# Legally, Can Obama fire up the printing presses? **URL:** \ **Category:** Factual Questions\ **Created:** [July 18, 2011, 9:52pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501 "2011-07-18T21:52:27Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![DaveBfd](https://avatars.discourse-cdn.com/v4/letter/d/c6cbf5/32.png) [@DaveBfd](https://boards.straightdope.com/u/DaveBfd)\ **Post date:** [July 20, 2011, 2:19am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/21 "2011-07-20T02:19:42Z")
I may not be correct, but by minting the coin you are creating money out of nothing, by borrowing the money you are moving funds from one hand to another, no inflation would take place directly. ---
**Author:** ![Uncertain](https://avatars.discourse-cdn.com/v4/letter/u/6a8cbe/32.png) [@Uncertain](https://boards.straightdope.com/u/Uncertain)\ **Post date:** [July 20, 2011, 2:25am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/22 "2011-07-20T02:25:23Z")
> [@jtgain](#): > > Basically the FED “prints” money to buy treasury bonds. Those treasury bonds represent a debt to the United States. If you gave the FED the paper currency back, those treasury bonds would be retired, so that debt is discharged. > > Basically we (the royal we) would be paid back by a reduction in the debt that we all owe. How does that amount to “paying off” the paper currency? “Here’s some paper currency. It’s guaranteed that if you give this to my creditor, he will forgive some of my debt.” Gee, thanks. Note that I’m not trying to argue against fiat currency (please, let’s not do that). I have no problem with it. I’m just trying to understand. > [@Susanann](#): > > What else would you want? Why would you want anything else besides paper? I wouldn’t. But post #2 said that the “Federal government has agreed to pay off [paper currency] on demand, guaranteed by the credit of the country.” I am trying to understand what this means. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [July 20, 2011, 2:53am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/23 "2011-07-20T02:53:42Z")
> [@DaveBfd](#): > > I may not be correct, but by minting the coin you are creating money out of nothing, by borrowing the money you are moving funds from one hand to another, no inflation would take place directly. It may not be approaching a trillion, yet, but apparently there _are_ billions of dollars worth of [unused, never-released dollar coins](http://www.nbcnewyork.com/news/local/Wasting-Money-Minting-Money-125612348.html) sitting around and it’s becoming a bit of a headache for the government. But according to the linked article they can’t just take them down to 7-Eleven and create money out of nothing: > [@](#): > > The coins are not technically legal tender yet. In order for the golden dollars to circulate as currency, private banks must buy them from the Federal Reserve. ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 20, 2011, 3:13am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/24 "2011-07-20T03:13:58Z")
> [@Uncertain](#): > > Note that I’m not trying to argue against fiat currency . > > But post #2 said that the “Federal government has agreed to pay off [paper currency] on demand, guaranteed by the credit of the country.” I am trying to understand what this means. It simply means you get nothing. And since as you say that you have no problem with fiat currency, then you should be satisfied with nothing. ---
**Author:** ![MilTan](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@MilTan](https://boards.straightdope.com/u/MilTan)\ **Post date:** [July 20, 2011, 3:16am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/25 "2011-07-20T03:16:34Z")
> [@DaveBfd](#): > > I may not be correct, but by minting the coin you are creating money out of nothing, by borrowing the money you are moving funds from one hand to another, no inflation would take place directly. Borrowing money increases the money supply (M1, rather than M0, but that’s not relevant). When you take out a loan from a bank, the money deposited in your checking account is added to the money supply. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [July 20, 2011, 3:32am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/26 "2011-07-20T03:32:16Z")
On the other hand, IIRC when the Fed sells Treasury bonds (IOUs from the gov’t) it actually has the effect of _decreasing_ the money supply. But perhaps neither here nor there . . . ---
