Wow! Was that dumb, or what?

So. I found this really great deal on some new stereo equipment, what do they call it, "home theater" or something. I'm giddy as a schoolboy. Only thing is, it's expensive. I worked it out. I need sixteen paychecks to cover it.

I went to the bank, walked up to the hot teller, and said, "I'd like to withdraw my last sixteen paychecks, please."

She gave me a confused look, then turned to her computer. After a moment she turned back to me: "Sir, you spent that money already."

Now I was confused. "But I've been putting my paychecks into this bank for years," I said, "and I never once took one of them out. Now I need sixteen, please."

She giggled. She turned and whispered something to the next teller, and he laughed out loud. They both looked at me like I was crazy.

Then it hit me: I already spent the money. Wow! Was that dumb, or what?


At New Economic Perspectives, Scott Fullwiler discusses the trillion-dollar beowulf coins and why they are not inflationary:

So, why won’t coin seigniorage, using very large face value coins, be inflationary? Here are the reasons:
The coin(s) would never circulate among the public. It (they) would always remain on the asset side of the Fed’s balance sheet, and would always rest in a vault at the Fed. Since the platinum coin(s) never circulate(s), minting and depositing the coins at the Fed cannot possibly be inflationary.

Not inflationary, because the coins never circulate. So how does it work, exactly?

Depositing the coin into the Treasury’s account at the Fed will provide the Treasury with an account balance nearly equal to the stamped value of the coin(s), but this is not inflationary, either...

"Not inflationary." Yeah, I get that part. But the rest of it...

Scott Fullwiler provides a rather lengthy list of reasons why the coin is not inflationary. Here is the first item on his list:

The Treasury can never legally spend any more than what has been appropriated by Congress. Congress still retains the “power of the purse,” actually the “power of the purse strings.” So, the coin(s) will never add to the government’s spending...

In other words, it isn't the coin that causes inflation. It's the spending authorized by Congress. Okay. It's a petty argument, but okay. It is always spending, never printing -- or "minting" as Fullwiler rhymes -- that causes inflation. This is certainly true, and it is often an important point.

But it is not the authorization of spending that contributes to inflation. It is the spending itself, the actual demand or effectual or effective demand created by that spending, that contributes to inflation.

If *not* minting the coin *prevents* spending that has been authorized, then minting the coin permits the spending. So the coin *is* inflationary.

Number two on Fullwiler's list:

The balances in the Treasury’s account could simply be used to retire the debt owed to the Fed. As of July 28, this is $1.635 trillion. So, the Mint stamps a coin or coins worth $1.635 trillion, the profits ... end up in the Treasury’s account, and the Treasury then pays down the debt...

Number three:

In addition to retiring debt held by the Fed, a coin or coins could be minted to retire the more than $4.5 trillion held by trust funds and government agencies...

At any rate, the Treasury could simply mint another $4.5 trillion coin, or just one coin for a bit over $6.1 trillion to cover debt owed to both the Fed and the trust funds. Just as with paying off debt held by the Fed, the coin(s) would not circulate....

As with retiring debt owned by the Fed, retiring debt owned by the trust funds would similarly not be inflationary.

Nothing would change, except there is an extra $6.1 trillion that we couldn't spend before, and now we can. By proclamation, this doesn't cause inflation.

This notion that the coin isn't inflationary because it doesn't circulate, this is as foolish as me thinking all my paychecks are still in the bank. Those paychecks don't circulate, either. Same thing.

From Fullwiler's conclusion:

What I've shown above is that there's no reason to believe that using proof-platinum coin seigniorage will cause either significant demand-pull or cost-push inflation, regardless of the denomination, whether it be $ 1 trillion or $60 trillion, of the coin used to fill the federal purse.

Whether it be $ 1 trillion or $60 trillion. And none of this is inflationary, according to Scott Fullwiler, because the coins never circulate.

This is a man who gets too much uncritical attention.