Courtesy of Mish.
Several people asked me to comment on the $1 trillion coin proposal endorsed by New York Times columnist and Noble Prize winner Paul Krugman.
I did so yesterday in a satirical post Krugman Supports the $1 Trillion Coin; Why Stop There? I Support the $1 Quadrillion Coin.
In response to the above article, I have received several emails wondering where the money comes from. For example reader Tom writes …
Hello Mish,
Thank you for your hard work and honest voice in producing this blog, I follow it daily. There is something that I do not understand in the platinum coin proposal. Where does the treasury come up with the trillion to purchase the platinum? Is this money printed from thin air? If the treasury had a spare trillion to purchase platinum they would not need to give it to the fed, simply use the trillion to finance more worthless deficit spending, a blatantly bad idea given the very low return we are now experiencing on stimulus.
Thanks,
Tom
Fictitious Accounting Entry
Hello Tom.
The proposal is nothing but a fictitious accounting entry. There is no trillion dollars. Certainly the treasury would not buy a trillion dollars worth of platinum. Indeed, that would be impossible, at least at today’s pricing.
Rather, the proposal was to take a coin (size is irrelevant), and stamp “one trillion dollars” on it.
Questions of legality have arisen as noted in my article.
It’s important to note that Krugman (correctly) never proposed spending the coin. It would take an act of Congress to spend it.
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