"[I]f Congress refuses to raise the debt ceiling, Treasury could avoid catastrophe by creating a … single trillion-dollar coin — deposit it in the Federal Reserve, and, boom, problem solved." New York: Republican member Greg Walden has introduced a bill banning the Treasury Department from using large denomination coins to save the economy from crazed Republicans.

  • http://craftbeergnome.com mkultra

    Ironically, by introducing this bill the Member from New York has inadvertently confirmed that this method of debt default avoidance is allowed by current law. The existence of this bill can be cited in arguments to SCOTUS. Oh, unintended consequences… you so crazy.

    • http://craftbeergnome.com mkultra

      Also, by “Member”, I’m not referring to this man’s status as a congressman; I just think he’s a dick.

    • Chuck

      I think his bill is called the “YOU HAVE TO LET ME HIT YOU” rule.  Quite popular on playgrounds.

    • http://mordicai.livejournal.com Mordicai

      Yeah, I had heard this method of debt ceiling shenanigans, but wondered how much of it was poppycock.  Well, Greg Walden sort of answered that question for me.  Not 100% poppycock, anyhow.

      • http://www.jjsaul.com Jim Saul

        It’s completely legal, but more importantly, it’s unnecessary. The 14th Amendment is unambiguous… the “debt ceiling” itself is unconstitutional: Congress already accrued the debt through passing the associated budgets. They cannot disown the obligation to pay those debts without passing a constitutional amendment.

        “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

    • DrDave

      Walden is a congressman from Oregon. “New York” is the magazine where the article appeared.

  • Eric0142

    Geeze what oh what could Obama do about a bill being proposed by a Republican member of the House? Veto’d!

    • BillStewart2012

      He’d only get to veto it if the Senate also passes it.  That’s unlikely, since this is a partisan conflict, but I’d hope that Congress would have the sense not to let the President arbitrarily create large quantities of money.

      • wysinwyg

         As opposed to the current situation where unelected and unaccountable central bankers appointed by the president are able to arbitrarily create large quantities of money?

        Putting the responsibility in the hands of a half-way accountable elected official might actually be a step forward I would think.

        • Antinous / Moderator

          You think that having a partisan who relies on party and corporate funding to get elected would be an improvement?

      • AnthonyC

        He might create it, but it was congress that already authorized spending it and then refused to print, tax, or borrow it.

      • SamSam

        Krugman’s article and the original NYMag article are quite good here. Essentially they’re saying “nobody would think this is generally a good idea, but in fact it’s far better than the insanity of allowing one party to crash us into the debt ceiling with far more ruinous effects than those involving simply printing money.”

  • TheOven

    Isn’t this the mentality that leads to rampant inflation? 

    • Michael Belcher

      Apparently not; according to Krugman in the NYTimes http://krugman.blogs.nytimes.com/2013/01/02/debt-in-a-time-of-zero/ it would have the same effect as raising the debt ceiling. 

    • TheKaz1969

      Well, they are only minting one… just think of valuable that coin will be! we can probably sell it for MORE than a trillion dollars!

      • http://twitter.com/fossilfuels Funk Daddy

        That’s precisely why it doesn’t really run against the intent of the law. Someone would definitely covet it for itself, all they have to do is pay $1,000,000,000,001.00 and it can be theirs!

        • xian

          I think the next Die Hard movie has just written itself.

          • mccrum

            Die Harderest?

          • http://newnumber6.livejournal.com Peter

            I believe the current trend is to use a common phrase that includes one part of “die hard” and include the rest of “die hard” it.

            Like “Die Hard Currency”

          • http://profiles.google.com/marc.k.mielke Marc Mielke

            Reply to Peter below:

            You mean “DIE!, Hard Currency” right?

        • jandrese

          I was under the impression that the whole idea was a bit tongue-in-cheek. 

          Besides, wasn’t this a Simpsons episode? 

        • http://profiles.google.com/marc.k.mielke Marc Mielke

          Where could you spend it? I can’t get most stores to break a hundred!

