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The ‘Trillion Dollar Coin’ Is No More Absurd Or Outrageous Than The Republican Threat To Put The U.S. Into Default



January 04, 2013 – Comments (14)

Of course no one here will agree with this post, especially the part at the bottom. So please feel free to flame on.


Henry Blodget Writes a Post for Me: The ‘Trillion Dollar Coin’ Is No More Absurd Or Outrageous Than The Republican Threat To Put The U.S. Into Default
from Modern Monetary Realism by Michael Sankowski

Thank You, Henry Blodget! I was just about to start writing a post about how the Trillion Dollar Coin is less absurd than a sitting senator calling for the U.S. to default on its debt, and found out you already wrote it!

“If the Republicans in Congress are really irresponsible and outrageous enough to hold the reputation and economy of the United States of America hostage just to win a few re-election points, then perhaps the appropriate response is for the Treasury to save the country by minting a “trillion-dollar coin.”

If you’re like most people, you’ll jump to the wrong conclusion when you hear about this “trillion-dollar coin.”

You’ll think that the “trillion dollar coin” is just another way for the government to print money out of thin air to pay for spending we can’t afford.

But that’s actually not what the “trillion-dollar coin” idea is.

The “trillion-dollar coin” is just a legal gimmick that responsible people in the U.S. government might use to enable the country to pay bills and honor commitments…without relying on a group of selfish, irresponsible people in Congress to first raise the debt ceiling.

Basically, the “trillion-dollar coin” would just allow the Treasury, which pays the country’s bills, to keep writing checks regardless of what Congress does with the debt ceiling.

Business Insider, St. Louis Fed

Yes, we have a budget problem. Spending (red) is too high as a percent of GDP and tax revenue (blue) is too low.

And then the hundreds of millions of other reasonable, responsible people in the country can just go on about their business until the folks in Congress finally grow up enough to address our budget problem like adults.”

This is a great post – it goes into incredible detail about how out-and-out stupid it is to threaten a default and use the debt ceiling as a negotiating tool. It’s beyond foolish.

I do disagree with one part of this post.  We do have a budget problem, but Mr. Blodget has it backwards. Spending is too low, and tax revenue is too high. We need more deficit spending, we need more stimulus right now to get our economy moving. The Atlantic pointed out, Ben Bernanke is begging congress to spend more money AND lower taxes.  The IMF pointed out, we get a 40%-50% boost to our spending right now from fiscal multipliers. So, if there is any budget problem right now, it comes from taxes being too high, and not too low.


14 Comments – Post Your Own

#1) On January 04, 2013 at 4:30 PM, L0RDZ (87.88) wrote:

I'll  try  not  to flame  on....   fantastic  four  style...

From what  i've  read,  the  plan  is  that  the gov would  coin and  sell ( platinum ) coins  with  figures  of  dead  people ~  quite  possibly  President  Reagan  or  some other  historic persons  or  figures.

At  first  I  thought  the  gov-ment  was  in possession of  some single magical  expensive coin  that's  worth a  trillion and  I thought  wow  who would have enough money to buy such  a  coin ?

But  after  reading,  the plan is  that  the us  would  use  it's supply  of  platinum  and  melt  it  down  into coins  to sell.

Supposedly  the  usa  could possibly  get  a  trillion dollars by doing  so ?   but  given  the  poor  management  and bad decision making  I  could  see  them  somehow  messing this up,  with insiders  stealing  the platinum  and using some other  bogus  metal  like  tungsten  or  something  mimicking ?

With President Obama having kicked off debt ceiling negotiations by vowing not to negotiate over the debt ceiling, a new option for paying off the nation’s considerable tab is gaining momentum with cheeky fiscal and monetary wonks.

It goes like this: Should Congress fail to extend the U.S. debt limit — reached again on Dec. 31 — the president could ask the Treasury to begin printing trillion dollar coins (in a process explained mostly seriously by Jim Pethokoukis on his American Enterprise Institute blog), a number of which could then be put toward fulfilling debt obligations in the event new legislation stalls in Congress.

While there are laws in place to regulate how much paper, gold, silver or copper currency can be circulated by the government, there is nothing so clearly stated when it comes to platinum. That door open, the Treasury could have the U.S. Mint melt and mold a few trillion dollars of it, then ship the goods over to the Federal Reserve for safekeeping until the time comes to pay the bills.

