A trillion-dollar coin could be minted within hours of an emergency decision
businessinsider.com
businessinsider.com
Before all paper money became Federal Reserve Notes, some was legally required to be "United States Notes", which were direct obligations of the US Treasury (as opposed to coming from the Federal Reserve system). Before the 1970s $2s and $5s were issued as USNs, with a red seal instead of the green seal of FRNs (or the blue seal of Silver Certificates, which had a slightly different legal authorization and obligation). When the concept of redeeming paper money for silver ended in the 1960s, USNs became irrelevant, and the $2 and $5 USNs were pulled from circulation and eventually reissued as FRNs. But the treasury still had the legal requirement to circulate a certain dollar amount in USNs. So they printed up a bunch of $100 USNs, stuck them in boxes, and occasionally carted them around between different bank vaults, which technically met the definition of "circulate". This went on until 1994, when Congress finally repealed the law requiring the USN circulation.
Default seems a bit more absurd. Gotta keep the machine running one way or another.
What's even more absurd is that Congress can approve trillions in tax cuts and new spending over the last four years, and then just refuse to pay for what they already approved.
Marco Rubio, for instance, has called Biden's policy agenda Marxist -- this coming from a man who has spent his political career agitating against normalizing diplomatic relations with Cuba. Conflating the two makes Cuba's government look more benign than it is, and makes the American government look more extreme than it is.
Ordinarily, NO, as this is passed in the normal course of business - this merely authorizes the issuance of debt instruments to finance the spending that was previously authorized.
But, now the answer is YES, when one party has decided to exploit this legal quirk separating the spending from the issuance of debt to execute a DOS attack on the other party currently in power.
>>Did people who pass the budget a few months ago get buyer's remorse?
Yes, since they are no longer in the driver's seat, they want to execute a DOS on the other party now in the driver's seat, and they don't care if it crashes the country or global economy, as they think they won't be blamed and the other party will.
It really is as simple as that, putting party over country.
But the party in power has 50 + tie-breaking VP vote? What gives?
It only takes 51 votes to change the filibuster rules, but at least 2 Democratic Senators oppose that, so we're kind of stuck.
60 votes are required to break the filibuster in the Senate, and whatever their private ideas (e.g., I've seen reports from credible sources that no less than 44 R Senators personally support raising the debt ceiling), there are apparently zero R votes to go against their leader and end the filibuster.
Interesting times.
Peter Schiff has touched on this, but who in the world is willing to lend to the US at the moment when the US just came out on record as running the biggest ponzi scheme ever?
I wanted to believe in MMT; it sounded at first like it could be something completely counterintuitive that just works, and some time later a rational quantity of math would explain it.
At the present, I think that was too wishful. The US seems to be able to print unlimitedly because of its unique status as the reserve currency. Once other countries opt out, and some are making concrete steps towards doing so, our dollar will quickly collapse, and it'll take the rest of our lives to experience a quality of living akin to today's.
No it wouldn't
> provide further proof that Biden is indeed an idiot,
Idiot or not, the coin is actually a solid move.
> and basically pushed the US to the slippery slope,
Nope.
> that ends with the US economy being in the same condition as Venezuelan.
TF?! Not at all. You do not belong in this conversation. You have no clue what you are talking about.
Look at any charts of the M1/M2 money supply (that haven't been discontinued) and they seem to strongly indicate we're on a slippery slope towards hyperinflation, that's been the trend for several decades and seems to be rapidly accelerating- At least that's what it looks like to a dumb layman like myself
"What can be asserted without evidence can also be dismissed without evidence" OP provided no evidence, so I dismissed without evidence.
> it's one of the most blatant examples of debasing a currency I can imagine
No. QE is. look it up. Actually minting a coin is smart.
If it was used to redeem debt held by outside parties, that would be an issue. Redeeming Fed holdings has no effect on circulating holdings or public debt holdings, and is basically a nonevent. The money creation that matters regarding those already happened when the Fed created real circulating money to buy the Treasuries in the first place. (Which, btw, did not have catastrophic effects on confidence in the US dollar.)
Because the coin can be any arbitrary amount, and its only use will be to redeem federal debt held by the Federal Reserve. Using multiple coins serves no purpose.
Sure this time it may used as an accounting trick. But it also frees government to spend recklessly until current money is worthless.
Substantively, its not when its used to redeem Fed-held government debt.
The money creation involved happened when the Fed created money to buy the debt (and, lo and behold, did not produce ultrainflation); interaction between two hands of the money-issuing government isn't substantively “money creation”, its accounting gimnicks with a platinum token.
> Sure this time it may used as an accounting trick. But it also frees government to spend recklessly until current money is worthless.
No, the law authorizing it already frees government to do that (and, more generally, the Constitutional power of creating money.)
There are procedural constraints, like the budget and the Constitutional assignment of power over it, which prevent the executive willy-nilly spending such money having minted it (unlike, say, the Fed’s money creating powers, where it can spend all the money it creates fairly freely, which is how it bought the debt it now holds.)
This is really a non-issue; its one of the clearly-legal routes around the stupid, contradictory (with mandated spending in the budget), counterproductive, and probably constitutionally null at least insofar as it purports to constrain later-mandated spending, and possibly more generally, debt ceiling without openly defying it.
