Well Infose, I went to the beach and whilst I was chasing a ball that my dog was throwing, I met this young ten year old kid and I asked him to explain to me the difference between nominal and intrisic values of a coin.
He explained his favourite coin at the bank safes has a nominal value coin of $30. He said it was a 2000 Sydney Olympics 1 kg of proof silver.
No no said I. It should be the other way round. I explained that I had written that the US was postponing a $26B, 2yr bond auction next Tuesday, because Congress wasn't allowing the raising of the debt limit, and thus there was no guarantee the $26B certificates couldn't be issued by the 2nd of Nov. I explained a possible way to circumnavigate this was to issue a $1trillion platinum coin instead of raising said limit by $1t. I further explained that the movie "The Million Pound Note" exposed the difficulties of this large denomination.
His answer, 'Why don't they issue 1million of 1 oz pt coins with a face value of $1million. After all $1m is now manageable, unlike it was then." (I'm trying to make a point of just how much $1t is.)
But even 1m, 1oz coins require over 30t of metal, and with about 150t mined annually, most used on ccs, where would the metal come from. Even 1 oz with a face value of $1m is impossible. Luckily investors are so stupid as to accept this. After all they accept negative interest rates. But how long will it take for investors to realise they've been fooled twice. (Shame on me!!)
He said, "instead of issuing certificates for these bonds, we send successful bidders this plastic, er, I mean platinum 1 oz coin instead, with the explanation that Congress were behaving badly and they could have these coins as substitutes." After all they were hoodwinked '71, why not again. They wouldn't see that 'the Emporer had no clothes'. Luckily investors are so stupid as to accept this. After all they accept negative interest rates. But how long will it take for investors to realise they've been fooled twice. (Shame on me!!)
In other words "IT'S THE VERY FACT OF ISSUING SOMETHING OUT OF NOTHING THAT WILL MAKE FIAT CURRENCY COLLAPSE EVEN SOONER. Even the US arn't that stupid to try. Are they?
BTW, after Tuesday's $26B 2yr notes probable postponement, there is a$35B (?) 3 yr notes auction scheduled for Wed, and $29B 7yr, for Thurs. All this with the Fed deliberating on rates at this time.
