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Date Posted: 21:17:27 1/24/23 Tue
Author: Jasper
Subject: Zman writes on how the US can make the dollar even more worthless.

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Trillion Dollar Coin

Another way to think of it is the trading card makers. They will create a special limited edition run of cards. They use the same paper and the same images as other cards, but these cards are limited in number. Maybe they have a special imprint or these days a holographic stamp on them. Collectors will pay a premium for these cards on the assumption that they will be worth more in the future. Of course, card collectors also buy for their own collections.

Who will pay a trillion dollars for a coin? The answer is no one. Markets can only work if there are buyers and sellers. Who would be the trillion dollar buyer? The only plausible buyer is the Federal Reserve. To do this they can liquidate assets from their balance sheet in the open market, then use the proceeds to buy the coin. There are two problems with this idea. One is the banks would be taking a trillion dollars out of the economy and flooding the market with various assets.

The other problem is the central bank could not plausibly list this new coin as an asset as the coin has a market value of zero. Again, a thing is worth what someone will pay for it and in the case of a coin with one possible customer, the value of the coin must by definition drop to zero when the customer acquires it. In effect, the Fed will have handed the mint a trillion dollars for nothing and the mint would then turn that trillion over to the Treasury as a profit.

https://thezman.com/wordpress/

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