**Author:** ![Uncertain](https://avatars.discourse-cdn.com/v4/letter/u/6a8cbe/32.png) [@Uncertain](https://boards.straightdope.com/u/Uncertain)\ **Post date:** [July 20, 2011, 4:59am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/27 "2011-07-20T04:59:15Z")
> [@Susanann](#): > > It simply means you get nothing. That doesn’t tell me what was meant by the person who wrote it. > [@](#): > > And since as you say that you have no problem with fiat currency, then you should be satisfied with nothing. I am. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [July 20, 2011, 5:23am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/28 "2011-07-20T05:23:55Z")
> [@Susanann](#): > > Back when we were on the\*\* gold standard\*\*, and back when we had paper money that said “gold certificate”, we could go into any bank and hand them a $20 paper bill and the bank would hand us a 1 ounce gold Double Eagle. Being on the gold standard meant that our paper money was freely traded back and forth to or from gold at any bank for face value. Back when we were on the gold standard, a United States $20 paper bill was worth $20 in gold coin, exchangeable at any bank. From 1790 to 1933 the United States was on the gold standard and the US dollar was as good as gold anywhere in the world. (What the heck do coin shops have to do with anything? As far as coin shops, anyone could buy and sell any coin at any coin shop ever since they were invented. ) Except that the USA could set the value of gold at whatever it wanted. The govt could then decide gold was worth a penny a oz or "(Dr Evil voice) “One meeelion dollars” a oz. For a time, you could not legally buy or sell bullion in the USA, including gold coins (except a few that were considered collectors items). Thus you could not buy or sell that $20 double eagle except to the govt at whatever price it had set the value of gold at). In theory, the govt could do this again, and gold would be worth $35 oz or whatever they decided it was worth, as the govt would simply confiscate all bullion and pay you what it was worth- which would be $35/oz as set by law. > **[Executive Order 6102](https://en.wikipedia.org/wiki/Executive_Order_6102)** > > Executive Order 6102 is an executive order signed on April 5, 1933, by US President Franklin D. Roosevelt forbidding "the hoarding of gold coin, gold bullion, and gold certificates within the continental United States". The executive order was made under the authority of the Trading with the Enemy Act of 1917, as amended by the Emergency Banking Relief Act in March 1933. > At the time and in the years that followed, this policy was highly controversial and faced criticism from those who asserted... Thus, he is correct and you are wrong. ---
**Author:** ![psychonaut](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/psychonaut/32/4655_2.png) [@psychonaut](https://boards.straightdope.com/u/psychonaut)\ **Post date:** [July 20, 2011, 9:51am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/29 "2011-07-20T09:51:36Z")
> [@Koxinga](#): > > I believe it’s not even the Fed that “creates” money, strictly speaking. Money comes from bank lending; and it’s the Fed’s open market operations, benchmark interest rate moves, reserve requirement changes and so on that determine how much money the _banks_ are allowed to create. > > ETA: Or, what **septimus** said. D’oh! This idea of how money is created is from the social credit movement, which was briefly popular in the 1930s and long since discredited. Unfortunately it has seen somewhat of a resurgence in recent years due in large part to the currency cranks in the Zeitgeist Movement. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [July 20, 2011, 9:59am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/30 "2011-07-20T09:59:53Z")
> [@psychonaut](#): > > This idea of how money is created is from the social credit movement, which was briefly popular in the 1930s and long since discredited. Unfortunately it has seen somewhat of a resurgence in recent years due in large part to the currency cranks in the Zeitgeist Movement. No, it’s simply [fractional-reserve banking](http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation). I’m pretty sure the concept has been around a while. ---
**Author:** ![psychonaut](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/psychonaut/32/4655_2.png) [@psychonaut](https://boards.straightdope.com/u/psychonaut)\ **Post date:** [July 20, 2011, 10:18am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/31 "2011-07-20T10:18:35Z")
> [@Koxinga](#): > > No, it’s simply [fractional-reserve banking](http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation). I’m pretty sure the concept has been around a while. In fractional reserve banking, a bank which receives a deposits of a certain amount cannot loan out more than that amount. The banks don’t create money; they only put back into circulation money which already exists in the form of deposits. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [July 20, 2011, 10:34am UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/32 "2011-07-20T10:34:05Z")
