”Better drink my own piss.”— Bear Grylls
A Georgia lawyer known online as “Beowulf” invented the concept of a trillion-dollar platinum coin just for the LOLs (pronounced lulz).
The proof of concept was outlined in the comment section of an online forum for the blog Pragmatic Capitalism.
What started as a “silly question” in response to an article titled “Miles for Nothing”—detailing how clever travelers were buying commemorative coins from the U.S. Mint via credit cards that award frequent flier miles then depositing them at the bank, paying off their cards, and accumulating free miles ad infinitum—became a full blown discussion about the fiscal stability of maintaining an empire built on debt, plus other derivative thought loops like, “But really, how big would a coin made of $1 trillion worth of platinum be?”
The question of larger and larger denominations of United States currency is the symptom of a Modern Monetary Theory (MMT) axiom: When in doubt, print money.
“Economics is often absurdist in nature,” writes Brandon Smith at alt-market.us, “because Ivy League ‘experts’ can be wrong time and time again and yet still keep their jobs and rise up through the ranks. It’s a bit like Hollywood in that way; they fail upwards.”
Brandon is, well, right. The idea of a trillion dollar platinum coin is not a new one. It comes around when the perennial debt ceiling debate hits the tickers.
We view it as a sort of straw-man argument, harkening back to our days at Saint John’s College in Santa Fe, New Mexico. Namely, the trillion dollar coin will never exist; it is pure absurdism locked away in the realm of theory. That hasn’t stopped it from being picked up by the more “legit” intelligentsia of our American noblesse, namely Nobel-laureate Paul Krugman. Krugman wrote in 2013, licking his own paws:
I feel comfortable in my understanding of the economics of the platinum coin, but don’t claim any legal expertise. However, Laurence Tribe knows whereof he speaks — and he says that it’s quite legal. And so there you have it: if we have a crisis over the debt ceiling, it will be only because the Treasury department would rather see economic devastation than look silly for a couple of minutes.
There’s that word again… “silly.” Later in the note:
What we’re looking at here is a collision of worldviews, one might even say of epistemology.
For many people on the right, value is something handed down from on high. It should be measured in terms of eternal standards, mainly gold; I have, for example, often seen people claiming that stocks are actually down, not up, over the past couple of generations because the Dow hasn’t kept up with the gold price, never mind what it buys in terms of the goods and services people actually consume.
And given that the laws of value are basically divine, not human, any human meddling in the process is not just foolish but immoral. Printing money that isn’t tied to gold is a kind of theft, not to mention blasphemy.
For people like me, on the other hand, the economy is a social system, created by and for people. Money is a social contrivance and convenience that makes this social system work better—and should be adjusted, both in quantity and in characteristics, whenever there is compelling evidence that this would lead to better outcomes. It often makes sense to put constraints on our actions, e.g. by pegging to another currency or granting the central bank a high degree of independence, but these are things done for operational convenience or to improve policy credibility, not moral commitments—and they are always up for reconsideration when circumstances change.
Now, the money morality types try to have it both ways; they want us to believe that monetary blasphemy will produce disastrous results in practical terms too. But events have proved them wrong.
But have events proved “them” wrong?
Recent events paint Krugman’s navel-gazing as a Keynesian voice crying in the wilderness. Maybe more shrill, even, like Edvard Munch’s The Scream.
I’ve always liked Krugman’s critiques. I’ve been reading him for 20-something years. I agree with most of what he says. But…
There’s always a “but.”
In every one of his pieces, when it comes to articulating policy solutions, he never wavers from some version of “the government needs to spend more money.”
Oy. The only way the government can get away with it is by “social contrivance.” Taxpayers and the middle class are the ones who bear the brunt.
Ah, the quandaries of stable monetary theory. It’s a dreary day here in Baltimore, perfect for thinking these ideas through: The trouble with trillions… To quote my classmates at Saint John’s: “What is real, anyway?”
While we await Krugman’s response, as Brad DeLong puts it, “I’ll dine on a simple meal of locusts and wild honey, and wash my spare goatskin.”
Follow your own bliss,
The Wiggin Sessions
P.S. We touched on the debt default crisis and its concomitant political absurdities in this week’s Session with Birch Gold’s Phillip Patrick.
“We’re going to need some intelligent political decisions,” Phillip asserted.
“Isn’t that an oxymoron?” I asked.
He laughed. And agreed.
“Listen,” he continued when I asked what an “intelligent political decision” might look like, “we have to reduce government spending.”
Or raise taxes.
“We have to secure our presence on the international stage,” Phillip, who is British, for whatever that’s worth. “We have to revert to manufacturing here in the United States. There are a lot of things that we have to do to bring ourselves back. It’s going to be a long fight.”
Who among the rabid narcissists in Washington is even worried about what’s good for the U.S. economy anyway? You can watch the full Wiggin Sessions Season 4 Episode 2, here.
P.P.S. We’ve had another Demise sighting. This one in Tyson’s Corner, Virginia.
Addison Wiggin is an American writer, publisher, and filmmaker. He was the founder of Agora Financial and publisher for 18 years. An acclaimed New York Times best-selling author, his books include: Financial Reckoning Day, Empire of Debt, The Demise of the Dollar, and The Little Book of the Shrinking Dollar. Addison is also the writer and executive producer of the documentary I.O.U.S.A., an exposé on the national debt, shortlisted for an Academy Award in 2008. He lives in Baltimore, Maryland with his family. Addison started his latest project, The Wiggin Sessions, powered by Consilience Financial, in March 2020. He films from a homegrown studio in his basement.