The Trillion Dollar Trick

Peter Schiff’s latest commentary pulls apart the ridiculous logic of a trillion dollar platinum coin as a solution to the nation’s debt, and exposes the real reason the Fed would never permit such a scheme:

“The government, not the Fed, mints coins, so they did not have to rely on the Fed to create value out of thin air. That is why the platinum coin idea was so seductive, if ultimately unsellable.

But the Fed does the exact same thing all the time using sophisticated accounting and state of the art computing. The Fed “expands its balance sheet” by buying government bonds from private banks. In exchange for these securities, the Fed credits the banks with funds it creates out of thin air. The banks then pass the funds to the general public through loans. But it’s important to realize that the Fed does not have any money to actually buy the bonds in the first place. The funds are “created” by a Fed computer. The process is easier (and equally duplicitous) than minting a trillion dollar coin (which at least requires the production of something other than computer code). The only difference is the lack of window dressing. It’s a shame that the platinum coin episode did not result in a wider recognition of this brutal truth.”

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