The Trillion Dollar Coin - how it could save America’s economy!
80 replies, posted
[quote=Joe Weisenthal]
The hottest idea to save the economy from another debt ceiling fight (and a potential default) is the Trillion Dollar Platinum Coin.
In order to understand how it works, we first need a very quick lesson in how the government spends money.
This is a super-crude version of it, but here’s the gist:
The Treasury Department has a bank account at The Federal Reserve, specifically the New York branch of the Federal Reserve. When the Treasury writes a check to a company (say a defense contracted owed $100 million) that check is “cashed” at the Fed. When the Treasury needs money (which is all the time) it sells bonds in an auction. The proceeds of those bonds go into the account.
Okay, now there’s this thing called the debt ceiling, which sets a maximum cap on the amount of debt that the US can carry at one time. Every time we come close to hitting it, the US has to ask Congress to raise the limit. In recent years, since the rise of the Tea Party, what used to be a mildly frustrating event has grown into a systemic economic threat.
So where does the Trillion Dollar Platinum Coin fit in?
In the section of the law which specifically relates to the Treasury’s ability to create money (coins and bills) section K says this:
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
In other words, when it comes to platinum coins, the Secretary (who is currently Tim Geithner) has discretion on the designs, specifications, quantities, and denominations of platinum coinage.
So let’s say, Tim Geithner decided to stamp out a $1 trillion coin. What does that accomplish?
The idea is that after it was created, Geithner could walk it over to the Federal Reserve, and deposit it in the Treasury’s bank account. Then the Treasury, rather than having to issue new debt (because remember, Congress hasn’t raised the limit) can make sure its checks clear against this money.
Voila, crisis averted!
The campaign has taken Twitter by storm at #mintthecoin
TheTell@thetellblog
Given the way Washington’s been spending lately, one wonders whether a $1 trillion coin is really enough. blogs.marketwatch.com/thetell/2013/0… #mintthecoin
4 Jan 13 ReplyRetweetFavorite
Now, that sounds all nice, but people have all kinds of objections upon hearing this idea. So we’ll address them here.
[B]MYTH #1: This will cause massive hyperinflation.[/B]
This is an understandable fear, because the idea of creating new money out of thin air to pay our debts brings to mind situations like Weimar and Zimbabwe, and trillion dollar bills being tossed about it in the streets.
But this is not about using the coin to pay back our debts, it’s staying within the law, while avoiding the technically nonsensical debt ceiling.
Think about the mechanics, the trillion dollar coin goes to the Fed, but in terms of the real economy, government spending takes place exactly as normal. Now it is true that the Treasury might not be doing bond purchases at this time, and that this could leave more money in the system, that could heat up and cause inflation, but this is easily remedied, because the Fed has a gigantic pile of Treasuries it’s sitting on that it could sell back into the open market to “sterilize” the government spending.
The bottom line is: Because this trillion dollar coin isn’t being used as “helicopter money” (money dropped directly into the economy) you don’t get the inflationary effects you’re used to seeing when you hear about governments creating money in large denominations.
This is purely a technical fix for a bad situation.
[B]MYTH #2: The trillion dollar coin will destroy the dollar![/B]
This is pretty much the same as the first argument. What would destroy the dollar is if the government just started printing $1 trillion bills, declared them legal tender, and then dropped them from a helicopter onto cities. Soon, the buying power of a single dollar bill would be zilch. But alas, because the coin isn’t a direct injection into the economy, but rather a stopgap that lets the government continue to spend on various services, you don’t have that destructive effect.
[B]MYTH #3: If this idea is so great, then minting a $16 trillion dollar coin could just solve our debt problem![/B]
This line of reasoning ignores the point completely. People who say this (or say we should print a $100 trillion coin) are mistakenly thinking that the point of this exercise is to pay off our debts and get out of the hole.
That’s not it. Our debts are plenty manageable at current levels, and with interest rates the way the are. The point is to stay within the law, while getting around the technical problem of the debt ceiling. So there’s no point to the $16 trillion coin or the $100 trillion coin, or anything else so absurd. This is not about having money to spend. This is about avoiding a legal crisis where the government had obligations to much (such as on its debt) but didn’t have the authority to borrow and spend money.
And furthermore, if we actually did try to eliminate our debts just by creating a coin, we would create the aforementioned inflation problem (via a massive expansion of money) and it would result in buyers less inclined to buy dollar assets.
[B]BOTTOM LINE[/B]: This won’t create hyperinflation, and it’s not the solution to all of our economic problems. It’s just a way to stay within the law, while avoiding the debt ceiling nonsense.
Is it silly? Of course it is. But what’s sillier is a rich nation having a debate on whether it will pay what it owes, which is what the debt ceiling fight is all about. So in the face of such silliness, this unfortunately may be required.
For more reading, see:
[url=http://www.bloomberg.com/news/2013-01-03/why-we-must-go-off-the-platinum-coin-cliff.html]Josh Barro: Why We Must Go Off The Platinum Coin Cliff[/url]
[url=http://monetaryrealism.com/trillion-dollar-coin-explodes-krugman-congress-is-talking-about-it/#comment-12984]Michael Sankowski: Trillion Dollar Coin Explodes: Krugman, Congress is talking about it[/url]
[/quote]
[url=http://business.financialpost.com/2013/01/04/have-you-heard-about-the-trillion-dollar-coin-and-how-it-could-save-americas-economy/]Source[/url]
The second extra link is a little wonky, sorry.
Man, I fucking laughed when I read this. I was picturing myself dressed as the cat burglar from the Simpsons sneaking into the Federal Reserve, but instead of leaving a calling card it would just be a note that said, "fucking jacked."
