The Treasury Has Already Minted Two Trillion Dollar Coins

(snip)
Come again?

Well, substitute a $2 trillion piece of paper called a Treasury bond for the platinum coin. Suppose the Treasury prints up such a piece of paper and hands it to the Fed and the Fed puts $2 trillion into its account. No difference right, except for the lack of platinum.

Next suppose the Treasury doesn’t hand the $2 trillion bond to the Fed directly, but hands it to John Q. Public who gives the Treasury $2 trillion and then hands the bond to the Fed in exchange for $2 trillion. What’s the result? It’s the same. The Treasury has $2 trillion to spend. John Q. Public has his original $2 trillion. And the Fed is holding the piece of paper labeled U.S. Treasury bond.

Finally, suppose the Treasury does this operation in smaller steps and over five years, specifically between 2007 and today. It sells, i.e., hands to John Q. in exchange for money, smaller denomination bonds, which Johns Q. sells to the Fed, i.e., hands to the Fed in exchange for money. Further, suppose the sum total of all these bond sales to the public and Fed purchases of the bonds from the public equals $2 trillion. Voila, you’ve got U.S. monetary policy since 2007.

In 2007, the monetary base – the amount of money our government printed in its 231 years of existence totaled $800 billion. Today it totals $2.8 trillion. And it increased by this amount via the process just described – the Treasury’s effective minting out of thin air two $1 trillion platinum coins.

[link to finance.yahoo.com]

Last Edited by Hard Eight on 01/18/2013 10:52 AM