No joke: $1 trillion coins


by NW Spotlight

Wow. The fiscal cliff fight is over, but now a debt ceiling fight is looming and it’s getting pretty surreal. Oregon U.S. Rep. Greg Walden is having to introduce a bill to prevent the U.S. Treasury from making $1 trillion platinum coins – a strange gimmick some are recommending to President Obama to avoid hitting the debt ceiling.

Responding to the gimmick, Rep. Walden said “Some people are in denial about the need to reduce spending and balance the budget. This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution. I’m introducing a bill to stop it in its tracks.”

A writer at Bloomberg New and advocate of the gimmick explains “the Treasury Department is not allowed to just print money if it feels like it. It must defer to the Federal Reserve’s control of the money supply. But there is an exception: Platinum coins may be struck with whatever specifications the Treasury secretary sees fit, including denomination. This law was intended to allow the production of commemorative coins for collectors. But it can also be used to create large-denomination coins that Treasury can deposit with the Fed to finance payment of the government’s bills, in lieu of issuing debt.”

Rep. Jerry Nadler (D-NY) is a supporter of the $1 trillion platinum coin gimmick – an indication of how Democrats view $1 trillion as just pocket change – and part of how we got to $16.4 trillion in debt.

UPDATE (1/12/2013): Treasury rules out trillion-dollar coin

  • DavidAppell

    I think it’s unlikely Obama will mint such a coin, but there’s a good argument that he should. Congress (of which Rep. Walden is a member) passed a budget, which calls for certain spending, and the President is Constitutionally bound to uphold that law. He has no choice but to pay for the spending Congress has already requested. How, then, should it be paid for?

    • dg

      I don’t understand why they don’t just pay the bills the old fashioned way: print more money. Is that so hard?

      • DavidAppell

        I think because only the Federal Reserve has the power to issue (print) money, not the Treasury Department. But if the Treasury Dept issued on of these special coins (which they *do* have the power to create), they could present it to the Fed (which the Fed is obligated to accept) and buy back debt from the Fed, lowering the debt by the amount of the coin and staying beneath the debt ceiling.

        • Ballistic45

          Great, they can pay off all the debt with 17 coins then put a few in a new SS trust fund, then buy every adult in America a new car, Geez, I can’t wait for mine… How about stamping out a few more to pay for every ones mortgages while we are at it.. Hey, we can stamp out even more and pay for EVERY kids College cost.. Whew, we’re on a role now…. And we could even request more to bail out all the State Debts like California.. Man, we got it made in the shade!!!!

          • DavidAppell

            You don’t understand the situation. The $1 trillion coin would be to cover money already spent, or that must be spent by law — a law passed by Congress and signed by the President.

          • Ballistic45

            Exactly, your saying we are paying for what we spent or will need to spend.. Just like paying off a credit card then charging it up again to then pay it off with these Trillion Dollar coins.. So let us make a quick law to replenish SS and put it permanently back in black ink… Let us make a law to fund all College educations for everyone who wants it. Lets make a law to buy every adult a vehicle. Lets make a law to pay off all home mortgages and let us make a law to bail out all State deficits… See, that’s not hard and we can bypass all this paper work by having King Obama just make a Executive Order instead covering all this….. Like most BS Obama pulls let us get this all done before some one slams the door shut on The US Mint making money outside the control of the Federal Reserve…. Life is Great…

          • DavidAppell

            Congress is perfectly free to pass whatever laws they want, which the President is legally bound to carry out. That’s what the $1T coin would accomplish — keeping the government from defaulting on spending Congress has already requested. So, in fact, Obama would be acting in the exact opposite way a king might.

  • Bob Clark

    Seems like an extreme event making for a small business opportunity. Since platinum is rather expensive, the opportunity might be to mint a “trillion” dollar aluminum coin and sell it as a gag novelty at Saturday markets and what not.

    But the whole idea of the trillion dollar coin shows the moral bankrupt-ness of many of our leaders at all levels of government. Theory says it might work. But theory is theory, and most often not reality. If you are a credit rating agency, you downgrade the U.S debt another notch or several if such a juvenile procedure is implemented. If you are an individual, you maybe start buying far out of the money long term call options on gold or gold mining companies. Then too, you improve your survival skills; and you stay as nimble as possible.

