shitstains it wouldn't even be an issue for discussion.

ricky2's picture

so...we're going on a platinum standard?.......i'm lost

GetZeeGold's picture

 

 

No you're not.....they are.....as in totally freakin lost.

Bob's picture

What's funny is that this internet meme of a platimum coin has legs even in the finance community.  Whether for good or evil, Obama going radical--as in doing something that has never been done before, entirely on his own--is preposterous.  It's not how he rolls.

slackrabbit's picture

 

I say in for a penny in for all unfunded liabilities’.

If your going to print one coin, then why not 16 to cover the debt?

In which case why not cover the unfunded liabilities’ as well so that the kids don't have to pay (notice my moral argument to justify my own personal fortune?).

True I own gold so I profit at around $56,000 per ounce (ref: Jim Richards), but I’m only saying this cos I rrrreeaaaaaalllllyyy care!

This is a win - win situation.

The government gets to lie and we get rich!

 

;-)

 

 

a growing concern's picture

Yeah, seriously... just do it.  Why the fuck not?  But if you're gonna do it, might as well just do it up right and pay off all those unfunded liabilities for SS and Medicare while you're at it.  Maybe $200 trillion ought to hold us over for a couple of years.

laomei's picture

Because it's a stopgap solution and it would make no sense to go that extreme in the creation of money.

 

How it normally works:

Government needs money, the Fed conducts a sale of T-securities issued by the treasury, revenue is deposited at the treasury.

 

How this works:

Government needs money, makes a coin which has a full legal value of $1T, that is placed on deposit at the fed and the fed places cash in the treasury.

 

It's non-interest bearing, but there's nothing that says it can't be placed in there as hock for a standard interest rate while cancelling out an equal amount of securities that the fed has onhand as assets and having it being interest-bearing until reclaimed.  Same exact thing.  There's nothing mysterious or magical about it.  It's like an out of work athlete signing a jersey and getting a loan on it.  It's worth something, they created it, if they run around making a ton of them, it will deflate the value to basically nothing.  The government could, if it wanted to, just create money to pay the bils, as long as it was kept under control as to how much money is floating around in the system, it would be just fine.

 

FRN is worth something because the law says it is.  This coin would be worth $1T because the law says it is.  Simple as that really.  This isn't a "platinum standard", this has no influence on the value of platinum, just like zinc or cupro-nickel or brass or whatever.  It's called seigniorage and it's nothing new.

 

In theory, yes, they could just make a single coin, slap on a face value of a few hundred trillion and suck out the money from it as needed.  Which would be no different from removing the credit limit entirely, or jacking it way up.  It's a loophole, it's constitutional, and there's nothing crazy about it.  What's crazy is that it has come to this because congress is so vile and broken.  So fuck it, a solution that fits a problem.

Beam Me Up Scotty's picture

"Which would be no different from removing the credit limit entirely, or jacking it way up"

Ding, Ding, Ding, Dingdong!!  Like I said in my above post, there is infinite spending desires.  Remove the cap on spending and it will go parabolic.  What you are basically saying in your post is, Obama would like another trillion in spending over and above what was already spent.  It won't stop at one coin.  You think these people are suddenly going to be all responsible?  As if this would be a one time event?  Give me a break....

Bay of Pigs's picture

"It's a loophole, it's constitutional, and there's nothing crazy about it."

First two points I get, the last one I don't. Anyone with a functioning brain should be considered batshit crazy for suggesting this absolutely terrible idea,

 

 

laomei's picture

Not really.  If you want to see what a US default looks like, no more subsidies, no more contracts, no more SS payments, no more anything else... well, you'll be begging for that damn coin, and then you'll be begging for the heads of the idiots who forced that stupid situation.

Beam Me Up Scotty's picture

You don't get it do you?  The coin will do nothing to fix any problems.  Mint it, print it, its all the same.  You will get your SS check, and food and gas will go up faster than the COLA that they will adjust your SS check.  You will not win the inflation battle by minting or printing, period.  The only reason inflation isn't raging right now is, most of the money the Fed has printed to date is sitting in the banks on reserve.  They aren't lending it out.  But if the government gets the money directly, they won't just sit on it to make their balance sheet look good, they will spend it.  THAT money will hit the street, and you can darn well bet it will be inflationary.

laomei's picture

Yea, the fed can sell some of the securities it's sitting on, and remove the cash from circulation.  No big deal at all.

AE911Truth's picture

Use precious metals as a store of value. Use this created out of thin air fiat to pay off the debt. It is the only way. Its OK, the debt is fraudulent anyway. Usry without forgiveness on a planet with finite resources is not doable.

Acet's picture

Just print a platinum coin with a face value of $1 Quadrillion - that would solve the public debt problem for the next 20 years.

It also has the additional benefit that it would be a tax on stupidty and gullability since the resulting inflation would essentially devaluate the savings of anybody stupid or gullible enough to still have savings in USD.

 

Matt's picture

And through this inflation, it would in fact fail to solve anything, since the annual budget would grow astronomically from the inflation, so the debt would grow anyways.

Even if you had a $1 quadrillion coin deposited at the Fed, and this did not cause a mass loss of faith in the USD, the problem then would be that Congress would (assuming they got around to producing a budget) feel free to continue increasing the budget to try to "fix" the economy.

AE911Truth's picture

So, pay off ALL the debt. All $600 Trillion of it. Do not issue any more debt, ever. So there is no more debt, and no more interest owed, ever.

Usry on a finite planet is immoral.

Shell Game's picture

Our local news brought up the story of this $T coin idiocy last night.  At the close of the brief story they were stumbling around the idea, shrugging and giggling at each other like school kids upon hearing Rumpelstiltskin's daughter could spin straw into gold. 

Funny how they keep a straight face for Fed printing, but wink-wink-nudge-nudge over this as if there's a difference. 

So, no, Bummers won't make this coin and open himself up to ridicule over minting funny-money, when he can be taken seriously over printing it.

overmedicatedundersexed's picture

the only thing I take from this is what is the diff vs 100 frn note...mint the damn coin it makes as much sense as our current fiat system just a matter of taking the fiat to it's logical conclusion..if you support the debt system we have this is perfectly logical and in fact needed

buying platinun the new gold.

cynicalskeptic's picture

Have four series of Zimbabwe banknotes framed - the oriignal series, when Rhdesia became independent had $Zim 1 = $US 1.48.   Beiong resource rich, the newly independent Zimbabwe had a dollar worht MORE than the US dollar.   After continued mismanagement and inflation, three currency series later (and losing 3 zeroes along the way) You finally had $zim 100 TRILLION revalued to equal $Zim(new) 1 - which quickly became worhtless.

This 'artwork' serves as a remindewr of where we're headed.   I'm also reminded every time I go to the grocery store.

When governments resort to 'gimmickier and gimmickier' 'solutions' to deal with their gorwing debt, you know you're screwed.

Quinvarius's picture

The coin is such a bad idea that we will probably do it.  It is basicly printing the money.  And we are going to do it anyway.  I don't care what they print the zeros on.  Might as well be a platinum disk.

slackrabbit's picture

Actually they may use it as an excuse to knock off some zero's sometime in the future...the 1T will become $1