Is time (although some may impugn it)
For coining a halt
To a US default
With a really big monet'ry unit.
A one-trillion coin, it is said,
Could be minted and shipped to the Fed,
In order to pay
What the US of A
Might be forced to renege on instead.
This sizeable denomination
Would be kept out of mass circulation,
The better to sidestep
That such an untried step
Precipitates hyperinflation.
When Republicans finally come round
From running bond issuance aground,
It's back to the Mint
For the Coin, where its stint
Will be wound up with melting it down.
So let's mint The Coin out of platinum!
Though objections there be, we may flatten 'em.
There are ways besides cash
'Round the Debt Ceiling clash,
But there's nothing as clever as that in 'em.
It's an idea so crazy, it just might work: the US Treasury could circumvent the looming debt ceiling showdown by minting a very large denomination platinum coin of, say, $1 trillion. The coin could be deposited in Treasury's account at the New York Fed, where the new funds could be used to pay any of the Federal government's many obligations. First proposed in a comment on an economic blog in 2010, the Coin is within the legal powers of Treasury, which "may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time." Never mind the fact that this law was intended to facilitate minting bullion coins for numismatists - it's on the books. Of course it's absurd to speak of minting a $1 trillion coin to keep the government out of default, but the debt ceiling itself is absurd, as is the threat to throw the nation into default for political purposes. So, it's a case of fighting crazy with crazier.
The "Mint The Coin" movement has been gaining steam thanks to the (only slightly tongue-in-cheek) advocacy of such leading economic writers as Bloomberg's Josh Barro and Business Insider's Joe Weisenthal. For those who fret that the issuance of a $1 trillion coin would ignite inflation of Zimbabwean proportions, a former head of the US Mint (who wrote the 1996 platinum coin law) has weighed in with a cogent explanation of why that would not happen. It all comes down to a choice: would we rather the US Treasury default, or do something absurd?
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So along came President Obama,
ReplyDeleteAnd minted the coin in this drama,
As a result of his folly,
His friends call him Wally,
But the markets are certainly calmer.
I think we are at a time in history where it is a good idea to have a really good understanding of hyperinflation. I have written a Hyperinflation FAQ to try to help with this:
ReplyDeletehttp://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics.html