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The US 1 trillion dollar coin

alexd

Administrator
Staff member


Didn't Zimbabwe try something like this? Most people know that issuing exorbitantly high denomination coins or bills to dodge an economic bullet will turn the US dollar into a banana republic currency. Using one credit card to pay off another? The fact that Americans are even talking about doing this really shows how messed up they are.

How a $1-trillion coin could solve the U.S. debt ceiling crisis
By Mark Gollom, CBC News

As the U.S. heads toward more political conflict over the national debt ceiling, liberal economist and New York Times columnist Paul Krugman believes he has found a simple trillion-dollar solution to stave off yet another potential economic crisis.

Writing on his blog, Krugman, somewhat half-serious, suggests that if the Republicans, who are looking for spending cut pledges to tackle the debt, would be willing to force America into default by refusing to vote to raise the debt ceiling, U.S. President Barack Obama should be willing to take this step.

"He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious," he wrote.

The debt ceiling is the government's borrowing limit that can only be raised thorough congressional authorization.

Krugman notes that a legal loophole allows the Treasury to mint platinum coins in any denomination it chooses. By minting a $1-trillion coin, then depositing it at the Federal Reserve, "the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all," Krugman wrote.

And Krugman isn't the only one raising the idea. New York Democratic congressman Jerry Nadler has expressed support for it and a formal White House petition has been started, as has a Twitter hashtag (#Mintthecoin)

But is this a plausible course of action?

"The platinum coin is a silly, but elegant, solution to a silly problem," Mike Moffatt, assistant economics professor at Western University's Richard Ivey School of Business, wrote in an email to CBC News. "The platinum coin proposal gives the Obama administration an alternative if House Republicans are completely intransigent on the debt ceiling issue."

Antony Davies, an economics professor at Pittsburgh's Duquesne University, took a dimmer view. He said minting a trillion-dollar coin is the same as printing money, and is all part of the "money illusion."

"Money illusion is the [false] belief that one is better off when one has more money," he wrote in an email to CBC News. "It certainly sounds reasonable until we distinguish between 'money' and 'purchasing power.'"

For example, he said that if the government announced that everyone was to add a zero to their money, every dollar bill would become a 10, just as $1,000 in a chequing account, would become $10,000.

"Would you be better off? The answer is no. All that would happen is that businesses would add a zero to their prices. A 75 cent hamburger would cost $7.50," Davies said.

What makes money valuable, he said, is the goods and services money buys.

"Minting a trillion-dollar coin doesn’t change the amount of goods and services. Therefore, all the trillion-dollar coin does is to take the value of existing goods and services and spread it around a larger number of dollars – thereby making each dollar worth less. We call this inflation. Printing more money [or minting more coins] simply causes inflation."

Moffatt agreed that if there was no response from the Federal Reserve, the trillion-dollar coin move would be inflationary. But he said the Fed would almost certainly respond by taking an equal amount of money out of the economy, by selling some of the large inventory of bonds.

This, in technical terms, would "sterilize" the deposit, meaning there would be no impact on inflation, Moffatt said.

"Although there are no direct economic consequences, I cannot see the Obama administration using such an option," Moffatt said. "Such a move would be highly controversial and would not be well understood by the general public."

In an email to the Washington Post, Philip Diehl, the former director of the U.S. Mint and Treasury chief of staff who helped write the platinum coin law, also said there would be no negative macroeconomic effects.

"The accounting treatment of the coin is identical to the treatment of all other coins. The mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the Treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues," he wrote.

"Once the debt limit is raised, the Fed could ship the coin back to the mint where the accounting treatment would be reversed and the coin melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin."

Leaving nothing to chance, Oregon Republican Greg Walden said Monday he's planning to introduce a law that would bar the Treasury from minting such coin.

"This scheme to mint trillion-dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution," he said in a statement. "I'm introducing a bill to stop it in its tracks."

from cbc:
How a $1-trillion coin could solve the U.S. debt ceiling crisis - World - CBC News
 

derek

TRIBE Member
while it is somewhat a magic trick, it's slightly different then printing one 1-trill bill in that the platinum (a rare metal) would be an asset (similar to the gold standard money system).

like they say though the general public wouldn't get it and it doesn't really fix anything other than allowing to fed access to cash.

it's not the first time it's been proposed.
 
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acheron

TRIBE Member
that'd have to be a pretty big fucking platinum coin for the coin to actually be worth 1 trillion USD at least with gold there are stockpiles of it but a single coin's worth?
 

The Watcher

TRIBE Member
Being able to assign any value to the magical coin is what makes it bogus to begin with. Why bother making the physical object if it doesn't have the inherent value assigned to it and instead overvalue many trillion times and use it as collateral. This is no fix, just a reason to inflate to oblivion. More dollars is not the answer, a single magical coin is definitely not the answer.

This is just more trickery for the masses to make them think the dollars they're exchanging their life force for are worth a damn...
 

derek

TRIBE Member
it is a slight of hand. it's not really trickery if they're being upfront about it. i'm only pointing out technically it's not the same as printing 1 - 1 trill bill like zimbabwe.

it would be one big coin. it's all silly really.
 

Bumbaclat

TRIBE Member
How much would a large platinum coin be worth in metal? $10,000? That isn't much of a difference to paper when you're talking about an arbitrary value of a trillion dollars being attached to the object.
 
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Wiseman

TRIBE Member
Exactly.

The fact that is actually a possible option shows money no longer has any real value except to be able to point to something measurable that shows who we are arbitraily superior to.

We've all gone fucking crazy.
 

Hi i'm God

TRIBE Member
If you gathered all the platinum in the world including whats in the ground it would amount to the size of a living room like 10x10.
 

The Watcher

TRIBE Member
We've all gone fucking crazy.
The whole populace has been tricked into worshiping the $ symbol, a fiat monetary system as their god and savior, an ever devaluing measure of their life force for the time they spend working for someone else, buying lottery tickets as their hope for a miracle, the smarter people "gambling" err... investing their money to keep up with the pace of inflation inherent to the system.

A system based on usury with no morals which breeds greed, suffering, scarcity, have's and have not's. People are too stupid to look into the system to see how corrupt it really is, and how it's at the end of it's life cycle, having gone exponential. We are being robbed blind at a faster rate the more time goes on. There is no solution possible, this system requires infinite expansion and acceleration of spending to exist, we can't survive the robbery for much longer.

People are going to react very violently when this thing pops, and everyone but the 1% are left with nothing. It's only a matter of time now.
 

Spinsah

TRIBE Member
Holy shit, you guys, of course the coin isn't worth 1 Trillion because it is made of platinum. The reason it would be a platinum coin is because the President has the right to issue currency in the form of a platinum coin (for collectable reasons ostensibly - this is why it is a legal loophole) and does not have that right with standard greenback.

It also, wouldn't, at least according to Krugman, cause major issues with inflation, because it's not actually in circulation, or paying creditors (this is why alex's analogy doesn't hold), but simply to avoid the debt ceiling.

It is pretty wild and wacky, but when dealing with house Republicans, what other methods are left?
 

alexd

Administrator
Staff member
It also, wouldn't, at least according to Krugman, cause major issues with inflation, because it's not actually in circulation, or paying creditors (this is why alex's analogy doesn't hold), but simply to avoid the debt ceiling.
It is actually in circulation if they use it as a payment method, even if it is only from from one branch of the US government to another to keep the economy from collapsing or to move debt around internally. Maybe not public circulation, but it is still being circulated, and it still shows the world how worthless the US dollar has become.
 
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Puma

TRIBE Member
when they entertain this kind of absurd idea you know the financial system dove off the cliff long time ago.
 
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