is coin seigniorage a viable, and permanent means of ending both the deficit, and debt problems?
posted at 11/7/2011 10:48 AM EST
hello all, i've been away from these boards for a long time. anyway, i have yet to find a reason why this isn't the best solution to permanently ending both the debt and deficit issues the gov't is currently having. for a brief explanation, when the Fed buys dollars, ie paper money they are paid seignorage because they buy those dollars at cost, as opposed to face value. when the Fed buys coins (from the Mint) they pay face value and the Mint is paid seignorage by the fact that it doesn't cost the face value of a coin to print it. back in the 90's Congress made it legal to print platinum proof coins with any face value, not tied to the actual value of the coin. so in theory they can print a platinum proof coin with a face vlaue of $10trillion dollars, when the actual coin doesn't cost anywhere near that amount to produce.
this would not result an inflation because the coin never needs to enter circulation, it can simply reside in the Fed's vault. the profit to the Mint would go into it's PEF and not add to the money supply. so can someone please explain to me why this isn't the best option?