> [@psychonaut](#): > > In fractional reserve banking, a bank which receives a deposits of a certain amount cannot loan out more than that amount. You’re wrong. That’s the _opposite_ of fractional reserve banking. ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 20, 2011, 12:03pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/33 "2011-07-20T12:03:31Z")
> [@DrDeth](#): > > Except that the USA could set the value of gold at whatever it wanted. The govt could then decide gold was worth a penny a oz or "(Dr Evil voice) “One meeelion dollars” a oz. > > For a time, you could not legally buy or sell bullion in the USA, including gold coins (except a few that were considered collectors items). Thus you could not buy or sell that $20 double eagle except to the govt at whatever price it had set the value of gold at). In theory, the govt could do this again, and gold would be worth $35 oz or whatever they decided it was worth, as the govt would simply confiscate all bullion and pay you what it was worth- which would be $35/oz as set by law. > > [Executive Order 6102 - Wikipedia](http://en.wikipedia.org/wiki/Executive_Order_6102) > > Thus, he is correct and you are wrong. 1. The price of gold was constant at $20 an ounce from 1789 until 1933. During 1789 thru 1933 the price of gold was NEVER!! a penny an ounce nor a million dollars an ounce. You are being very deceitful by implying that the government “could” have changed the value of gold from 1789 to 1933, although you know full well that the government never did it. There was no fluctuation in gold. Gold was a constant. A 1 ounce gold coin from 1860 was $20, and a 1 ounce gold coin from 1925 was still just $20, was ALWAYS just $20, freely traded back and forth, turned in, or exchanged for paper money at any bank anywhere in the country. 2. There never was a time in the United States that people could not buy and sell gold coins. From 1933 to 1975 gold coins could be bought and sold by coin shops and by individuals, and they were. Just about everyone bought and sold gold coins as collectors. My family bought and sold plenty of gold coins at coin shops in the 1950’s and the 1960’s. 3. The only thing that stopped was that after 1933 one could no longer go to the bank and exchange paper money for gold, and we could no longer legally use gold coins as legal tender at store, i.e, stores were no longer required to accept gold coins when you bought something. After 1933 we no longer used gold coins at A&P, Montgomery Wards, or at the local gas station anymore. 4. Gold coins were not confiscated from individuals, and that is why today there is so much old gold coins minted prior to 1933 still out there today. There are zillions of pre-1933 American gold coins out there. They are not rare. Most gold coins minted before 1933 today still sell for around melt value/bullion value because they were NOT confiscated they are SUPER abundant and they are NOT rare at all. I dont know any individual that turned in any gold to the government in 1933. It was the local banks that turned in their gold coins, because they could no longer exchange gold with the public. . ---
**Author:** ![psychonaut](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/psychonaut/32/4655_2.png) [@psychonaut](https://boards.straightdope.com/u/psychonaut)\ **Post date:** [July 20, 2011, 12:07pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/34 "2011-07-20T12:07:50Z")
> [@Koxinga](#): > > You’re wrong. That’s the _opposite_ of fractional reserve banking. Only if your definition of “money” is so broad as to include things such as bank deposits. But that’s not IMHO a very useful definition for most purposes. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [July 20, 2011, 12:13pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/35 "2011-07-20T12:13:42Z")
> [@Susanann](#): > > Back when we were on the\*\* gold standard\*\*, and back when we had paper money that said “gold certificate”, we could go into any bank and hand them a $20 paper bill and the bank would hand us a 1 ounce gold Double Eagle. Being on the gold standard meant that our paper money was freely traded back and forth to or from gold at any bank for face value. Back when we were on the gold standard, a United States $20 paper bill was worth $20 in gold coin, exchangeable at any bank. From 1790 to 1933 the United States was on the gold standard and the US dollar was as good as gold anywhere in the world. Pure fantasy. First, the United States was most certainly not on a gold standard starting from 1790. The US didn’t begin its dalliance with gold as the only metal available for