Mish's Global Economic Trend Analysis |
- Reader Questions on the 1 Trillion Coin Proposal: Where's the Money Come From? Will It Cause Inflation?
- Social Security Trends: Beneficiaries, Total Costs, Number of Workers, Ratio of Workers to Beneficiaries
- Eurozone Unemployment Hits Record High 11.8%; Spain 26.6%; Greece 26%; Youth Unemployment top 56% in Greece and Spain
| Posted: 08 Jan 2013 03:56 PM PST Several people asked me to comment on the $1 trillion coin proposal endorsed by New York Times columnist and Noble Prize winner Paul Krugman. I did so yesterday in a satirical post Krugman Supports the $1 Trillion Coin; Why Stop There? I Support the $1 Quadrillion Coin. In response to the above article, I have received several emails wondering where the money comes from. For example reader Tom writes ... Hello Mish,Fictitious Accounting Entry Hello Tom. The proposal is nothing but a fictitious accounting entry. There is no trillion dollars. Certainly the treasury would not buy a trillion dollars worth of platinum. Indeed, that would be impossible, at least at today's pricing. Rather, the proposal was to take a coin (size is irrelevant), and stamp "one trillion dollars" on it. Questions of legality have arisen as noted in my article. It's important to note that Krugman (correctly) never proposed spending the coin. It would take an act of Congress to spend it. Thus, the proposal was to value the coin at one trillion dollars simply as an accounting entity. In other words, the Treasury would take a coin worth essentially nothing, that could not be spent, and value it on the books as one trillion dollars. Accounting Fraud My personal opinion is that it would be fraud to do place a one trillion value on a coin that could not be spent (in this case, because the money was already spent. In higher denominations, the money would not be spent until Congress authorized such spending). Regardless, actual future spending would be precisely what Congress authorized to be spent, no more no less. No Inflationary Effect There would be zero inflation as a result of minting such a coin. Indeed, it would not cause inflation if the Treasury minted a 1,000 quadrillion coin. This is an important point. Debt Ceiling Nonsense The entire exercise is to avoid another nonsensical discussion about whether or not Congress will bump up the debt ceiling. I say "nonsensical" because we all know that Congress will indeed cave in and bump up the debt ceiling. On that score, Krugman actually has a point. However, (ignoring legalities and accounting fraud) there certainly is a huge need for discussion in Congress about the deficit and debt levels. That is why I am against the coin idea even if it is legal (which I doubt). However, in case I am legally wrong, I repeat what I said earlier (the treasury should mint a one quadrillion coin), simply to highlight the absurd nature of the idea. With that, I repeat my proposal for this picture on the front of the coin.  The back of the coin should be equally obvious. Paul Krugman Prays for America.  Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 08 Jan 2013 12:57 PM PST Inquiring minds are digging into social security trends including the numbers of beneficiaries, average costs, total costs, number of workers, and the ratio workers to beneficiaries. First, let's take a look at the CNS News report Social Security Ran $47.8 Billion Deficit in Fiscal Year 2012. The Social Security program ran a $47.8 billion deficit in fiscal 2012 as the program brought in $725.429 billion in cash and paid $773.247 for benefits and overhead expenses, according to official data published by Social Security Administration.With that backdrop, let's look at the actual data to see the underlying trends. Data Notes
Social Security Beneficiaries December 2012
Social Security Beneficiaries, Costs, Employment
Notes for Above Table Employment and beneficiary numbers are in thousands. I computed the total annual cost as monthly benefit * 12 * number of beneficiaries. That method will tend to overstate annual costs slightly vs. totaling every month individually. Thus, the total cost may vary slightly from other published figures. Average Monthly Social Security Benefit  Total Annual Cost of Social Security 1967-Present  Social Security Beneficiaries vs. Total Non-Farm Employment  Ratio of Workers to Social Security Beneficiaries  Social Security Benefits Analysis
The system is currently running a deficit. Trends say that deficit is going to worsen with each passing year unless benefits are cut and/or taxes are hiked. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 08 Jan 2013 10:47 AM PST Inquiring minds are investigating miserable unemployment stats in Euroope as reported this morning by Eurostast. The euro area (EA17) seasonally-adjusted unemployment rate was 11.8% in November 2012, up from 11.7% in October. The EU27 unemployment rate was 10.7% in November 2012, stable compared with October. In both zones, rates have risen markedly compared with November 2011, when they were 10.6% and 10.0% respectively. These figures are published by Eurostat, the statistical office of the European Union.EU Unemployment by Country
Things are bad in aggregate and getting worse every month. Bad does not even begin to describe the misery in Spain and Greece. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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