    • lafave

       No.

      It would have to be deposited in the Fed; it could only be used to pay for currently authorized expenditures; and it could be undone with bond sales.

      • http://profiles.google.com/michbar Michael Barton

        Not the act- the mentality. And the answer is yes in any event.  The Fed creates money through bond sales which is inflationary in that it allows the government to spend money it can’t collect through taxes AND gives banks excess deposits (since they buy most Treasury paper) which they could lend out but aren’t because they’re playing hedge fund games. Remeber when JPM’s prop desk blew up last year?  Ever wonder why the stock market keeps rising on low volume and crappy news?

        Christ, trillion dollar coins.  Anything to mask the fact that the government is hopelessly bankrupt. 

        At least Obama is scaring people into buying guns; that’ll make foreclosure on the US a lot tougher.

        • http://hgomersall.wordpress.com/ heng

           Arguably, we need some more inflation. Everyone needs a way in which overpriced assets can be devalued without making the banks bankrupt in the process (by devaluing their loan assets and so making their borrowings too large). It also encourages people to spend money rather than sit on it.

          • Rindan

            Inflation is a very bad idea in the long run.  Inflation destroys value.  That is great if you have a bunch of debt, but in the process you are screwing people who are trying to save to retire on something more glamorous than a shrinking social security check.

            Saving isn’t a bad thing.  It is healthy.  Getting into a situation where the economy demands everyone spend more than they have is what kills you in the long run.

            It is a shame that the Republicans are so bat shit crazy and serve as a worthless opposition party.  We actually DO need to balance income with revenue.  It isn’t a bad thing for the opposition party to hold the government’s heels to the fire and demand a plan for getting the debt under control.

            The problem of course is that Republicans are not honest brokers.  They have as little interest in fix the debt issue as democrats.  Where democrats will over spend, Republicans will slash revenue and overspend on stupid shit (military, drug wars, corporate hand outs, etc).  

          • SamSam

            But we’ve had much lower inflation rates over the past few years than we normally have. The average inflation rate since 2009 has only been about 1%, well under the approx. 4% inflation that we had during the 90s. [1]

            Inflation is far, far better than deflation. A little inflation is just fine in a functioning economy, but deflation causes a downward spiral that destroys economies.

            Point being, we can certainly afford a slightly higher inflation than we have now.

          • wysinwyg

             Inflation may be bad in the long run, but deflation is bad in both the short run and the long run.  The key would seem to be balance between inflation and deflation, not preventing inflation at all costs.

    • LordBlagger

      http://i.telegraph.co.uk/multimedia/archive/01240/moneyzim_1240629c.jpg

      Even cheaper. Why use platinum when you can use paper? 

      • edgore

        Apparently the law that provides this loophole specifies that the treasury can issue *platinum* commemorative coins of *any* denomination. The coin could be the size of a dime though – it doesn’t have to contain a trillion dollars worth of platinum or anything like that.

        • LordBlagger

          And? 

          The US still has a debt it can’t pay. 

          No amount of financial tricks are going to solve a debt problem. 

          Printing causes inflation, and a lot of your debts such as social security are linked to inflation. Print, and as quickly as you print, your debts go up, and in all likelyhood faster than inflation.

          You’re borrowing costs will rocket, because people won’t lend, knowing your plan is default. 

          Oil producers if you are still dependent on them will either demand more dollars, since the sell oil for purchasing power, or demand you make payments in Euros, or whatever the Chinese currency of the day, …

          That’s what is mad.

          People are after instance gratification. They want it now. What they fail to realize is that there is a price to pay, and its their retirement cash that is being spent. 

          I dread the results. The result will be those people on the streets destitute. 

          • wysinwyg

             Well, if the arguments against cutting defense spending have any merit than we should be able to extort “protection” money from pretty much the entire world solving our “debt problem” neatly.

            I still think that getting physical stuff from China in exchange for worthless pieces of paper is a good deal.

