The Trillion Dollar Coin

You get the coin Garg, Congrats!

As an instrument to solve the US government’s fiscal problems, the idea sounds a bit dubious to me (it’s hard to make change for a trillion dollar coin if you try spending it).  I would note, however, that the Royal Canadian Mint once produced five giant gold coins with a face value of one million dollars:

http://www.mint.ca/store/mint/learn/million-dollar-coin-1600006

A friend of mine (who used to work for a precious metals dealership) got to handle one of them a few years ago, when she helped to set it up on a display stand as part of an exhibit.  She said they practically needed a crane to lift the darn thing.

I think it would be better if the intransigence that has led this discussion were stopped. That what had always been a simple ‘house-cleaning’ matter for the government has come to this point is unconscionable.

Mint the coin. It would be irresponsible not to. Winning quote from the article, "Krugman and others also say that, as crazy as this sounds, it’s less crazy than Congress forcing the country into a default by not raising the debt ceiling. Krugman does acknowledge that it may be “undignified”: “Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac—a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit,” he writes. “And the response of the nervous Nellies is, ‘My god, we can’t dress the secretary up as a clown!’ ”

Yea make the coin and call it the “Obama Collectible Coin” and sell it for $10 bucks plus $59.00 shipping and processing and only one coin per customer. That should work.

Make sure his face is on it and it is in color.

Instead of minting one $1,000,000,000,000 coin and putting it in bank, they should mint 400 million silver coins valued at $1,000,000 each and distribute one to each and every person living in American territory (including Guam, Samoa, Virgin Islands, Canada, etc.).  The catch is, you have to use it to pay off ALL of your debts and whatever is leftover is yours to save or spend as you like.  You also must sign a contract that is equivalent to bankruptcy and that makes it impossible for your to EVER borrow money again for ANY reason.  That would eliminate debt slavery and make the banks solvent in one fell swoop.

Then we should take all the bankers out and shoot them, then shoot the politicians.

@Gargantua:

The question is - in terms of the economics game, does it make sense? and what do YOU think about it?

In terms of economics, this policy does not make any sense at all. If it did, why not mint a 16 trillion dollar coin and pay off the whole debt. Or better yet, mint a trillion dollar coin for each American and we can all stop working! Why does the coin even need to be platinum, if the coin is not made up of one trillion dollars of platinum then it is money by law(or fiat) not markets. We could just as easily mint a one trillion dollar wooden coin or a one trillion dollar bill or even a one trillion dollar imaginary coin made of nothing( like the Federal Reserve normally does but calls is Quantitative Easing).

The main problem is that the more dollars there are the less they are valued. So if the government makes more dollars its essentially a tax on anyone who currently holds dollars. Of course whoever spends the new money first(Large banks who lend out money created by the Treasury and whose former employees end up staffing the Federal Reserve System and Treasury)  pays at the non-inflated prices, though eventually markets discover that there are more dollars than before so when the average citizen finally goes to spend their money, he find that he can not buy as much as he once could.

Typical Krugman to argue its responsible for the Treasury to create money from nothing. Of course if most Americans created money from nothing, they would be called counterfeiters and be sent to prison. If its responsible for the treasury to create money from nothing, then why isn’t it responsible for me to print dollars in my basement. If there really is a threat of deflation then every American should do there part to create more fiat money!

@Emperor_Taiki:

The main problem is that the more dollars there are the less they are valued. So if the government makes more dollars its essentially a tax on anyone who currently holds dollars. Of course whoever spends the new money first(Large banks who lend out money created by the Treasury and whose former employees end up staffing the Federal Reserve System and Treasury) �pays at the non-inflated prices, though eventually markets discover that there are more dollars than before so when the average citizen finally goes to spend their money, he find that he can not buy as much as he once could.

That’s only true if the money has “velocity”.  If it sits in a vault as security against a loan rather than circulate in the economy it will not create inflation and devalue the currency already in circulation.  The best example is “Quantitative Easing” that has allowed debt servicing but done absolutely nothing to create demand for goods and services.  I like your idea of making it out of wood though, as in “don’t take any wooden trillions”.

Also, notice that if they were to follow my advice above, that would not create inflation either, because it would wipe out existing debt but NOT allow those debtors to take on new debt.  Hence no new money enters the economy and all it does is wipe out the digital “money” that was spawned out of thin air when they opened up you line of credit or whatever.

