Ron Paul: Krugman’s Trillion Dollar Coin is NOT Real Wealth

by Ron Paul

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.


  • but they always have that empty heart and a life full of misery and void of true joy and love, and they just keep wondering everyday. where is that part of me that is missing??? that I lost. They have NO clue what they are missing out on.

  • That is what he wants you to think and that is what he has these poor excuses for congressmen we have brainwashed with. congress is not functioning and doing what it is supposed to period.

  • Too bad half the people that can impeach him are bought out and sold their souls.

  • Too bad half the people that can impeach him our bought out and sold their souls.

  • the corporation needs to learn alchemy and turn lead into GOLD !
    because counterfeiting notes will cause a collapse !

  • You don’t understand. Too bad. I guess you espouse the Austrian school.

  • wrong. the fed’s management is politically appointed and profit goes to the treasury. there is nothing wrong with interest. also we need to privatize all the functions of the govt. real libertarians dont care about your socialism. populist comments like that are totally anti intellectual

  • love hearing Ron Paul’s voice of reason

  • Who would impeach Obama? Obama holds all the cards.

  • Creating money from thin air means more money for the banks to lend and play on Wall Street, to maximize their profits, and less money for anyone that has to work for them by decreasing the value of their economies and capital.

  • Prostitutes? Pimps can’t commit the unborn to debts.

    They think they are the masters, and we the slaves.

  • Too bad you don’t understand. Nationalize the FED, switch it from finance and speculation towards productive purposes. Instead of issuing 700 trillion dollars of interest free credit to banks and hedge-funds issue money towards production, manufacturing, re-building infrastructure, rebuilding our country that’s stuck in the 1950’s. This money would go to useful, productive purposes and we would be able to pay off. won’t happen, govt is owned by wall street, people dont understand it.

  • YES, YES

  • Laugh out loud

  • Thank you. It is middle Americans who are not hearing much of that you say. Thanks again! You should be a great leader!

  • I love how Ron Paul has a hard time containing his laughter at most all of the absurdities of the gov he has to point out.

  • Thank you Dr. Paul. I can’t believe people take Paul Krugman seriously.

  • “Why not issue money towards real capatal? ”

    Because magic doesn’t work for anyone but the magician. I hear Copperfield does quite well ( but at least people find him entertaining ).

    “Issuing money” is no different than counterfeiting. The only difference when the gov’t does it is the quantity.

  • We are being played all around. This is a movement to ‘takeover’ by the UN. It is time for “We The People’ control Our Own Affairs, and END THE FED’s, and The UN. This is America, and time to TAKE IT BACK !

  • only if niggers use them