          • edgore

            I was just addressing why it’s a platinum coin. You might want to read up on the actual situation though – most of what you mention above has nothing to do with the debt ceiling issues the coin would address (or, rather, circumvent – fiscally there is absolutely no difference between issuing the coin and raising the debt ceiling) or the impacts it would have. Also, social security has nothing to do with the U.S. deficit, since by law social security cannot borrow.

        • Antinous / Moderator

          it doesn’t have to contain a trillion dollars worth of platinum or anything like that.

          A coin that contained that much platinum would weigh about forty million pounds.

          • edgore

            And since that’s something like 40% of the total amount of extracted platinum in existence, I am going to guess that the invisible hand of the market will make it worth MUCH more than a trillion dollars! PROFIT!

          • http://twitter.com/criminalcrafts Miss Demeanor

            and if it didn’t fix the whole debt ceiling thing we could strap it to a giant slingshot and use it to deflect in coming asteroids 

  • http://www.jjsaul.com Jim Saul

    I want to see Obama, during the State of the Union, dramatically nail it to the front of the podium, like Ahab nailing a silver piece to the mast, where it will remain as a reminder until the House quits fucking around with sabotage-as-policy.

  • http://www.facebook.com/people/William-Collins/601599182 William Collins

     Why stop at 1T? To infinity! This is brilliant. We never, ever, have to revisit or think about this issue again. Done!

  • http://twitter.com/fossilfuels Funk Daddy

    Okay I’ve got dibs on a screenplay featuring Nicholas Cage daringly stealing the trillion dollar coin from the mint or the Federal Reserve, for some purpose or another.

    • Boundegar

      I’m wondering what would happen if the Tea Party stole it.  Riding down Massachusetts Avenue with their AR-15s and Medicare-subsidized scooters, fighting bravely for Boehner’s right to force America to heroically default.  And then they don’t try to sell it.  They just hide it.  (In their survival bunker.)

      • SamSam

        Ha, they’d never be able to get down Mass Ave, because knowing their smarts they’ll try to do it a rush hour, and will sit there in traffic in their silly hats impotently bleating their tiny scooter horns while real Massholes drive on the sidewalk to get around them and flip them the bird.

        • L_Mariachi

          I think Boundegar meant the one in D.C., not Boston.

      • AbleBakerCharlie

        You forget the bit where said bunker is of a string surrounding David Koch’s lawn, and they wait night after night telling ghost stories about death panels and lie in wait for the tide of immigrants and terrorists to move them into FEMA concentration camps and take their coin, along with all the gold they bought with their Social Security checks.

    • jandrese

      He has a plan to fix the national debt.  First the government insures the coin, then he steals it, and then gives it back after the insurance pays out, but some bad guys want to steal it to fund terrorists instead, and action movie explosions car chases women everything! 

    • Luther Blissett

      I *so* want Gerd Froebe to be resurrected to roll a “dirty bomb” plot. And a British secret agent saving the day.

      Eat this, TeaBagPartiers!

    • http://newnumber6.livejournal.com Peter

       While it’s certainly fun to speculate, wouldn’t it be at least somewhat theft-proof?

      The only way it has the trillion dollar value is by fiat of the government, but in order to collect it from the government, as it’s the ONLY one of its kind, you’d have to know it was stolen goods and thus your use of it was illegal, it’d simply be taken from you and put back in the reserve. 

      You could sell it more quietly for the raw value of the platinum, or to some collectors who put a price on its historical curiosity (or embarrassment it would cause the government), but you can’t exactly say “A-ha, now I have a trillion dollars to buy whatever I want!”

      (Leaving aside that if you were actually in the mint or Federal reserve to steal it you’ve probably got access to more valuable stuff to steal)

      • http://twitter.com/fossilfuels Funk Daddy

        That’s right, and even if you did manage to part with in exchange for a sum, they could still nick you on tax evasion.

        Even if you tried to pay taxes upon selling it, they would probably expect tax be paid on a trillion, no matter what you got for it, since they would honour it themselves, if they had it.