Right now there is only a little inflation, but what happens when interest rates rise? If they rose to 5% the interest on the national debt would be over a trillion dollars.

@variance:

Then we should take all the bankers out and shoot them, then shoot the politicians.

:lol: :lol:

@variance:

Also, notice that if they were to follow my advice above, that would not create inflation either, because it would wipe out existing debt but NOT allow those debtors to take on new debt.  Hence no new money enters the economy and all it does is wipe out the digital “money” that was spawned out of thin air when they opened up you line of credit or whatever.

I don’t understand the math on how there is no inflation, at the very least there is a massive redistribution of wealth. I do like your idea’s on what should happen to bankers and politicians though :-D

Taiki is mistaken about it not being good economics. The US ‘defaulting’ on its debt if the debt ceiling is not raised would be bad economics. A government shut down would be bad economics.

That this even needs to be a discussion is bad economics and bad governance. Until this past year the raising of the debt ceiling was a routine act. And if intransigence (and petulance from my POV) will not allow to be performed what has always been a routine house-cleaning matter for the government and this is what is necessary to allow things to continue functioning normally it should be done.

@Emperor_Taiki:

Right now there is only a little inflation, but what happens when interest rates rise? If they rose to 5% the interest on the national debt would be over a trillion dollars.

Interest rates will not rise unless there is increased demand for goods and services.  As this second great depression unfolds we will see decreasing demand and increasing unemployment and under-employment, with little to no rise in interest rates.  There are a few things with increasing prices (i.e. oil and food), but that’s only because of increasing scarcity and not increasing demand.

@frimmel:

Taiki is mistaken about it not being good economics. The US ‘defaulting’ on its debt if the debt ceiling is not raised would be bad economics. A government shut down would be bad economics.

That this even needs to be a discussion is bad economics and bad governance. Until this past year the raising of the debt ceiling was a routine act. And if intransigence (and petulance from my POV) will not allow to be performed what has always been a routine house-cleaning matter for the government and this is what is necessary to allow things to continue functioning normally it should be done.

Frim, you are one of the most intelligent guys on these forums, perhaps the most… so I am surprised that you believe that we can keep postponing this indefinitely by ignoring the immense reality? I guess that for a long time that is all we have done… but the more massive it gets, the less force it will take to upset the balance and send it all crashing down. Contrary to buying into false security by simply writing it off to the next year and the year after that… a reset is ultimately what we need. I think it is foolish to think that we can get out of this now without some pain. But I guess some people are still in the denial stage.

Gum would cost like a million dollars if they did that.

I would buy Russia and start a nuclear war with EVERYONE!

@frimmel:

Taiki is mistaken about it not being good economics. The US ‘defaulting’ on its debt if the debt ceiling is not raised would be bad economics. A government shut down would be bad economics.

That this even needs to be a discussion is bad economics and bad governance. Until this past year the raising of the debt ceiling was a routine act. And if intransigence (and petulance from my POV) will not allow to be performed what has always been a routine house-cleaning matter for the government and this is what is necessary to allow things to continue functioning normally it should be done.

A default and a government shut down would be great economics!!!. Instead of resources being distributed by bureaucrats and politicians, that wealth would return to the people and individuals could distribute the resources as they see best. When individuals determine production and consumption with their own resources they are much wiser than a bureaucratic handling funds that don’t belong to him. If a bureaucrat or politician spends money poorly, its no skin off his back. If an individual spends money poorly he could end up with no personal wealth at all. So the more money we let the government take from us, the poorer we will be. In fact governments, may intentionally make poor economic decisions in order to cause a crisis, which it can then use as an excuse to extract more wealth from the host population.

I understand that until recently increasing the debt-ceiling was considered something routine, but what is the point of a debt-ceiling if when ever you reach it you go over it? That is not much of a ceiling. I thought the idea of a ceiling was that it would be a limit on how much the government could go into debt. Of course politicians say its somehow “responsible” to go into more debt which is basically doublespeak since its irresponsible to go into more debt that cannot be paid back.

At any rate the US will default, either by actually defaulting or by inflating the dollar to the point it is worthless. The world will not buy US treasuries at 0% interest rates forever, eventually those rates will rise. So we might as well default now and get it over with before it gets any worse.