Tuesday, January 8, 2013

Copernicus and the Platinum Coin

Fun fact: Copernicus was a monetary theorist. Yes, the astronomer extraordinaire who worked out a theory of the revolution of celestial spheres also turned his attention back down to earth to consider currency reforms in his native Poland. At the time (early 16th Century), Poland had three different types of currency. All were made of precious metals, but were subject to frequent debasement, since the state could alter their value by decree.

Copernicus explained that Gresham's law was at work. When multiple coins are in circulation, those with cheaper metallic content relative to their value will be used for payment, while those with more expensive metallic content will be melted down for their metal and disappear from circulation. In short, "bad money drives out good." Copernicus also was an early developer of the quantity theory of money, that prices vary directly with the size of the money supply. He thought that the government needed to stop minting so many coins if they wanted to solve the inflation problem. He published his monetary ideas in Monetae cudendae ratio in 1526.

Copernicus focused on coins whose value derived from their metallic content. Today, of course, our paper currency does not get its value based on the value of the paper itself; it is not commodity currency, but fiat currency. What about the trillion dollar platinum coin we keep hearing about in the debt ceiling discussions? It would not get its value from its metallic content either. The government does not actually have a trillion dollars worth of the commodity platinum to mint into a coin. The coin would just use a small amount of platinum, and have its value by fiat. It is just as if the President were allowed to print a trillion dollars of paper money, which he's not. (That's why the platinum coin scenario is called a loophole.)

18 comments:

  1. I think everyone agrees that the government can stamp out a trillion dollar coin. The real question is should they and if they did what would be the effects?

    ReplyDelete
  2. A hello to Carola from another Bear, although many moons ago. LIke the disco era, in my case. At least we knew how to dance!

    The platinum coin is fun, but it turns out the US Constitution also allows the states to mint coins, if from silver or gold. No delineations made on the value of the coins relative to content.

    So, a state like CA, which could use a boost, could mint up a few billion in coins, with some minor silver or gold content, and set the values of said coins at $50, $100 and $1000.

    The state would pay employees and vendors, pensioners in these coins. In turn other in the state would accept the coins as they know they can pay their taxes with the coins.

    Of course, this will never happen, along with the platinum coin idea, but it fun to talk about.

    And a serious question: The Fed conducts a monetary policy that it believes on average is good for the states---but for some states it will be too loose and for some too tight. Think about the ECB, or if there were a global central bank.

    The Fed is way too tight for CA. Should states seek to conduct they own monetary policies?

    Think about what a failure the ECB is.

    Best of luck at Berkeley!



    ReplyDelete
    Replies
    1. Thanks for the comment and Go Bears! You might like this paper called "Is the United States an optimum currency area? an empirical analysis of regional business cycles" by Michael Kouparitsas. http://ideas.repec.org/p/fip/fedhwp/wp-01-22.html
      He finds that the U.S. in not an optimal currency area, and that having regional monetary policy might be better.

      Of course, it would be inconvenient to have to exchange currency when doing business or traveling across state lines.

      Also, in the U.S. the states have balanced budget requirements, and the national government can run a debt or surplus. So we have monetary union with fiscal union, unlike the eurozone. Imagine if each state were allowed to run as big a deficit as it wanted and have its own currency. We would all have to keep track of how likely each state was to devalue its currency, etc.

      Delete
  3. This is an informative blog. Keep it up. I am looking forward to this kind of blog. Thanks for sharing it with us www.norton.com/setup

    ReplyDelete
  4. Nice blog, it's so knowledgeable, informative, and good-looking site. assignment is a great platform that has been performing astonishingly well office.com/setup

    ReplyDelete
  5. Dear admin thank you so much for sharing this informative information with us, it's really useful for me. your blog is amazing. I wish you all the best for future comments. I have read it and I have also something here to share with you. norton.com/setup
    www.norton.com/setup, Norton product key

    ReplyDelete
  6. Thanks for sharing interesting information. Boulos Corporation is the leading property development company in Tallahassee renowned for quality New Homes In Tallahassee built for the highest standard of living.

    ReplyDelete
  7. Dear admin I really like the way you have to describe this blog it is awesome. All information is very informative I really appreciate your effort toward the reader. Thank you so much for this amazing content and I have also something to share here. www.office.com/setup, Office product key, office.com/setup

    ReplyDelete
  8. Get the best seo services in India from seo company India. Quality of work is guaranteed here. We also offer other marketing services to drive traffic and boost conversions.

    ReplyDelete
  9. Get Packers and Movers Jaipur List of Top Reliable, 100% Affordable, Verified and Secured Service Provider. Get Free ###Packers and Movers Jaipur Price Quotation instantly and Save Cost and Time. Packers and Movers Jaipur ✔✔✔Reviews and Compare Charges for household Shifting, Home/Office Relocation, ***Car Transportation, Pet Relocation, Bike SHifting @ Packers And Movers Jaipur

    ReplyDelete
  10. The online assignment help also guarantees you timely submission, as their experts have the experience of completing the tasks in quick time. Also, the online assignment help offers to make changes while writing the assignment, which you may not find with the offline assignment help. Customer care support is another advantage you get in the case of online assignment help, and they also allow you to connect with your assignment expert directly. You can simply ask, give me the contact details of my assignment expert to connect with them. And the major difference is the cost that you will pay for your assignment. Online assignment help charges very less compared to offline assignment help. And this concludes that it is better to prefer online over offline to get the best service.

    ReplyDelete
  11. Canon IJ Network Tool is a toolkit software with the options to keep a check on most of your Canon printer network settings and adjust them according to your requirements. The Canon IJ Network tool will get you through the network settings uninterruptedly. Canon IJ Printer Utility is a complete software package meant to adjust and modify the configurations of your printer device as per the requirement.

    ReplyDelete
  12. Canon IJ Network Tool will get you through the network settings uninterruptedly. It is essentially required when you are attempting to get your printer connected to a different network because a new network tends to reset the printer’s existing network settings.The Canon IJ Printer Utility can be used to keep a check on your printer’s ink levels and cartridges and clean the ink tanks and paper feed rollers. Also, you can make adjustments to your Canon printer’s power settings.

    ReplyDelete
  13. The ij.start.cannon setup process for every Canon model is almost similar, however the download through https //ij.start.cannon and http //ij.start.cannon installation process may differ. you can also visit canonsetup-canon.com/ijsetup website for same. Https //ij.start.cannon.Depending on your requirement, it offers a type printer including PIXMA, SELPHY, MAXIFY, etc. canon.com/ijsetup

    ReplyDelete
  14. Once you are done with the driver setup via canon.com/ijsetup , you will have to insert a pile of pages into the printer tray for printing the documents..

    Visit ij.start.canon | ij.start canon and find out the best way to download Canon printer drivers.

    All-in-one Canon Inkjet printers are suitable for home, business, school, and others to improve productivity. You can easily set up your Canon printer through drivers from Canon.com/ijsetup , wireless connection, USB, and a few components.

    ReplyDelete
  15. Amazing website, Love it. Great work done. Nice website. Love it. This is really nice.
    Hbomax/tvsignin
    Disneyplus.com/Begin
    Disneyplus com login begin
    Cricut.com/setup

    ReplyDelete
  16. Meanwhile, choosing to operate in Document Mode, you ensure the improved readability of your documents as a result of scanning the document. Similarly, in Photo Mode, you can get the best quality of your photos scanned. ij scan utility | ij canon scan utility

    ReplyDelete

Comments appreciated!