I’m looking over my queued up list of news stories and URLs that I’ll cover in tomorrow’s wrap-up. I think I’ll get one out of the way right now.
Rush talked about some nut professor who will go unnamed, simply because we all know, (and this nut professor knows) his proposal is pure SVNT (shock value nut talk). And he knows it because he, like everyone else with a brain, knows it will never happen, and that the only reason he’s “proposing” it is to become a celebrity. It’s this business about striking $1 trillion platinum coins and using that to “pay” the deficit.
But in thinking about this non-story, I wondered what the real money supply is these days. For a long time, the metric referred to in the vernacular of economics education as M0 (M-Zero), but not officially by the Fed (their official name for it is some long acronym), which is defined as all the American paper and coin currency in common circulation, wasn’t even $1 trillion, so a single $1 trillion coin would more than double it. But to my shock, it wouldn’t do that now: While M0 was only around $800 billion as late as the fall of 2008, before you-know-what happened, thanks to several rounds of quantitative easing, it now stands at about $2,700 billion ($2.7 trillion).
People are claiming that things aren’t that bad, because DJIA is now riding at about the same 13k it was in the summer of 2008, pre-crash. Yeah? So what? Does 13k in an America with $2.7 trillion of open currency and coin floating around mean the same thing as 13k in the America of yore with only $0.8 trillion ibid.? It’s actually scary that with more than three times as much physical currency floating around out there, that your oh-so-important metric based on the current selling prices of mostly long-ago issued shares of common stock of the thirty given large publicly traded corporations that some cigar-munchers in some room deem currently “important” can only get back to par. What’s more scary is that everything isn’t more than three times as expensive as it was in September 2008 — A lot is significantly more expensive, but not everything is literally (2.7/0.8) = 3.375 times more expensive. But that must mean one or more of several things: (1) Things are about to get more expensive, and it’s just taking time for the increased money supply to work its way through the economy, (2) “Official” CPI is artificially low, (Duh, when Social Security checks and tax brackets are indexed to CPI, do you think the Feds/Fed have a big incentive to nuance/lie it down as far as possible?), (3) There are other economic factors why there are things that are not yet or will not eventually become 3.375 times more expensive than they were in 9/08, (4) M0 is not the be-all end-all metric of money supply: Ron Paul actually thinks M3 is a better “real” metric for money supply, and M3 is all “M0” coin/currency floating around plus banks’ deposits with the Fed plus checking accounts plus travelers checks plus savings accounts plus almost all money market funds and mutual funds plus almost all certificates of deposit, if my memory serves. Since the financial crisis, M3 has increased, but not at the same ridiculous rate as M0.
So, maybe an extra $1 trillion coin wouldn’t be the uber-disaster I would otherwise fear. Though it doesn’t mean it’s at all desirable.