I came across this interesting article which seemed to have some small relevance to precious metals... http://www.nakedcapitalism.com/2011...aign=Feed:+NakedCapitalism+(naked+capitalism) What could possibly go wrong? Who said there is no such thing as a free lunch?
Can't work. If they bump up the face value, you'd buy a 1oz platinum coin with a $10,000 face value for $1,700, spend it and get a free $8,300 worth of "stuff". Doing that would cause the same amount of inflation as if they just printed an extra $8,300 except they'd be just be using very expensive material to make the money. Keeping the face value lower than the intrinsic value actually decreases (hides) inflation by removing the difference between the face value and the intrinsic/sale value from general circulation when the coin gets purchased from the Mint (and the money goes back to the Treasury). i.e. "We just spent $0.03 printing a $100 bill and some sucker gave us $100 for it" ...and... "We just created a $100 coin and some sucker gave us $1,700 for it" ...are the exact opposite of each other (the first creates inflation, the second creates deflation), but either one is great for the U.S. Treasury.
I guess that depends on your definition of "work". If by "work" then you mean "allows congress to go on spending like drunken sailors while not having to worry about increasing the debt limit and selling bonds etc", then I think it could work. Of course that still is going to eventually cause massive inflation and loss of faith in the US dollar which will have its own set of consequences. The article doesn't actually talk about selling the coin to anybody, simply depositing it in the federal reserve - it's simply a way for the US govt. to print their own currency and bypass the fed completely.
How is that any different from the U.S. Treasury issuing more T-bills? Legally, I'm sure there is a difference but on a practical level, wouldn't minting high value platinum coins stir up the same amount of s**t in the marketplace?
They have to raise the debt limit to issue more T-bills. Also, they don't have to ever pay interest on the amount created - though interest on T-bills is basically non-existent anyway.
But the debt limit would increase by $2 trillion if the U.S. Mint made a $2 trillion legal tender platinum coin as well since whoever owned it could rock up to the US Department of State and ask them to make change for the parking meter out front. Making high value platinum coins could actually be even more dangerous than the battle over the debt limit because it would mean the U.S. Treasury could arbitrarily create government debt without Congressional oversight - the Secretary of State (or the President) could just issue an order and it would happen. All you'd need is one nutjob in office to completely screw the U.S. economy (and they've worked out that its better to have 535 nutjobs working on screwing the economy than just one).
No, they don't sell the coin to anybody - just deposit it in the treasury account at the fed. Of course it's dangerous. The mere fact that people are talking about this as if it's a serious proposition shows how screwed up the whole situation has gotten.
If they did that - than the 1 oz Platinum coin WOULD NOT cost $1700 as it does now - Platinum would shoot up in price and new spot for Pt would be $10500 - that would shake all the metals and they would also be repriced at much higher prices than they are now. by the way Rhodium reached a spot of around $10000 USD just before the GFC hit and the price collapsed to around $2k !!!
The demand for platinum would stay the same because they'd simply be writing "$10,000" on the font of a coin that usually has "$100" written on the front of it. If they wrote "One hundred Beeeelion dollars" on the front, it would still just be an ounce of platinum with an intrinsic value of about $1,700.
Because they've basically just printed a 2 trillion dollar note - it's not owed to anybody and hence not subject to the debt limit.
The Industrial demand for Platinum would remain the same, but monetary demand would skyrocket, which in turn would maybe lower industrial demand. But - If you have redeemable 1 oz platinum coins walking around at $10k than thats the new price for platinum coins
What do you think the demand would be for, say, a billion dollar coin? If they wrote "$1 million dollars" on an empty Coke can, its wouldn't increase the monetary demand for Coke cans either. That's the new price for $10,000 platinum coins. If it doesn't have $10,000 written on it, its not worth $10,000 as far as the United States government is concerned.
