Wednesday, January 9, 2013

Trillion Dollar Coin Perspective

I had a great idea for a post that involved showing how much actual platinum was needed to mint a coin that was worth one trillion dollars.  The purpose was to show the absolute absurdity of the issue.

This being the Internet, someone beat me to it.  Take it away, zerohedge:

  • A coin valued at $1 trillion and made out of platinum would, at today's price of $1557/ounce, weigh in at 642.3 million ounces.
  • 642.3 million ounces is also roughly 18 thousand tonsor about 1100 times more than all the platinum mined.
......

So if the Treasury plans on literally coming up with ridiculous laws, what is there to prevent it from merely coining a one ounce, or half an ounce, or one gram Platinum coin and assigning it the value of $1 trillion.
Sure it can. There is a problem with that, however: it is called currency devaluation and is also what FDR did with executive order 6102 when he confiscated America's gold - he basically devalued the US Dollar by well over half overnight (which, for all those curious, is the endgame in the current depression also, but we'll cross that bridge when we get to it).
In other words, when one strips away with all the rhetoric, all the advocates of this insidiously stupid idea which gets a new life every time there is a debt ceiling crisis, are doing, is arguing for a massive devaluation of the dollar: because for the trillion dollar coin idea to be even remotely plausible, the price of Platinum, and by implication the entire precious metals complex, would have to go up by a factor of some 1,100.
It also means the value of the paper US currency would have to go down by 1,100.
Which, by the way, is precisely what all those who wish for the Fed to continue funding America's unprecedented spending binge, which can never be satisfied by taxes alone, are hoping for.

(emphasis zerohedge's)

So....to add onto the topic, let's do some simple math to find out the actual size of the coin(couldn't find my TI-85, so bear with me):
1) 1 trillion dollars div 1557 dollars/ounce = 642,260,757 oz
2) 642,260,757 oz = 17,697,494 kg
3) Volume = mass / density = (17,697,494 kg)/(21,450 kg/m^3) = 29,942 m^3
4) A coin is a cylinder.  A cylinder's volume = pi * r^2 * h
Assumptions:
h = thickness of coin = 3.1 mm = 0.0031 m
-I chose the thickness of a silver dollar since why not
pi = 22/7
-forgive me-as cited above I cannot locate my old calculator
5) solve for r
r = sqrt (29,942 m^3/(0.0031 m * 22/7))
r = 1,753 m 
5) the diameter of the coin = 2r = 3,506 m

So there you have it.  Imagine a silver dollar 3,506 m wide, or 2.18 miles wide, and you would actually have a platinum coin worth one trillion dollars.

This is the economic lunacy we are dealing with.