    Two serious scenarios evolve for the individual: One, individuals respond to this juvenile maneuver by increasing their rate of savings as they lose any remaining faith they might still harbor concerning the fiscal sanity of the current government regime. This rational reaction actually offsets the dis-saving of government, and the economy actually maintains itself. Gold and equities actually continue doing well, although a Japan style indefinite malaise is also a possiblity. Two, inflation surges (government labor regulations would only accelerate inflation with a decline in unemployment rate) leading to a rush to precious metals, commodities generally, and hard assets; inflation drives interest rates on all debt, including treasuries, sharply higher so as to cause servicing of government debts to become extremely difficult without massive cuts in government safety net and entitlements, not to mention defense spending. At one hundred percent of GDP, the government might just escape a default by these cuts in safety net, entitlements and defense. At more than one hundred percent, which is on the horizon, game over; we’re very likely talking U.S and global government defaults on obligations and maybe also debt instruments. The problem for the astute individual in this scenario is his/her investment in precious metals only works tremendously well for a short period of time before the economy implodes and government goons change currency and outlaw transactions in other than the new currency (the super nimble individual might be able to somehow secure his/her precious metals and get them to a black market or to an international venue).

    If the federal reserve were truly independent from the executive branch, which it is not, it could refuse such coin I would suspect since it is of dubious value. In fact, maybe a shrewd fiscal conservative politician might summon a rating agency or two and have them issue an assessment of the value of such a juvenile inspired coin. If rating agencies were to prescribe a subpar rating on such coin, then the federal reserve would have cover to deny the treasury its value upon deposit. Thus, a possible route to countering one technicality with another.

  • Oregon Engineer

    Again it is good to know that DA and DG have such a tremendous grasp of money and economy. and just to support them here is a link that puts the proposed coin into peerspective. But they will “not get It” ever.

    • DavidAppell

      So what? US money is fiat money — its only intrinsic worth is set by law and the market, not by its precious metal content. Hence a $1T coin does not need to be made of $1T of platinum, just as a $1 bill is not made of $1 in gold.

      • valley person

        You will scare the hell out of these people if you make them realize our money only has the value we believe it has. And toying with default can make our money valued a lot less.

        A platinum trillion is a lot better than a default.

        • 3H

          You wanna really scare them? Tell them that outside of electronics and aesthetics that gold really doesn’t have any value except psychological. If you really think the country is going to go to crap, land, tools, food and water will be much more useful.

          • David from Mill City

            Then there is the small matter that most money exists only in a electronic form. That there are more US dollars in circulation then there is currency in existence.

          • valley person

            I’m in pretty good shape then. 5 acres, a barn full of tools, and a rain catchment system. all I need are some solar panels and an AR 15 and I can survive the Repocolypse.

  • voterid

    What most people don’t know is that there is enough money coming into the treasury on a monthly basis ($202 Billion) to pay for the public debt, military pay, Social Security and Medicare. There is a bill in Congress to prioritize spending to the programs above with approximately $30 billion left over every month for other spending. We don’t need to increase the debt limit to keep over spending…it’s time to plan our federal budget with a common sense solution and make the federal government learn to live on what monies it takes in and what is left over. There is enough money in our treasury each month to pay our obligations…don’t let the politicians tell you anything different…they just want to keep taxing others to justify more spending with no intent in reducing the deficit.

    • valley person

      Does your budget include weapons and ammo for the military we are paying? Fuel for their vehicles? Veterans benefits? Homeland security? Nursing home payments for elders? Maintenance funds for our highways and bridges? Operating funds for our hydro dams? The State Department? Air Force 1? Cleaning Congressional bathrooms?

    • DavidAppell

      Research and development (about $150 B/yr)? Farm aid ($10-15 B/yr)? Medicaid ($408 B/yr)? Education?

  • mike

    But would the coin work in most vending machines? That is what I need to know.

  • David from Mill City

    There is a bit of poetic justice in using one gimmick to counter another gimmick. Particularly as the Trillion Dollar Platinum Coin is clearly both constitutional and legal and the Debt ceiling is of questionable constitutionality.

    The best solution is for Congress to just repeal the Debt Ceiling Law. But as that is not likely to happen, we are left with either the coin or the 14th Amendment approach of ignoring the Debt Ceiling law because it is not constitutional. Of those two choices, minting 5 to 10 of those 1 Trillion Dollar Platinum coins is probably the cleanest choice.