        That would be the ending of the movie, a frustrated Nicholas Cage and a trillion dollar coin being boxed up, wheeled into and stored in a tremendous warehouse sight unseen, forever beneath bureaucracy.

        • http://profiles.google.com/marc.k.mielke Marc Mielke

          IIRC stolen funds are still taxable income, so the government could take the coin back and STILL stick you with a tax bill for your trillion dollars of ill-gotten gains. 

          Hmm…this might be the plan all along…”The Poison Pill Job”. 

      • http://twitter.com/criminalcrafts Miss Demeanor

        “fiat of the government”? No, it would have to be Mini Coopers for the heist to work

  • http://twitter.com/the_damned_fool the damned fool

    Marketplace Money did a story on this last night.   http://www.marketplace.org/topics/economy/final-note/congressman-blocks-trillion-dollar-coin-idea

  • Navin_Johnson

    This will all go to hell again shortly. If Obama had a pair on him he’d hammer the GOP and howl to the press about the fact that all the current GOP leaders voted 19 times to let Bush raise the debt ceiling and without any strings attached or cuts in spending, in fact they cut taxes and exploded the deficit.  Of course Obama is essentially a conservative, and I honestly believe that he wants to go after Social Security too. I’ll be curious to hear the usual excuses for him…

    http://thinkprogress.org/politics/2011/04/14/158424/republican-leaders-debt-limit-hypocrisy/?mobile=nc

  • http://www.facebook.com/teobromina Vida Rojo

    ¿Where is Moist Von Lipwig when you need him?

    • Luther Blissett

       Do we? I guess the whole interwebz is going postal already…

      Wonder why nobody introduces the Idea of BitCoins as new and only legal currency in the US. At least, it’s not possible to just print any infinite amount of BitCoins…

  • Bevatron Repairman

    If they are going to do this, it had better be the size of a Yap Rai stone or I’m going to be severely disappointed.

    http://en.wikipedia.org/wiki/Rai_stones

  • oldtaku

    Why not just mint one for each family? We can all live like kings!

  • http://mordicai.livejournal.com Mordicai

    I’m sad Leverage is over because “let’s steal a 1 trillion dollar coin” would be a good pitch.

  • http://newnumber6.livejournal.com Peter

    Now, let’s start a rumor that the democrats are going to get around the debt ceiling limit by creating a race of Oompa Loompas to detain Republicans, with their hypnotic singing and dancing, on the date of crucial votes (and also make them feel guilty).  Maybe we can get a Republican to propose a law banning Oompa Loompas!

    • LordBlagger

      Police are appealing for witnesses to an assault that took place in Norwich by some men dressed up as Oompa Loompas.
      It happened on Thursday 27 December at some point between 3.20am and 3.30am on Prince of Wales Road.
      The victim, a 28 year old male, had just come out of a kebab house next to Tesco when he was approached by a group of four people – three males and one female. Two of the males were dressed as ‘Oompa Loompas’ from ‘Charlie and the Chocolate Factory with painted orange faces and dyed green hair and were wearing hooped tops. The female had dark hair and a dress split at the side.
      One of the males in the group pushed the victim to the floor before he got up. He was then hit on the head, fell to the floor and hit again.
      The victim sustained a cut below his right eye, two black eyes, a small cut to the nose and a cut lip.

      ============

      We’re out to arrest them in the UK. If you find them, we want to extradite them. 

  • http://twitter.com/fossilfuels Funk Daddy

    Whenever I hear about fiscal “cliffs” or other make believe calamities I’m reminded of FDR’s 1933 inaugural address. 

  • AbleBakerCharlie

    Endless hard wringing over the present scale of the debt, or of the relatively modest array of accounting tools (including this coin notion- which is really just a T-bill printed on a piece of metal) and taxes being discussed to manage it is pretty much a screaming declaration that you need to go take an mid-grade marcoecon class before you hurt yourself by trying to cram the actual mechanics of a modern mixed economy into some folk conception of debt and savings drawn from grandmotherly aphorisms. Sovereign debt in essentially no way shape or form resembles credit card debt, and printing money isn’t some vast violation of a sacred trust that inevitably leads to destitution as the Invisible Hand smacks you about, it’s just a job that sometimes needs to get done to change the dimensionless quantity that is the money supply to a value that gets people to jobs and roofs over heads.