I  don't  want to  be  negative  ?   but  what's  next ?  how  about  the Potus  raffle's  off   dinner  with his wife ?

Maybe  a  white house  bake  sale  ?   where   billionaires  and  millionaires  are  coerced   into  buying  over-priced  baked goods ?

Oh wait  the gov  already  does  that and  is planning on  doing  more  to those  unable  to  stop it.

What  kills  me  is  the  decision  to not  even  bother  negotiating ?   yeah  that works  well  just ask  the nhl.


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#2) On January 04, 2013 at 6:18 PM, Turfscape (< 20) wrote:

I absolutely LOVE the thought of a Trillion Dollar Coin...please put the face of C. Montgomery Burns on it! Instead of printing "In God We Trust" on it, I'd like it to read "Meh...Could've Been Worse".

This is the next Nicholas Cage movie, by the way. The Trillion Dollar Coin gets stolen, Nicholas Cage needs to track it down before it falls into the hands of the President of Ignoristan, who would immediately use it to buy all of the former Soviet Union's nuclear weapons and material. Cage saves the day by hiding the coin in a vending machine by buying a package of Twinkies! 

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#3) On January 04, 2013 at 7:05 PM, L0RDZ (87.88) wrote:

In light of  gov-bs

I say  they mint  coins  out of  fake  air...  claim  they have it somewhere  like  the  weapons of mass destruction or claim they are at  fort knox...

Maybe  say we  mint  32 trillion dollars worth  so  the current gov  can  go on a spending spree like   steroid  filled  hetero sailors  who accidentally took  horse  v   and  find  themselves  at  the  brothel  with a  suit  case full of  thousand dollar bills....

Problem solved...  Obama  can  go  down  as  the legendary president who solved  the  money crisis until he lands  in jail  and  they can claim its  political,  Biden  can  given Obama  a pardon and  we  can all live  happily ever after  for a few years until  we breach  32 trillion in debt.

A-team  plan.


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#4) On January 04, 2013 at 10:38 PM, rd80 (96.71) wrote:

Trillion dollar coin?  Pikers.

Why not just give everyone $100 trillion dollars?

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#5) On January 05, 2013 at 12:15 AM, whereaminow (< 20) wrote:

In Mosler's book Seven Deadly Frauds, doesn't Warren admit that such a scheme as this would lead to price inflation that would have to be remidied by other policy measures?  (I think it's the first myth - a late caveat added towards the end).

Also, why are so many MMT's dragged in by this fake Left/Right talking points nonsense?  Republicans don't hold anyone's feet to the fire or do anything to stop the growth of spending.  It's like the argument I had with Roche a couple of years ago where he was just convinced those new Tea Party Expressers were going to block a debt ceiling raise! 

You guys gotta stop watching the news.  It's warping your view.

David in Liberty

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#6) On January 05, 2013 at 12:31 AM, Melaschasm (< 20) wrote:

The decision to sell platinum coins should be based upon the government having an excess of metal.  If we have extra junk laying around we should sell it, no matter what the republicans do regarding the next debt ceiling debate.  

From an economic standpoint, selling a few trillion dollars of junk will only delay bankruptcy by a few years at best.

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#7) On January 05, 2013 at 12:01 PM, NOTvuffett (< 20) wrote:

The really scarey part is that there are people, that are supposed to be serious people, that believe this to be a good idea.

Just to be clear Melaschasm, this isn't an idea about melting down the USA's vast stores of platinum (there aren't any).  As LORDZ said, this is a scheme about creating money with "fake air".  It could also be made out of recycled newspaper, it doesn't matter.

I think rd80 is on the right path.  Maybe Pres. Obama can be on the $1 trillion coin, maybe some officials from the Weimar Republic on higher denomination coinage, and Robert Mugabe on the folding money, lol. What could possibly go wrong?

whereaminow is exactly right.  there will be a big show, but nothing will get done, it is business as usual in Washington.  The only question is how big will the increase in the debt ceiling be?  Will it put us in the Greek debt/GDP range which everyone thought was a crisis?  Will the pundits on the left say that it is OK because the USA can print money and Greece cannot?  It seems everything comes full circle. 

