Monday, January 14, 2013

The $50 million coin

This is a much better idea.

Gary Gorton, an economist at Yale University, suggests there might be demand for a bunch of $50 million coins. He notes the financial system still craves safe, liquid assets. Corporations in particular are desperate for a safe place to park cash now that unlimited federal deposit insurance has expired. Including fees, many bank accounts now sport negative yields, as at times do Treasury bills. Money-market mutual funds may float their asset values. Platinum coins would represent a risk-free, liquid way to store cash with no risk of negative yields. Of course, if the CFO lost one down a sewer grate, it would be a disaster. So instead, the Fed could simply keep the coins in a vault with their owners' names affixed. When one owner wants to settle payments with another, the Fed could simply switch labels. In the meantime, Treasury gets the equivalent of an interest-free loan from the public and a reprieve from the debt ceiling. Not quite a free lunch, but close enough.
--http://www.cnbc.com/id/100367281

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