Skip to comments.There is No Platinum Bullet
Posted on 01/06/2013 8:50:17 AM PST by NaturalBornConservative
But there is plenty of Gold ::
Here are my recently edited Google+ comments on, Hey, lets avoid the debt-ceiling standoff by minting a trillion-dollar platinum coin instead.
Yeah, let's borrow another trillion dollars, and then use it to buy a trillion dollars worth of platinum. Then we can mint it into a gigantic non-marketable, non-negotiable coin, deposit it into the Treasury, and use it as collateral for the cost of buying the Platinum and minting it into a gigantic coin. That sounds like a real winner, eh? Yeah, its a dumb idea, and not even possible since there isnt a trillion dollars worth of platinum lying around anywhere for the taking.
On the practical side, why not just take the 261,498,900 troy ounces of Gold sitting in the Treasury, which is something the federal government already owns, then sell it all for $433 billion? This would raise $422 billion net, since the government would first have to redeem the gold certificates held by the FRB for $11 billion, which the gold currently stands as collateral. Then we can then use the proceeds to cover 40% of this year's budget deficit. Once this has been accomplished, then next year we can _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (you fill in the blanks).
One of the commenters admitted that the idea was crazy, but then went on to say that he thinks eliminating the debt ceiling is a good idea. His reasoning was that the government is constitutionally mandated to pay its debts, or something. To this I replied, You just said the government has to pay its debts, and then said there should be no debt ceiling because the government must pay its debts. So how is the federal governments act of continuing to borrow more on an unlimited basis synonymous with paying its debts? He continued to repeat the same foolishness without stopping to try to understand my point, so my interest in the conversation waned.
My creditors have extended to me credit within certain limits. If I exceed those limits I will be forced to pay a penalty, and the extension of credit will cease. If I don't bring the debt balance below the limit quickly enough, my accounts may be closed at the lenders discretion. Even an unlimited credit line has an implied limit. That is the point at which the debtor can no longer reasonably make principal and interest payments while meeting its basic obligations.
Having worked in the past as a corporate credit manager, I can state that when extending credit, one of the considerations is whether the debtor has enough annual income to cover principal and interest payments on all of its outstanding debt, while at the same time being able to cover its basic obligations. Using the same logic, it doesnt take a degree in accounting or finance to understand that the U.S. government is already well beyond this capability. It is not setting aside monies to pay its debt principal, and is in fact not making principal payments at all. It is basically continuing to borrow more in order to meet its basic obligations, including the interest it pays on the debt.
Like it or not, the U.S. government has an implied credit limit, which has already been surpassed. It is currently borrowing to meet its basic obligations including interest paid on its "interest only" credit line. At this point, if the federal government were to raise income tax rates by 50% on everyone, it still wouldnt be enough to cover principal and interest payments and to meet its basic obligations. To get there, on its current trajectory, would take better than a 100% across-the-board tax hike. Until the federal government balances its budget, theres really nothing to look forward to or even discuss.
When creditors stop issuing credit, or begin to demand higher interest rates to compensate for the risk of default, that's when the house of cards comes crashing down. When it comes to the federal debt, there is no platinum bullet. This government must either cut spending dramatically, or raise taxes by more than 100% across-the-board, its either that or face extinction.
Related: Solving the Debt Crisis | A Catch-22; From AAA to AA- in Four Years
Photo Via: The Most Expensive Journal
The US Gub’mnt has ASSETS so they can pay. We are far from being at the line where we will be forced to hand over anything other than more paper.
“Yeah, its a dumb idea, and not even possible since there isnt a trillion dollars worth of platinum lying around anywhere for the taking.”
You seemed to miss the point of the platinum coin end-around. The U.S. government has the authority to declare the currency value of any piece of currency. Quarters aren’t worth 25 cents because they have 25 cents worth of metal in them: instead they cost pennies apiece to produce. Likewise, a $10,000 bill doesn’t have $10K of material in it or backing it. All of these pieces of currency take whatever value Uncle Sam assigns to them and are “legal tender” for paying debts etc.
I’m not saying the $1 trillion coin is a good idea, but as best I can tell it (unfortunately) appears to be perfectly legal. Of course, any country stupid enough to try this strategy might well find that its previous lenders quickly seek an escape exit.
REAL value is how much someone WILL ACTUALLY pay for them.
