Do these second hand dealers have any idea what goes on between the Treasury and the Fed now?
Instead, of using platinum, the Treasury prints, on paper, dollar denominations. These "securities," which go once through the public wash, are then often bought by the Fed. Currently, the Fed owns $1.6 trillion of the Treasury printed paper. This is 60% more than the amount the second hand dealer chuckle at when a trillion dollar platinum coin is suggested be minted by the Treasury.
Except for a few minor technicalities, there really isn't much difference between what the Treasury and Fed do now, and what the minting of a trillion dollar platinum coin would do. The fact that the second hand dealers fail to grasp this, and that they are never called on this, is a sad commentary on the ability of most Americans to think more than two steps deep on economic and political issues.
This is not a new phenomena in American intellectual discourse. Henry Hazlitt's great book, Economics in One Lesson, first published more than 50 years ago, was about this very topic. Hazlitt discussed in the book the failure to consider an economic problem fully. That is, those that charge, for example, that it is good for an economy when a vandal breaks a window, because a window maker now has more work, fails to take into consideration where the victim of the broken window would have spent the money otherwise. In other words, the broken window is a negative for an economy, and this point can be obviously seen if one thinks deeply enough about the problem.
Among modern day economists who display this inability to think deeply, Paul Krugman leads the pack. Not surprisingly, he was among the group of second hand dealers in ideas, who early on promoted the trillion dollar platinum coin. He called the idea "silly" and a "gimmick," but was still in favor of it, though there has been no indication in his comments about the coin that he understood that there is little difference between the minting of such a coin and the current printing of Treasury "securities" on paper. This should not come as a surprise. Krugman, through out his columns, seems to have an inability to think more than two steps deep. Indeed, in his writings he has admitted that he was greatly influenced in his core thinking about economics, by a journal paper on a baby sitting co-op that used coupons. But, from his writings about the co-op, it is clear that Krugman does not think deep enough and fails to comprehend how the coupons issued by the co-op are different from money. It is this failure to think deeply that is at the core of his inability to get many economic concepts correct.
I am not kidding when I write that Krugman holds his misunderstanding of the babysitting co-op story as the basis of his economic views. In 1998, Krugman wrote in Slate of an "earth shattering" experience, the reading of the co-op story:
Twenty years ago I read a story that changed my life. I think about that story often; it helps me to stay calm in the face of crisis, to remain hopeful in times of depression, and to resist the pull of fatalism and pessimism.In his recent book, End This Depression Now!, Krugman devotes a full chapter (chapter 2) to the babysitting co-op and in that chapter again displays his inability to think more than two steps deep.
For my commentary on Krugman's misunderstanding of the co-op story, see:
Now Krugman on Mises Monetary Mental Disorder
The Krugman Economic View Built on a House of Babysitting Coupons
In Review: Paul Krugman's New Book