    To begin with, the scale of a debt itself is irrelevant. A person could go through their life in constant possession of a mortgage that was many times their annual income and never feel destitute, if the payments on said string of mortgages didn’t represent a tremendous opportunity cost relative to their income- regardless of if that income is in the form of loans, or gifts, or paychecks, or whatever.. What matters is the cost of servicing it- and that’s a value that we have access to in the form of the federal budget (debt service is pretty far down in the scheme of things) and in the form of the interest rates that lenders are able to demand from the Treasury- and they are pleasantly low. And when I say low, I mean *negative.* Go look yourself. The global consensus is that the American government’s ability to levy taxes from a nation filled with productive infrastructure and people is so high, relative to other group’s ability to raise money, that the owners of the Big Pool of Money are willing to accept a minor loss as a minder’s fee for their cash. Yes, that’s right, it is presently *profitable* for the Treasury to lend money.

    The story is essentially the same for inflation. There’s this constant freakout about inflation ripping through the middle class when the data at hand suggests that inflation is *lower than it should be.* Yes, that’s right, there’s a level of inflation where things work better, because savings aren’t always good (that’s usually where personal level grandma economics just melts down.) Sometimes. having too much saved switches from being a prudent regulator against random economic fluctuations, rising and falling to smooth out the eddies, and becomes a sink, where economic activity goes and never returns. The only way to get the money out of the sink is to tell its owners that there are better places for it to go, and you do that by making it less valuable relative to having it in the form of things or investment, and you do that by printing money- and the data suggests that that’s about where we are.

    The reason that a rising debt can matter isn’t that the debt collector is suddenly going to come around and repo everyone’s car- it’s much better for everyone if they can keep driving said car to work, and we have armies for that too. It’s that it decreases the eagerness of the owners of the Big Pool to lend more, because, effectively, of concerns that the people that got there first will get paid first. But once again, that’s a fear we can assess in the form of the interest rate, and it’s fine- and go figure, when the US is the world’s largest economy and has some of the lowest tax rates in the civilized world, the proportion by which you could raise taxes in the future to pay everyone coming to the trough before you’d have an expectation of substantial economic damage is pretty wide.

    Unless of course the body controlling said tax rates views keeping them low as a moral imperative disconnected from the practical (and frequently moral) benefits of having tax revenues, and the public knowledge of that tendency kept people from coming to the trough at all….

  • heligo

    Didn’t we all come up with this solution when we were kids?? I always wondered why the banks didn’t just print “more” money.

    • http://twitter.com/the_damned_fool the damned fool

      Why not print more money? For one thing: inflation – more dollars chasing fewer goods, causing dollars to be worth less and goods to cost more.   

      I’m old enough to recall the Whip Inflation Now campaign, all shiny buttons and rhetoric, meanwhile consumer prices continued to rise closer to 20 percent per year. 
      Alan Greenspan as the Chairman of the Council of Economic Advisors recalled thinking “This is unbelievably stupid” when the Whip Inflation Now campaign was first presented to the (Ford Administration) White House.  

      It took until after the Ford administration for politicians to understand (ala Milton Friedman) that to reduce the money supply would help control inflation. 

      • AbleBakerCharlie

        Very true- but moderate inflation can also stimulate growth via the Mundell-Tobin effect, and can improve market efficiency in allocating investment capital, amongst other things. Zero inflation isn’t the right value by nearly every educated reckoning. Right now, the situation is much different than the 1970′s, and the risk of personal-savings-corrupting inflation is way smaller- a larger money supply would do us some good by nearly all reckoning at present.

        • http://twitter.com/the_damned_fool the damned fool

          There’s a lotta reckoning goin’ on there.  But not an overabundance.  :D

  • http://blog.headsign.de/ mat

    One coin to rule them all…