The trillion dollar coin

The weirdest idea for solving the debt crisis comes from Ezra Klein of the Washington Post:

Obama could always just solve the crisis with a pair of magical platinum coins. Sure, that sounds preposterous, but Yale’s Jack Balkin argues that this is actually a perfectly legal strategy. Here’s the logic: Under law, there’s a limit to how much paper money the United States can circulate at any one time, and there are rules that limit how many gold, silver and copper coins the Treasury can mint. But the Treasury is explicitly allowed to mint however many platinum coins it wants and can assign them whatever value it pleases.

So the Mint makes a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Federal Reserve moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations in the near term without issuing new debt. If the Fed was worried about all that newly created money being pumped into circulation, it could always counteract the inflationary effects by selling off the $2 trillion in securities it owns from quantitative easing (thereby taking an equivalent amount of money back out of the economy). Problem solved. Right?

Well, sort of. The interesting thing about the platinum option, as it turns out, is that it actually seems to be on a firmer legal footing than the 14th Amendment approach. The law very clearly states that the Treasury Secretary can mint these platinum coins. He could even adorn them with the face of House Speaker John Boehner (R-Ohio) if he fancied. The trouble, of course, is the politics. Does Obama stage a press conference where he holds up the two large coins and announces what he’s doing? It’d be hard to see how he could do that with a straight face. (When I tried calling various market observers to get a sense of how Wall Street might react, responses ranged from “I don’t really want to talk about this” to actual laughter.)

via Can a giant platinum coin save our credit? – Ezra Klein – The Washington Post.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Dennis Peskey

    My only issue would be the element chosen. I propose really, thin tin. This would not endanger our supply of yet another precious metal (i.e. copper pennies) and would allow for a most appropriate moneker for our current Congress: RepublicanIndependentDemocratic Tin Tin, with the appropriate governmental nomenclature of RID Tin Tin. Note: my apologies to all true canines (except poodles) for any given offense – rest assured they (the true dogs) are more holy than the collective lot of Congress.
    Pax,
    Dennis

  • Dennis Peskey

    My only issue would be the element chosen. I propose really, thin tin. This would not endanger our supply of yet another precious metal (i.e. copper pennies) and would allow for a most appropriate moneker for our current Congress: RepublicanIndependentDemocratic Tin Tin, with the appropriate governmental nomenclature of RID Tin Tin. Note: my apologies to all true canines (except poodles) for any given offense – rest assured they (the true dogs) are more holy than the collective lot of Congress.
    Pax,
    Dennis

  • Cincinnatus

    Of course, this confirms the suspicions of everyone that Ezra Klein is an idiot. I was hoping he was merely being facetious, but it appears not.

    On the other hand, he’s correct. The reason American debt is so popular with creditors is that the United States possesses a nearly unprecedented capacity to honor its own debts, notably by simply printing its own currency. This is a power, for instance, that even the members of the European Union do not possess.

    But if we did that, a loaf of bread would cost $500 and we would be failed state. So try again, Ezra.

  • Cincinnatus

    Of course, this confirms the suspicions of everyone that Ezra Klein is an idiot. I was hoping he was merely being facetious, but it appears not.

    On the other hand, he’s correct. The reason American debt is so popular with creditors is that the United States possesses a nearly unprecedented capacity to honor its own debts, notably by simply printing its own currency. This is a power, for instance, that even the members of the European Union do not possess.

    But if we did that, a loaf of bread would cost $500 and we would be failed state. So try again, Ezra.

  • http://www.facebook.com/mesamike Mike Westfall

    That would be the ultimate in “quantitative easing.”
    Quantitative ker-plopping, actually.

  • http://www.facebook.com/mesamike Mike Westfall

    That would be the ultimate in “quantitative easing.”
    Quantitative ker-plopping, actually.

  • WebMonk

    Cin – if they only stuck to doing it one time, for the $2 trillion coins, then it wouldn’t be too bad. However, as we all know, they wouldn’t stop once that particular door was opened.

    Right now the door hasn’t really been opened, and there would be an outcry against it. Once that door is opened, though …. yech!

  • WebMonk

    Cin – if they only stuck to doing it one time, for the $2 trillion coins, then it wouldn’t be too bad. However, as we all know, they wouldn’t stop once that particular door was opened.

    Right now the door hasn’t really been opened, and there would be an outcry against it. Once that door is opened, though …. yech!

  • Cincinnatus

    WebMonk: Yeah, I have no idea what kind of inflationary impact the immediate issuing of $2 trillion in currency would have.

    But the root of Klein’s stupidity is that such a “solution” does even less to ameliorate the debt crisis than the bill currently being considered in Congress, which itself does nearly nothing. So we coin $2 trillion in currency and pay off a few current obligations. Fine, but the national debt still exists and will continue to grow because the structural problem hasn’t been addressed.

  • Cincinnatus

    WebMonk: Yeah, I have no idea what kind of inflationary impact the immediate issuing of $2 trillion in currency would have.

    But the root of Klein’s stupidity is that such a “solution” does even less to ameliorate the debt crisis than the bill currently being considered in Congress, which itself does nearly nothing. So we coin $2 trillion in currency and pay off a few current obligations. Fine, but the national debt still exists and will continue to grow because the structural problem hasn’t been addressed.

  • http://geochristian.wordpress.com/ Kevin N

    The Simpsons had an episode with a trillion dollar bill. It ended up in the hands of Fidel Castro.

  • http://geochristian.wordpress.com/ Kevin N

    The Simpsons had an episode with a trillion dollar bill. It ended up in the hands of Fidel Castro.

  • Dan Kempin

    Congrats, Kevin. I was getting worried that no one would reference Mr. Burns and the “trillion dollar bill.”

    On the other hand, what does it say that an episode of the Simpsons is less ridiculous than what is being proposed in real life?

  • Dan Kempin

    Congrats, Kevin. I was getting worried that no one would reference Mr. Burns and the “trillion dollar bill.”

    On the other hand, what does it say that an episode of the Simpsons is less ridiculous than what is being proposed in real life?

  • WebMonk

    Aaargh! How could I have forgotten that episode?!?!?

    I hang my head in shame and bow to Kevin’s mastery of the Simpsons.

  • WebMonk

    Aaargh! How could I have forgotten that episode?!?!?

    I hang my head in shame and bow to Kevin’s mastery of the Simpsons.

  • http://www.toddstadler.com/ tODD

    I have several of these trillion-dollar coins, if anyone’s interested. I found them once on a trip to D.C. I think we were touring the Mint. I didn’t realize they were anything special. I think they’re still in the jeans I wore yesterday. Which, I just remembered, are in the wash. Drats.

  • http://www.toddstadler.com/ tODD

    I have several of these trillion-dollar coins, if anyone’s interested. I found them once on a trip to D.C. I think we were touring the Mint. I didn’t realize they were anything special. I think they’re still in the jeans I wore yesterday. Which, I just remembered, are in the wash. Drats.

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  • Joe

    This is basically what we just did isn’t? No one has enough money to lend us the 2 Trillion we just authorized. So I am sure that we will borrow that money from the Fed who will just print more money to cover it.

  • Joe

    This is basically what we just did isn’t? No one has enough money to lend us the 2 Trillion we just authorized. So I am sure that we will borrow that money from the Fed who will just print more money to cover it.

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