09 January 2013

A Useful Idiot

So minting the [$1 trillion] coin would be undignified, but so what? At the same time, it would be economically harmless — and would both avoid catastrophic economic developments and help head off government by blackmail.
What we all hope, of course, is that the prospect of the coin or some equivalent strategy will simply take the debt ceiling off the table. But if not, mint the darn coin. [Emphasis added.]

Here’s how you can tell that Krugman is peddling nonsense:  he doesn’t take his argument to its logical conclusion.  If minting a $1 trillion coin is so harmless, why not mint a $16.4 trillion coin and pay off the entire federal debt in fell swoop?  Why not mint $84 trillion coin and cover unfunded liabilities?  Why not mint one platinum coin annually to cover each year’s budgetary deficit instead of going into debt?  I mean, if $1 trillion dollar coins are so harmless, why not mint enough of them to completely solve the problem instead of minting one or two and just sort of half-assing it?

In many ways, Krugman’s argument is similar to the arguments made by proponents of the minimum wage. If minimum wage is so good and has no drawbacks, only benefits, why not mandate that minimum wage is $50 per hour?  Or $100?  Of course, that proponents of minimum wage don’t take their arguments this far suggests one of two things:  either most proponents of minimum wage are unthinking idiots who simply parrot the talking points spouted off by people they deem intelligent, or proponents of minimum wage recognize the flaws inherent to their argument and are simply lying misrepresenting the reasons why they desire minimum wage.

The same, of course, is true for Krugman in his defense of minting the $1 trillion coin.  If it is indeed so harmless, why not go ahead and mint all the money we need?  To ask the question is to answer it.  The reason why it’s so bad to mint $1 trillion coins is because they are inflationary, and would jack up ordinary citizens’ cost of living while enabling the wealthy and politically connected to profit at the middle class’s expense.  Of course, this effect happens whether inflation occurs monetarily or by credit expansion, but if you admit that one type of inflation has negative consequences—and Krugman is implicitly admitting that monetary inflation is a bad thing, else he would pursue it to its logical end—then you must admit that any other form of inflation has the exact same type of negative consequences, even though the timing of their appearance may differ.

Thus, it is apparent that Krugman is either a fool or a liar.  Given that he constantly reverses himself about every major belief he’s ever had or any opinion he’s ever voiced, one might reasonably conclude that he’s a liar.  Unfortunately, though, this would be a foolish conclusion, as the above-referenced post indicates that Krugman has no imagination, which would generally preclude him from being a liar.  However, this does make him an idiot and, judging by the scope of his influence, a rather useful idiot at that.  And since his devotees and followers are apparently not smart enough to see through him, it would appear that Krugman is nothing more than a blind leader of the blind.  Too bad his leadership will drag blind and sighted alike down into a pit.


  1. You don't understand how our banking system works.

    The national debt is not about "borrowing". Obviously, the government does not have to borrow - as both you and Krugman agree, it can simply create money by fiat. This is what differentiates a sovereign from a subject, and is why from the foundation of America and every country - counterfeiting was one of the most serious crimes. It is a direct attack against sovereign authority.

    The purpose of the national debt is twofold: change the terms of money for economic planning purposes. Clearly, no one - and especially the most powerful nation on earth - has a need to borrow money for 90 days. It's about central banks around the world coordinating economic policy.

    The second purpose, unique to the United States, is to create demand for dollars around the world. Every other sovereign in history has only been able to project authority via taxation (as we note above, sovereigns don't need to tax to raise revenue!). The US is different. Our military supremacy allows us to compel the world to participate in our financial system. This allows us to essentially export inflation as well as acquire foreign products at nominal cost. It is also the source of the wealth of wall street.

    2012 marked the year where the largest percentage of global trade was settled in US dollars. Over 75%. That means Wall Street bankers get to take a cut of 75% of all global trade. That is a huge amount of money, and is the primary tool that funds the welfare state, drone jobs for the middle class, etc.

  2. Also, we do "mint all the money we need". Congress authorizes spending first, and taxes later. The money is already created before taxes are levied.

    Taxes aren't about raising revenue. It's about creating demand for dollars and controlling the inflation that necessarily can result from creating money.