free coinage until 1873, when the coinage act of that year demonetized silver. And even after that, the government still toyed with limited silver coinage for political boondoggles to the silver states. The US didn’t officially adopt gold as the standard until 1900. That didn’t last long, either. Gold export was prohibited during World War I. Precious metals were used previously, but again not consistently. Gold and silver convertibility was stopped during the Civil War, to help stabilize banks during the rebellion and as an alternate way to raise government revenues through seignorage. The original US greenbacks, first printed during the war, weren’t convertible at all. Although we can get back to predominant gold usage before the Civil War, there was still not a single gold standard. Bimetalism was the legal rule of the day. You can ignore the law, and argue correctly that the US was on a _de facto_ gold standard after the Coinage Act of 1834 until the Civil War, but that’s just another demonstration of the instability of the system. What’s more, you’d then have to admit that the US was on a _de facto_ silver standard from the founding of the Republic until 1834, when the legal silver/gold ratio was changed from 15:1 to 16:1, thus providing incentive to change the standard. Any way you slice it, it’s impossible to argue that the US was consistently on gold. That’s hardly the only error. Gold notes were not redeemable at “any bank”. Federal Reserve Notes were legally redeemable only at the US Treasury, or at any one of the 12 Fed branches. Private banks were not required to surrender gold in exchange for Fed notes. It was not a matter of “go into any bank” to get your precious metal. Any bank that did so was offering a courtesy to its customers, and nothing more. The errors are still not done. After Jackson killed the Second Bank of the United States, but before the US government decided to start issuing currency itself with the Civil War, it was private banks themselves who were responsible for printing money. And private banks did not have to honor each other’s gold promises. In fact, it was customary for banknotes to be accepted only at a discount outside their local bank districts, because of the distance and cost involved in going to the note originator to redeem the notes. If I had a banknote from Georgia, and I wanted to pay for a product in Maine, it was likely that the people in Maine would not accept the note at all, for fear that it was fraudulent. There were magazines to fight counterfeiting, which appraised local banks of reliable and unreliable currency. These magazines were continually updated, with new developments in forgery skullduggery mandating new issues of the magazine to inform bankers. It was only with the National Bank Acts at the end of the Civil War that the national again had the benefit of nationally accepted banknotes. The requirements for receiving a national bank charter were stringent enough to give nationally chartered banknotes enough reliability that they were not traded at a discount. State chartered banks were basically stripped of the right to issue any banknotes. These new national notes from private banks, in addition to the new notes issued by the government, provided some semblance of monetary unity across the nation – but even then, greenbacks still traded at a discount to gold notes for a time, until resumption was completed in the late 1870s. There were essentially two currencies being freely traded side-by-side. It took a long bloody time until people had some reasonable assurance that one dollar was, in fact, worth one dollar. Before that, it was hardly the case that a one dollar note was worth one dollar within the United States itself, let alone “anywhere in the world”. Once upon a time, gold and silver had their use as backing for paper banknotes, but they did not magically make money any easier to use or understand. Money was not any less complicated in the gold standard era. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [July 20, 2011, 12:31pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/36 "2011-07-20T12:31:00Z")
> [@psychonaut](#): > > Only if your definition of “money” is so broad as to include things such as bank deposits. But that’s not IMHO a very useful definition for most purposes. So you confine your definition of money to M0. Yeah, that’s useful, all right. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [July 20, 2011, 12:48pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/37 "2011-07-20T12:48:50Z")