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#8) On January 05, 2013 at 10:40 PM, awallejr (59.32) wrote:

The debt ceiling is going to forever increase.  Go read newspapers from the 1900's where they were complaining about the debt.  Just kick the can down 30 years.  The baby boomers will be dead and the Country will have major budget surplus's.

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#9) On January 05, 2013 at 11:07 PM, whereaminow (< 20) wrote:

The debt ceiling is going to forever increase

I don't think you mean that literally.  But yeah, this could go on a for a long time.

There is excellent precedent for repudiating crushing public debt burdens that result in prosperity, but the MMT crowd is not interested in this history, since it did not occur under a paper money standard. Oh well.

David in Liberty

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#10) On January 06, 2013 at 10:16 AM, MoneyWorksforMe (< 20) wrote:

It's all about political posturing and managing people's perceptions.

Most don't understand that perceptions can largely be influenced irrespective of the final outcome. It's not so much the outcome itself, but the way in which the objective is achieved.

Imagine two scenarios: 1.) A bipartisan deal is struck immediately, months before the deadline, to raise the debt ceiling another $5 trill with backloaded spending cuts. The is a strong consensus and both the house and senate easily reach a majority.

2.) There is much ostensible disagreement. The Republicans claim they want speding cuts, $1 for ever $1 increase in the ceiling. Over time, after putting on a political show, both parties converge on a deal within a few days of breaching the debt ceiling. The deal is the same as in scenario one. A $5 trill. increase with backloaded spending cuts.

One can see the effect this has on managing perceptions. In scenario 1, it seems the government is completely out of control and unwilling to do anything to limit spending/deficits. In scenario 2, people actually feel like the government is more responsible, and genuinely does want to cut spending, but prefers a better economic environment before moving forward.


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#11) On January 07, 2013 at 2:40 AM, Melaschasm (< 20) wrote:

#10 great post and it should be noted that option two helps the Republican leadership maintain support from Tea Partiers while undermining them.  

Also it should be noted that people who donate time and argue on behalf of one party or the other are more supportive when their side at least pretends to try to follow idealogical purity, rather than both parties agreeing on most everything. 

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#12) On January 07, 2013 at 12:27 PM, edwjm (99.89) wrote:

How about the famous French solution?  Send all the aristocrats (rich ppl) to the Guillotine and confiscate all their property?

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#13) On January 10, 2013 at 11:05 PM, ChrisGraley (28.62) wrote:

1) It takes 2 parties to put the US in default and the Democrats have more power right now.

2) The “trillion-dollar coin” is just a legal gimmick that responsible people in the U.S. government might use to enable the country to pay bills and honor commitments…without relying on a group of selfish, irresponsible people in Congress to first raise the debt ceiling.

No such thing as responsible people thinking that a trillion dollar coin is the answer.

A) Once we create that power, we can't take it back and the treasury can create the 100 trillion dollar coin without permission from congress any time they want. They could technically sell that 100 trillion dollar coin to China for say, $1.50 and there isn't much anyone could do about it.

B) The whole purpose of the structure of our government. Is to work within the system to come to a comprimise. The solution of "Well if they don't agree with us, we'll just find a way around the system!" Isn't just anti-American, it's anti-moral. Given a big enough dose of it, the American public will rebel, and rebel with violence. We got our healthcare system through a loophole, We've currently got the Senate making a day equivalent to 3 weeks in order to make filabuster reform. Our politicians are voting on bills that they haven't read. Now our government wants to make a trillion dollar coin and the majority power has the audacity to say it's because "They are being responsible." Responsibility is balancing the budget, not finding ways not to balance it! We all saw this coming months ago. Even with the threat of a fiscal cliff, the best we could come up with was a solution to kick the can down the road a little with a bill that was mockingly full of pork. If we remove the threat of doom, the politicians will do absolutely nothing.

3)  LOL I've got myself worked up enough now, I should stop because I'm about to do the flaming that you are looking for if I don't. I sincerely hope that instead of BS tricks to keep extending the madness, that somebody in this government actually tries responsibility and succeeds.




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#14) On January 11, 2013 at 12:10 AM, awallejr (59.32) wrote:

the best we could come up with was a solution to kick the can down the road a little

Actually no.  I said kick it down 30 years because then the boomers will be dead and the resulting massive annual budget surplus will start to statisfy the debt.

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