A less legally clear method is just to treat it as the complete legal nullity it may be and ignore it completely. In many ways, I think that's the best option, but effectively “mint the coin” is no different in substance.
Congress has approved a budget not merely authorizing but legally mandating spending and necessary borrowing to finance it.
It has also imposed a debt ceiling, purportedly prohibiting borrowing beyond a certain amount.
Minting the coin is one way of using an unquestionably legal power to resolve the conflict of mandates.
Another option is to simply ignore the debt limit because it conflicts with the budget mandate (and, given existing obligations, the 14th Amendment’s debt clause.)
> But president can mint coins without Congress's authorization
Only platinum coins. For...reasons that are mostly irrelevant.
Who gets the coin?
The coin goes to the Federal Reserve, the government's bank. Then the government has money on deposit at the bank, and can write checks for the things that the Congress has already budgeted.
Ordinarily they would just sell bonds to the Federal Reserve, which is exactly the same thing. There's a law preventing them from doing that above the authorized debt limit. But there's another law allowing them to mint coins -- which are the same thing, except made out of metal.
It would be much easier if Congress would just allow them to borrow the money to spend on the things Congress already ordered them to do. But as a matter of political grandstanding, parts of Congress are standing on the rules... so the President will stand on different rules.
Interestingly, the workaround involves minting an official, physical coin worth $1T:
> "The swiftness of creating a $1 trillion coin could serve as an extreme last-minute option if Congress failed to raise the debt ceiling before the Treasury runs out of money on October 18."
All of these smart-ass solutions are leading inexorably to a lack of confidence by the world in the US Dollar. When that happens, you can produce billions of these 'Trillion-Dollar Coins' and it won't make the slightest bit of difference in the 'New Zimbabwe' currency.
We're literally giving it to China. I mean you don't create a coin without having someone to give it to.
Sorry, was your question rhetorical?
My best faith reading of the original comment was that it decries the arbitrary nature of platinum - if we are calling it a $trillion, why not make it out of anything?
But the debt ceiling is itself a legal construction. People call it a "loophole" because of episodes of The Simpsons or whatever but the Treasury is explicitly given permission to issue coins of arbitrary value. The debt ceiling is itself a legal construction.
The sovereign citizens and anti- Federal Reserve folks had fun with the idea in the 90s too.
The Secretary may mint and issue bullion 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.
You don't fix what you spend on your credit card by not paying the bill.
That is not how government budgets work, at all.
For starters, payment within a household budget are not typically to other members of the same household. The house's mortgage debt isn't to another person resident there, the groceries aren't bought from an household member.
Payments within a country are. It's circulation of money within the entity, not income and outgo.
And a household does not own their own bank to manage the circulation.
https://theconversation.com/why-the-federal-budget-is-not-li...
https://positivemoney.org/2018/10/a-government-is-not-a-hous...
https://www.forbes.com/sites/francescoppola/2018/04/30/gover...
Your government will have more money to spend usefully, and the world would be a better and safer place.
Government expenditure in the USA isn't unreasonable in itself, being lower than most other liberal democracies and even the levels in the USA in prior decades.
Either jacking up taxes or cutting government spending by like 20% total in the middle of such an economically precarious time seems far too risky, anyway. Times like these are what deficits are for! It's a shame the country was in a bull economy and yet still entered the pandemic already fiscally stretched to breaking point.
Last I checked, platinum was trading at around 30-31 dollars a gram, roughly half that of gold. The presumption is that the coin will be 1 troy ounce or about 31g.
Hyperinflation from reckless debt monetization isn't unprecedented. When it does occur, it tends to quickly spiral out of control. Let us assume for the sake of discussion that there are some responsible people within these institutions who would like for these platinum coins to act as an actual asset, a backstop against a total devaluation of the dollar.
What would a reasonable weight of a trillion dollar platinum coin be?
In other words, they would be issuing new money by debasing the dollar, without generating debt in their balance sheet. It's like issuing one trillion worth of cash, which is backed with just one worthless platinum coin. It's not really different from just issuing debt that isn't paid back, but this way they don't have to raise the debt limit.
Shenanigans like this will completely erode the trust in the value of dollar.
>...backed with just one worthless platinum coin.
Platinum is a precious metal and far from worthless.
Let us pretend there are people involved in this charade who would allow that initial wealth to be extracted via Cantillon effects, but still desired the coin to act as a backstop at a later date.
Given the current rate of spending and outstanding obligations, what would be a reasonable weight for a trillion dollar coin?
Not sure why you need to factor in "current rate of spending and outstanding ", but 1 trillion divided by current platinum prices gets you 31,610 metric tons. Apparently that exceeds all platinum ever mined:
>Mining experts also estimate that just over 10,000 tonnes of platinum have ever been mined by man.
$1 Trillion Coin: - Treasury mints coin - Treasury sells it to the Fed who can create $
Both can be inflationary, but the optics on the coin are terrible. And with currency appearances matter.
Treasury mints the coin.
Treasury trades the coin to the Federal Reserve for existing bonds the Fed already owns.
Treasury retires the bonds which keeps the US under the statutory debt limit.
The coin isn't "spent in the economy".
It's just an exchange of assets among government departments.
Zero new money circulates in the economy.