You are viewing an obsolete version of the DU website which is no longer supported by the Administrators. Visit The New DU.
Democratic Underground Latest Greatest Lobby Journals Search Options Help Login

Minting the $1 Trillion platinum coin would NOT be inflationary. [View All]

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
This topic is archived.
Home » Discuss » General Discussion Donate to DU
girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Jul-31-11 05:49 PM
Original message
Minting the $1 Trillion platinum coin would NOT be inflationary.
Advertisements [?]
Edited on Sun Jul-31-11 05:52 PM by girl gone mad
Since this idea went mainstream, the reaction has consistently been: ZOMG! Inflation!!1!

This response seems to be based on the misconception that the money being created is going to be "spent" in the economy, but that's not what actually happens.

For the uninitiated, the basic idea is:

The US Constitution gives Treasury the authority to mint coins, and there is no legal limit on the face value Treasury can set for platinum coins.

Treasury can mint a platinum coin and stamp $1 Trillion on the face, then swap the coin for $1 Trillion USD credits from the Fed. The coin will be stored in Treasury's vault at the Fed where it will never circulate.

Treasury would then use those USD credits to retire $1 Trillion worth of US Treasury bonds. This is the key to understanding why the operation is not inflationary. $1 Trillion in US dollars are going into the private sector while $1 Trillion in Treasury bond holdings are being removed.

No net financial assets have been created in the private sector. The net effect is actually slightly less money in the private sector because once the bonds are retired, they no longer bear interest and cash reserves pay a much lower interest rate.

This procedure would give the government the ability to pay its debts, but again, this is not inflationary since they are merely paying for spending that was already approved back when the budget passed and not doing any additional spending now. The entities to which money is owed already expect to be paid and have budgeted according to that expectation.

Just wanted to make an OP since this comes up in every single thread on the subject. Feel free to correct any errors or add more details.

Printer Friendly | Permalink |  | Top

Home » Discuss » General Discussion Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002
Software has been extensively modified by the DU administrators

Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC