Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
In the same category

Krugman’s Trillion Dollar Coin Is Not Real Wealth

IMG Auteur
Published : January 23rd, 2013
607 words - Reading time : 1 - 2 minutes
( 11 votes, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

Last week President Obama bluntly warned Congress that he will not negotiate when it comes to raising the statutory debt limit. If Republicans attempt to use a debt ceiling vote to win concessions on spending from the White House, Mr. Obama threatens simply to raise the limit by executive order or other unilateral action.

This is business as usual in Washington. Democrats literally do not believe we have a deficit and debt problem, and reliably propose greater borrowing and spending. Republicans talk a good game when it comes to government debt, but have no credibility to argue against deficits or abuses of executive power. Brinksmanship ensues, and ugly compromises are reached at the 11th hour. We all lose as the endless borrowing and money printing further erode our dollar and our economy.

Keep in mind that the federal government relentlessly spends about $100 billion more each month than it collects in taxes. This means roughly 40% of every dollar Washington spends is borrowed, to be “paid back” only in highly devalued, newly created money. Ultimately this can only lead to the destruction of the US dollar, as history plainly teaches. But in the face of this reality Obama just shrugs, turning to demagoguery and talk of little old ladies’ Social Security checks . Like Obama, far too many Americans view federal debt as a nonissue. Consider Paul Krugman, America’s most reliable Keynesian economist and a beloved figure among mainstream journalists. He recently wrote an article about the debt limit issue, in which he discussed a controversial proposal to have the federal government simply create a platinum coin with a face value of $1 trillion:

“Here’s how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion (or many coins with smaller values; it doesn’t really matter). This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government’s account. And the government could then write checks against that account, continuing normal operations without issuing new debt.”

To be fair, Mr. Krugman acknowledges that minting such a coin would be an accounting “trick,” but he is dead serious about this option for the Obama administration. This then is the state of modern economics discourse in America, where a respected New York Times economist literally can propose creating “money for nothing” and have the idea taken seriously.

Krugman’s suggestion is just another variant of the endless stimulus proposals, which purport to create greater aggregate demand in the economy by creating more money. Whether this is done by the Fed or the Treasury is of little importance, as long as government is creating demand-side “growth,” however artificial.

But in just a few short sentences Professor Hans-Hermann Hoppe eviscerates the Krugmans of the world by pointing out the obvious: If governments or central banks really can create wealth simply by creating money, why does poverty exist anywhere on earth? Why haven’t successive rounds of quantitative easing by the US Fed solved our economic recession? And if Fed money creation really works, and doesn’t create inflation, why haven’t Americans gotten richer as the money supply has grown?

The truth is obvious to everyone. Fiat currency is not wealth, and the creation of more fiat dollars does not mean that more rice, steel, soybeans, Ipads, or Honda Accords suddenly come into existence. The creation of new fiat currency simply strengthens a fantasy balance sheet, either by adding to cash reserves or servicing debt. But this balance sheet wealth is an illusion, just as the notion we can continue to raise the debt limit and borrow money forever is an illusion.


<< Previous article
Rate : Average :5 (11 votes)
>> Next article
Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.
WebsiteMake a donation
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Panicked Hedge Funds Now Praying...
30 Junovertheedge
"... and the silly game theory ..." Obviously you have no knowledge of game theory and its applications. Otherwise you wouldn't have used ...
The Gold Standard: Generator & P...
30 Junuser4779
Is it really so bad for Americans that they do not spend their lives labouring on a production line to make mass-produced goods, and have left this...
The Gold Standard: Generator & P...
30 Junsam_site
You state, “To continue selling to the West, China will have to open wide its doors to imports” Here’s the crux of your argument of why Chin...
The euro crisis
30 Junovertheedge1
"There is no immediate benefit from debating why." Debate? That would be like debating whether or not gravity exists. You stated the obvio...
The Ultimate Confirmation
29 Junovertheedge
It would appear that we share the same conclusion. A few sealed cans of kerosene might be handy as well. Thumbs up sir.
The Ultimate Confirmation
29 JunS W.1
My main sentiment here is why swap dollars for gold or silver only to sell at some later date for more dollars when that same paper is continually ...
The Ultimate Confirmation
28 Junovertheedge1
Well, gotta admit that there is a problem if a person tries to play silver as both an investment and as an insurance policy. I would suggest th...
The Ultimate Confirmation
27 JunS W.
Fair call, overtheedge. I've given Butler short shrift several times. Fancy spending 30 yrs analysing the silver market likely believing Ag...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Arch Coal(Au-Coal-Cu)ACI
SHAREHOLDER ALERT: Levi & Korsinsky, LLP Announces an Investigation Involving Possible Violations Concerning Arch Coal, Inc.’s 401 (k) Plan-- ACI
US$ 0.33-2.94%Trend Power :
Corporate news
Bannerman(Ur)BMN.AX
Change of Director's Interest Notice - L Jubber
AU$ 0.05+0.00%Trend Power :
Corporate news
Peabody(Coal)BTU
Mid-Day Market Update: Chubb Surges Following Announcement of Acquisition by Ace; Ballard Power Shares Decline
US$ 1.78-18.72%Trend Power :
Corporate news
Peabody(Coal)BTU
Mid-Morning Market Update: Markets Open Higher; Constellation Brands Q1 Profit Tops Views
US$ 1.78-18.72%Trend Power :
Corporate news
AlstomALO.PA
Alstom’s Citadis Dualis enters service on the Nantes-Clisson line
€UR 25.73+1.10%Trend Power :
Corporate news
Range Res.RRS.AX
Why Range Resources (RRC) Could Be Positioned for a Slump - Tale of the Tape
AU$ 0.02+0.00%Trend Power :
Corporate news
AlstomALO.PA
Alstom signs a turnkey contract with Eletrosul to integrate wind farms in southern Brazil
€UR 25.73+1.10%Trend Power :
Corporate news
Kibo Mining PlcKIBO.L
Results of Annual General Meeting
GBX 4.13+3.25%Trend Power :
Corporate news
Western Areas NL(Au-Ni-Pl)WSA.AX
Change in substantial holding from CBA
AU$ 3.25+0.62%Trend Power :
Corporate news
Range Res.RRS.AX
Expiry of Options
AU$ 0.02+0.00%Trend Power :
Corporate news
Comments closed