Well, how about it. The debt ceiling is a false problem created to control....what, exactly? Congress directed the Executive to spend far more money than Congress is willing to take in taxes. This is apparently still the case since the House GOP won't touch the Two Big Ones or defense so there's not much left to cut. So Congress accumulated the National Debt and now the House seems poised to default on that same debt. I post now on this subject because, although I understood the idea of minting trillion dollar coins as a way of avoiding the debt limit without having to rely on Congress, I did not realize until this morning that minting these coins and depositing them in the Federal Reserve could simply wipe out the entire National Debt! Whoa. Double whoa. We are living in surreal times!
Actually, it doesn't end there! Trillion dollar coins could find the government with no need for congress even to appropriate funds for anything!
I don't think the President could use the money to fund any project not authorized by Congress. I also don't think President Biden is cynical enough to mint such coins. Or maybe he's too cynical? If the House GOP causes a default and locks up things like Social Security, Biden might figure they will take the blame in the next election. Let them destroy themselves.
As to tradeoffs...well, the money is already created and in the economy. The world economy in fact. I see no economic or fiscal difference between minting a few coins and congress raising the debt limit. Paying off the debt altogether with coins would be a very different thing. Here's where I really feel my lack of economics background. I not only don't know what might happen, I don't know even how to approach the problem.
I'm obviously no fan of deficit spending. But if House Republicans really do hold the economy hostage over the debt ceiling, threatening to put the federal government in default, the consequences would be dire enough that not only would those in the Biden administration not be cynical to order a trillion dollar coin minted, one might argue it would be the most responsible response left to them at that point. On that, I don't either. That's more what I was referring to, yes, and the comment about funding literally everything federal that way. And even then, who do you listen to? Different economists come from such different vantage points, sometimes completely incompatibly. (Or maybe ask the finance people instead? A friend who did his MA in economics and then switched to finance for his PhD was fond of saying things like "finance is like economics, except with money" and that the bits of economics that actually make sense should move to the finance department, and the vast majority that remains should be moved to the philosophy department.)
New life goals for the coin collectors that must have one of everything in their collection. Since the collectible ones are worth more than their face value, what will be the collector rate for this one?
Yeah, I wonder. There must be one guy out there literally trying to get one of every coin ever minted. This includes Big Maple Leaf, a 100 kg, pure-gold coin with face value of 1 million Canadian dollars (the value of 100kg of gold is more like 4 million, so its intrinsic value is already higher than the face). The Canadian Royal Mint made like 4 of them as a stunt and to promote their pure gold bullion products. One was stolen from a museum in Germany , and no one knows how that happened. Must be a collector willing to go to any lengths.
I would think this radical form of quantitative easing would have an effect on the dollar vis-a-vis other currencies. Taken too far, it could render our currency meaningless. But that's for currency exchange markets to decide, I guess. Or something. Maybe.
Carefully feeling my way through an unfamiliar swamp here...bank notes and government bonds are obligations of the Federal Reserve and backed by the Treasury, right? In turn, the Fed earns interest on the U.S. Treasury bonds in its possession. If the Mint deposited a Trillion Dollar Coin to the government's account and retired a trillion dollars worth of Treasury bonds with it, the Coin would become the property of the Fed, right? But Treasury bonds are the valuable property (because they bear interest) that back the issuance of Federal Reserve Notes. A Trillion Dollar Coin does not bear interest. Does it actually have any value at all? Would the Fed then back its outstanding Notes with tiny portions of the Coin as specie? Or, more likely, would it just destroy a trillion dollars worth of currency and cash equivalents outstanding? In other words, would depositing a Coin shrink the money supply? Money is debt. Debt creates money and paying off debt destroys money.
Further baseless ravings...the Trillion Dollar Coin would not have to be legal tender nor would private possession necessarily be legal. In 1934 the Treasury printed a few hundred Gold Certificates in $100,000. These were an accounting device for inter bank transactions. Possession by individuals was illegal.