"Fuck i lost the coin"
[QUOTE=Madtoker;39095610]"Fuck i lost the coin"[/QUOTE]
"fuck it was stolen"
[QUOTE=Madtoker;39095610]"Fuck i lost the coin"[/QUOTE]
Imagine accidentally putting it in a vending machine..
Instantly thought of the Chip from New Vegas.
[QUOTE=FreakyMe;39095638]Imagine accidentally putting it in a vending machine..[/QUOTE]
Where it would harmlessly be ejected into the change bin because it's not a standardized dimension or weight
[QUOTE=FreakyMe;39095638]Imagine accidentally putting it in a vending machine..[/QUOTE]
Why accidentally? I would totally do it just to see how much change it would give.
The Simpsons were right all along.
Except they had one trillion dollar bill instead of a coin.
Just when you thought the government couldn't come up with any more dumb bullshit.
[QUOTE=FreakyMe;39095638]Imagine accidentally putting it in a vending machine..[/QUOTE]I know you're sarcastic but legal tender in Canada hardly works in vending machines so if you wanna lose a one trillion dollar coin and still have your bag of chips not come out, go ahead.
okay so basically the reserve gets a free trillion dollars from nowhere
irl gold faucet
[QUOTE=Forumaster;39095667]Just when you thought the government couldn't come up with any more dumb bullshit.[/QUOTE]
Why would you think the government would even do this? This is an opinion piece.
[QUOTE=Forumaster;39095667]Just when you thought the government couldn't come up with any more dumb bullshit.[/QUOTE]
You mean news journalists/economists talking about things for shits and giggles
It's all fun and games until it falls in between the couch cushions
As soon as the government takes this money and distributes it tho, be it through buying services or social security or like road repairs, it will act like dropping a trillion dollars into the economy
[QUOTE=Rocâ„¢;39095659]The Simpsons were right all along.
Except they had one trillion dollar bill instead of a coin.[/QUOTE]
We all knew from day 1 this mumbo-jumbo would not fly.
[QUOTE=FreakyMe;39095638]Imagine accidentally putting it in a vending machine..[/QUOTE]
Enjoy ninehundredandninetyninebillion-ninehundredandninetyninemillion-ninehundredandninetyninethousand-ninehundredandninetyseven dollars and 50 cents in change.
[sp]As if a vending machine would carry that much but whatever its just a joke[/sp]
[QUOTE=FreakyMe;39095638]Imagine accidentally putting it in a vending machine..[/QUOTE]
Buy a drink and wait for them to decide how they're going to give you the change.
How do figure that Im dumb?[QUOTE=Ybbat;39095739]As soon as the government takes this money and distributes it tho, be it through buying services or social security or like road repairs, it will act like dropping a trillion dollars into the economy[/QUOTE]
How does this work, I don't understand..
[QUOTE=mobrockers2;39095802]How does this work, I don't understand..[/QUOTE]
This guy is talking about the Secretary of the Treasury making money out of nothing and handing it to the Fed to artificially avoid an artificial limit on debt and claiming that it won't have the same problems as Zimbabwe or Post-WWI Germany because fuck you, that's why. It's a REALLY stupid opinion piece.
[QUOTE=Sixer;39095511]
Man, I fucking laughed when I read this. I was picturing myself dressed as the cat burglar from the Simpsons sneaking into the Federal Reserve, but instead of leaving a calling card it would just be a note that said, "fucking jacked."[/QUOTE]
I thought of [URL="http://en.wikipedia.org/wiki/The_Trouble_with_Trillions"]this Simpsons episode[/URL] when I read this. Surprisingly relevant.
[IMG]http://i269.photobucket.com/albums/jj80/cambridgebicycle/simpsons-trillion-dollar-bill.png[/IMG]
Or lets do something that will work, like budget cuts.
[QUOTE=ASmellyOgre;39096152]This guy is talking about the Secretary of the Treasury making money out of nothing and handing it to the Fed to artificially avoid an artificial limit on debt and claiming that it won't have the same problems as Zimbabwe or Post-WWI Germany because fuck you, that's why. It's a REALLY stupid opinion piece.[/QUOTE]
it wouldn't have the same effect as long as the money doesn't actually enter circulation.
btw this doesn't solve out debt or pay for anything, this would only(supposedly) get around the debt ceiling restriction so we don't go on the verge of financial crisis every fucking year.
[QUOTE=FreakyMe;39095638]Imagine accidentally putting it in a vending machine..[/QUOTE]
Legally, they'd have a trillion dollars.
There should be a position called the 'Worth-Wizard.'
He could point out to a pen and declare it to be 10 trillion dollars and so the markets would follow suit.
There would be an order of Worth-Wizards that could convene once a month to decide the worth of certain products in order to curb this growing debt.
Economics are fucking convoluted as shit.
[QUOTE=mobrockers2;39095802]How does this work, I don't understand..[/QUOTE]
basically, bits of governemnt don't want to wait for congress to raise debt ceiling, so they temporarily pretend that they have 1 trillion dollars less debt (by spreading out over many treasury accounts or just pretending it isn't there)
[QUOTE=SweetSwifter;39095752]Enjoy ninehundredandninetyninebillion-ninehundredandninetyninemillion-ninehundredandninetyninethousand-ninehundredandninetyseven dollars and 50 cents in change.
[sp]As if a vending machine would carry that much but whatever its just a joke[/sp][/QUOTE]
you mean to tell me it doesnt carry enough change???
Castro is bound to steal that shit.
[img]http://3.bp.blogspot.com/_p0Ky0eMmXNo/TIrXweoR4nI/AAAAAAAA8Lc/0ZMqbyuTq58/s1600/simpsons-3.jpg[/img]
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