A Platinum Parachute off the Fiscal Cliff

Insanity abounds! An old suggestion has resurfaced that was originally made during the debt ceiling crisis in 2011. Cullen Roche, writing for the Pragmatic Capitalist, shared a suggestion sent to him by one of his readers, and the unusual idea had made it all the way to the desks of Yale law professors and court economists. Now the suggestion has resurfaced, this time from Brad Plumer, writing for the Washington Post. To solve the economic crisis all they have to do is issue two shiny new platinum coins worth … wait for it … $1 trillion dollars each!

The problem is that the US Treasury is expected to hit the $16.4 trillion debt ceiling in February. Traditionally they just raise the debt limit when they hit it. Wouldn’t you if you could issue yourself a credit card? A debt ceiling you can raise yourself is essentially no limit at all. But these days they’re reaching their own limit so quickly that there isn’t time for Americans to forget, even with our incredibly short political memories, and so they’re finally getting some political blowback.

So, US Senators and Congressmen are desperate for a solution that both satisfies the mostly economic illiterate electorate, and absolves themselves of any accountability for their pilfering of public funds. So, of course platinum coins are appealing.

So I thought… how much platinum is $1 trillion? I usually check Kitco.com for live silver and gold spot spices, but you can also buy platinum there. Historically platinum is more expensive than gold, and in 2011 when this suggestion first appeared it was, but right now it’s not, which might be a bad sign in and of itself. The price of platinum right now is about $1,600 an ounce. So each $trillion platinum coin would weigh about 20,000 tonnes.

Silly me… thinking the government would issue a coin that was actually worth its face value. According to Jack Balkin, a Yale law professor, there’s a legal limit on how much paper the Federal Reserve can issue, and a legal limit on how many gold, silver and copper coins the Treasury can mint, but the Treasury is technically allowed to mint any amount platinum coins and assign whatever dollar value they wish.

So, they mint two $1,600 bullion coins. They wave the Treasury’s magic wand over them. Then they deposit them in the Federal Reserve’s bullion vault that allegedly exists. Then they wave the Federal Reserve’s magic wand over them. Presto chango! The Treasury suddenly has $ trillion in its account for Congress to pillage.

Court economist Joseph Gagnon of the Peterson Institute for International Economics says “I like it, there’s nothing that’s obviously economically problematic about it,” which tells you just how much you can trust mainstream economists. But Gagnon insists, “The U.S. government would simply be using the money to keep spending at existing levels, so it wouldn’t create any extra inflation.” I about choked when I read that.

They will never ever have the fiscal discipline to actually adhere to the limits they place on their own systems of plunder. “Keeping spending at existing levels” is so ridiculous an expectation any economist buffoonish enough to utter it should be stripped of all his credentials.

If this is a viable solution, and it wouldn’t accelerate hyperinflation as any competent economist would tell you, why stop at the budget deficit? Why not pay off the entire $16.4 trillion debt? Any why stop there? Why not just issue one $100 trillion coin and buy everything in the world! If economists and legal scholars will sign off on it, why the hell not?

Visit http://www.SilverCircleMovie.com to learn more about our upcoming 3D animated film. Also, the Silver Circle graphic novel is available now at the following hyperlinks in full color and black and white.