> [@Uncertain](#): > > How does that amount to “paying off” the paper currency? “Here’s some paper currency. It’s guaranteed that if you give this to my creditor, he will forgive some of my debt.” Gee, thanks. Why is that bad? You (the collective you) owe the debt. It’s like taking your money and paying your mortgage and/or car payment. What did you get out of that other than a partial retirement of your debt? Plus, with currency, when you don’t wish to turn it into the federal reserve to retire part of the national debt (i.e. all of the time) then they are valuable instruments that can be exchanged for goods and services. You said you have no problem with fiat currency, so what exactly were you looking for the FED to give you in exchange for that $100 bill? ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 20, 2011, 1:09pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/38 "2011-07-20T13:09:24Z")
> [@Hellestal](#): > > Pure fantasy. > > Federal Reserve Notes were legally redeemable only at the US Treasury, or at any one of the 12 Fed branches. Your entire post is pure fantasy and false. For your information, there was no such thing as Federal Reserve notes until after 1912, because the Federal Reserve was not invented until then. Additionally, I myself own US gold coins dating all the way back to the 1700’s. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [July 20, 2011, 1:09pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/39 "2011-07-20T13:09:43Z")
> [@MilTan](#): > > By what mechanism would minting a trillion dollar coin, which expands the money supply by $1T, cause more inflation than borrowing $1T, which also expands the money supply by $1T? Or than QE2, by which the Fed deliberately set about to expand the money supply, with basically no inflationary consequences. And certainly not hyperinflation. Because when the feds borrow money, they issue treasury bonds which are valid outstanding debts and our creditors see that as honest acquisition of money. If you stamp a platinium coin and say it’s worth a hillion-jillion dollars, then there is no such debt, you’ve created “value” out of nothing and our creditors will see that and start wondering if the assets they hold will be paid off with these platinum trillion dollar coins. ETA: And I’m sure that you will rightly say that these coins will be backed by the full faith and credit of the US Government, but it sets a terrible example of monetary policy. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [July 20, 2011, 2:04pm UTC](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501/40 "2011-07-20T14:04:06Z")
> [@jtgain](#): > > That’s the same thing as hyperinflation. Ninety-nine times out of a hundred, you would be right. We are currently living in one-in-a-hundred times. Coin seignorage, even at a trillion dollars, would not necessarily have to be hyperinflationary. If it were done right, it would not only resolve the debt limit impasse – until the next impasse – but it would also provide pretty much the entirety of the stimulus that the economy currently needs. That’s not to say I’m advocating this course of action. The idea is bananas. But the Fed has plenty of other assets it can squeeze off their balance sheet to soak up dollars elsewhere. Abstractly, there’s no reason the last trillion of base money needs to be supported by a genuine asset, since the last trillion would never be squeezed out of the system anyway. The economy needs a minimum of base money to function. The coin idea is in many aspects similar to Ron Paul’s notion of the Fed shredding a significant chunk of its current holdings. That idea is also bananas, and could also potentially “work”, if people preferred unorthodox silliness to sensible policy. > [@psychonaut](#): > > Only if your definition of “money” is so broad as to include things such as bank deposits. But that’s not IMHO a very useful definition for most purposes. Bank accounts are money. They are not just a medium of exchange, but the _primary_ medium of exchange. The overwhelming majority of transactions in terms of value – we’re talking well over 90% – occur only through shifting numbers in bank ledgers. No coin, no notes, just numbers shifting from one bank account to another. If your definition of “useful” doesn’t include the majority of value in the system, then your definition is in need of serious refinement. > [@Susanann](#): > > Your entire post is pure fantasy and false. For your information, there was no such thing as Federal Reserve notes until after 1912, because the Federal Reserve was not invented until then. 1. It was 1913. My grandfather had Parkinson’s. I remember what he was like at the end. A strange reminder. There was no way to offer sympathy to the man who didn’t know what it was for. [Previous page](https://boards.straightdope.com/t/legally-can-obama-fire-up-the-printing-presses/589501.md?page=1)