Did the MSM’s new wave of commentaries on platinum coin seigniorage (PCS) miss the really big story about it? Of course, I think it did, and I’ll continue my review of the MSM commentaries with the efforts of Chris Hayes at MSNBC, substituting as host on the Rachel Maddow show (12/05 at 9:20 PM); and John Carney at CNBC (12/06 at 11:54 AM). This is my second review post on this subject.Platinum Coin Seigniorage is the idea that the US Treasury can use its right to print coins or arbitrary value, (the Federal Reserve has this power with regard to paper and electronic currency) which can then be used to pay down the debt by depositing at the Federal Reserve.
I think that this is a good thing, and so does Firestone, but he takes issue with a couple of points made by Hayes and Carney.
First, he objects to their characterization that such an action is unlikely to happen. I disagree.
I understand his point, that the legal and economic barriers to doing this are not great, but the psychological and political barriers, particularly for two people as wedded to economic and financial orthodoxy as Barack Obama and Timothy Geithner does make the possibility that this strategy would be implemented to be vanishingly small.
The area where I disagree is his argument that using the coin won't cause inflation.
While it is clear that if the coins are used exclusively to retire debt held by the Fed will not have much inflationary effect, Federal Reserve held Treasury Bonds are basically an accounting trick.
That being said, if you start retiring other debt, that money has to go somewhere, and if the trillions parked in US government securities need to find another place to park, one could expect these funds to slosh around and this would have an inflationary effect.
My more significant area of disagreement is his assumption that inflation is a bad thing, which is why he argues against the potential inflationary impacts.
I do not think that inflation right now is a bad thing. Given that we have a significant debt overhang, and inflation serves to devalue debt, favoring the debtor over the creditor, I think that inflation is a good thing.
In a very real way, we are in a position very similar to that at the end of the 1800s, when William Jennings Bryan gave his "Cross of Gold" speech.
Seigniorage is today's free silver, and much like free silver, it is not a likely to be implemented, except as a bargaining strategy.