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.



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253 Comments:

  1. Injustice anywhere is a threat to justice everywhere. Martin Luther King, Jr.

    We must develop and maintain the capacity to forgive. He who is devoid of the power to forgive is devoid of the power to love. There is some good in the worst of us and some evil in the best of us. When we discover this, we are less prone to hate our enemies. Martin Luther King, Jr.

    The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”
    ― Martin Luther King Jr.

    “He who passively accepts evil is as much involved in it as he who helps to perpetrate it. He who accepts evil without protesting against it is really cooperating with it.”
    ― Martin Luther King Jr.

    The greatest purveyor of violence in the world : My own Government, I can not be Silent.”
    ― Martin Luther King Jr.

    “True peace is not merely the absence of tension: it is the presence of justice.” Martin Luther King, Jr.

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  2. So what would be the market value of that coin ? Particularly in liquidation ?
    Hardly an "arms length" transaction .

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  3. Paul Krugman is a stump.

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  4. It's wealth if your a counterfeiter who has gullible people backing you !!

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  5. How are we going to Pay for Said Trillion Dollar coin again?

    woundn't such a thing just make it easier to put us into dept and destroy the value of the dollar when we can just have a machine output a trillion Dollar value coin per coin?

    I wound imagine some kind of currency would have to back up the value of the coin so you could pay for the creation of said coin in the first place.

    This is just a quicker and more efficient way to put us into dept and it solves nothing.

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  6. How are we going to Pay for Said Trillion Dollar coin again?

    woundn't such a thing just make it easier to put us into dept and destroy the value of the dollar when we can just have a machine output a trillion Dollar value coin per coin?

    I wound imagine some kind of currency would have to back up the value of the coin so you could pay for the creation of said coin in the first place.

    This is just a quicker and more efficient way to put us into dept and it solves nothing.

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  7. GOD BLESS YOU, DR PAUL!!!

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  8. "Every things going down the drain", said Donna Shalala

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  9. Which word in "magic doesn't work" don't YOU understand.

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  10. Fiat currency isn't money. Money is a market feature that has value first as a commodity good then later as a means of exchange. Government can only push out real money through dictate. The purchasing power of a countries monetary unit is determined by the strength of capital structure, how the market has evolved into productivity. Nothing has any inherent value. Value is subjective not objective. Economics is a science. There are only schools of analysis not application.

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  11. Those "economic hit men" are all about creating toilet paper and giving it "face value."

    Face Value = Bold faced lie

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  12. or worse

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  13. or worse

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  14. I like that he refers to Hans Hermann Hoppe. What other politician would do that?

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  15. I like that he refers to Hans Hermann Hoppe. What other politician would do that?

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  16. I like that he refers to Hans Hermann Hoppe. What other politician would do that?

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  17. It's because legitimacy and value is such arbitrary concepts.

    What's valuable and legitimate for me isn't the same for the next guy.

    So really it's about who's the strongest well positioned thug weilding the most power towards any agenda and who can or can't stop it.

    That's why the nefarious types are insidious and seek to negate the power, identity,
    self-functionality, and liberty of the of individuals.

    They need folks to play along and conform, via intimidation or coercion.

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  18. They have been doing that since the founding of the country.

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  19. finally someone that understands how the world works

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  20. You didn't answer the question. My point is, nothing short of civil war could change the course now. Lets just hope they ppl running the show have a future in mind that isn't pure hell.

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