The USS Ronald Reagan has a real value, that someone like the Chinese would pay. The US capitol not so much.
Then there is the question of who are the buyers?
There are 403 billionaires in the US. With a combined worth of approximately $1.3 Trillion.
2 problems here. First, all the worth of these billionaires isn't just sitting in some bank somewhere, as idle cash. Its locked up in ASSETS (just like the US ASSETS), in order for those billionaires to buy US assets, they would either have to borrow (go in debt, to pay off government debt) or sell their assets to buy other assets. The problem with this is, I doubt Bill Gates is willing to sell $66 billion in valuable stock, that makes money, to buy government land in New Mexico, that grows scrub grass. (Besides, if all the billionaires liquidated themselves to buy government assets, WHO would BUY their assets??? (And with all the billionaires selling off their assets, there would be a glut in the market, forcing stock prices to plummet, so Bill Gates wouldn't actually be worth $66 Billion, more like $10 Billion)
Next issue. Like I mentioned earlier, there are 403 billionaires in the US, currently worth about $1.3 Trillion. Their entire net worth is only about this years deficit. The entire US debt is over $16 Trillion.
Its easy to SAY that the US government has XXX amount in assets, its quite another thing to find buyers for those assets.
The point being, there isn't enough money in the world to pay off the debt.
BUT... if we keep printing it, there soon will be.
Paper money is fiat currency, but coinage actually has intrinsic metal value and is not the same as paper money. The US Mint sells silver and gold coins at or near FMV. For example, a One Ounce $100 Platinum American Eagle (1997-Present) contains 99.95% Platinum, weighs 31.12 grams, has a denomination value of $100, but a current melt value of $1,557.75. Its melt value would have been between $350 and $400 in 1997.
You can actually buy a $100 denomination platinum proof coin from the U.S. Mint today for just $1,892.00 (US Mint). Imagine that, a $100 coin for $1,892. So although the government could mint a wooden nickel and stamp a denomination value of $1 trillion on its face, its intrinsic value will always be the worth of its components.
You don't have to sell an asset to determine it's value ~ simply impute the income by looking at the records.
Here's your situation ~ you live in a country where the federal government owns 30% of the surface area and 100% of the offshore claims. The offshore areas are, of course, literally stupendous ~ most of the claimable bed of the Pacific Ocean to start with.
One hydrocarbon deposit in Montana was reported by Newt Gingrich at being worth over $100 trillion if worked. That's on federal lands. The nearby deposits on privately owned land are doing well also.
But the biggest asset is our combined military forces. We could probably get well over $3 trillion a year through the simple expedient of demanding tribute ~ no more mamby pambly United Nations garbage!
I"ve proposed issuing a US currency backed by asset production.
Everybody could coin their own trillion buck platinum coins ~ simply eliminate world debt!
Proposing borrowing against a fiat-defined coin is nor more worthless (in the full meaning of that word), than borrowing against the image of that same coin. Indeed, the Federal Reserve Corporation goes one step further and glances at the credit of my grandchildren when clicking on the computer mouse to have the computer create money from nothing. The dialogue goes something like this:
Create ONE trillion dollars? Yes/No.
Are you sure? Yes/No.
Fiat money enables the government monopoly to embezzle wealth from the holders of its currency by dilution of the value of that currency. It is theft plain and simple.
I think the government should do it. The first time would cause a lot of comment and predictions of doom. The second time would precipitate the collapse and if the first time were perceived somehow a success there will be a second time.
The longer we put off the collapse the farther it is to the bottom and the less likely that we will be able to climb out of that abyss.
[Between 1829 and 1835, President Andrew Jackson pledged to pay off the debt. In order to do so, he took advantage of a huge real-estate bubble that was raging in the Western U.S. The federal government owned a lot of Western land so Jackson started selling it off. He was also ruthless on the budget. He blocked every spending bill he could. "He vetoed, for example, programs to build national highways, Brands says. "He considered these to be unconstitutional in the first place, but bad policy in the second place.] ~ From AAA to AA- in Four Years
[I’ve proposed issuing a US currency backed by asset production.] - Great idea, since the value of our currency should be somehow related to the value of our national worth!
Yeah, what law is that? Are you aware that the face value of a quarter may be 25¢ US, but it only costs 11.14¢ US to make one? ~ Also from How Much Does it Cost to Make a Penny?
Cows don't care if the toilet is in the kitchen
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.