What's up with the $1 trillion coin?

American Eagle platinum proof coin / U.S. Mint

As President Obama and Congress barrel toward the next fiscal fight - how to deal with the $16.4 trillion debt ceiling the country is expected to hit next month - one solution that has generated an extreme amount of buzz is for the Treasury to simply mint a $1 trillion platinum coin. The idea is kind of like Justin Bieber: It has wildly vocal fans despite its flaws but it also has equally as vocal detractors who think the whole idea is completely absurd.

Here are five things to know about the $1 trillion coin idea:

It is legal and it's possible

Regardless of what they think about it, economists on the left and the right point out that it is completely legal.

"I think it's deeply wacky but it's possible," said economist Jared Bernstein, former economic adviser to Vice President Biden.

Economist Douglas Holtz-Eakin, former director of the Congressional Budget Office and adviser to John McCain's 2008 presidential campaign, agreed that it's possible. But, he said, "I think it's an incredibly stupid idea."

The $1 trillion coin is idea that was initially mentioned in the comments section of a blog post and has gained steam in recent weeks. The proposal is to have the Treasury Department mint the coin, declare it worth $1 trillion, deposit it in the Federal Reserve and then use the money to pay its bills to avoid defaulting when it hits the debt ceiling.

Congress passed a law that allows the Treasury Department to print platinum coins and determine the value. The original intent was to allow the printing of commemorative coins. Philip Diehl, who ran the U.S. Mint from 1994 to 2000 and helped to write the bill, admitted that $1 trillion coin is not the original goal. "Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I'd guess," he wrote in an email to the website DailyKos. 

The coin itself does not have to literally be worth $1 trillion

It's common sense: just because there's a $99 difference in the value of a $1 and a $100 bill, the materials that are used to make them are worth the same. Translation: The $1 trillion dollar coin does not need to be made of $1 trillion worth of platinum.

The coin would have no economic impact; it would no cause inflation

The reason this idea is so out of left field is because the Federal Reserve is the entity responsible for printing money, and every dollar the Fed prints must be backed by Treasury bonds and counted toward the U.S. debt. But the Treasury's printing of a trillion dollar coin would not have any connection to the debt. Because it would sit in a vault and not be part of the money supply and not backed by bonds, it would not skew the economic system and, therefore, can't cause inflation. But because this coin is sitting in a vault and the Treasury Department determines that it's worth $1 trillion, it is.

The trillion dollar coin is purely political - just like the debt ceiling

Because the trillion dollar coin has no impact on the economy, conservatives decry it as political laziness. They say it causes a perception problem that the U.S. is unable to deal with its financial problems. "You're messing with international confidence," Holtz-Eakin said. "That confidence is fragile."

"This is the typical Washington sophistry ," David John, senior fellow at The Heritage Foundation, said.

But what is the debt ceiling? Just like the $1 trillion coin, it's completely created out of thin air. Congress can raise and lower it at will. It is not steeped in economic basis but in political gamesmanship. The debt ceiling was created by Congress more than 100 years ago to put some checks on the executive branch. Holtz-Eakin calls it Congress' "political instrument."

Holtz-Eakin admits that the debt ceiling and the $1 trillion coin are equally political, but he said there's a difference. "One's about enforcing control; one's about evading." He said that if Mr. Obama approves the minting of the coin, he would do it by bypassing Congress' effort at checks and balances.

But liberal economist Bernstein said the $1 trillion coin is not ideal but it's better than the potential negative economic impact if the debt ceiling isn't raised.

"It shouldn't have to come to that but it's a better solution than default," he said.

Minting of the $1 trillion coin is a long shot

White House spokesman Jay Carney refused to dismiss the idea after being asked about idea Wednesday. "Look, there is no substitute for Congress extending the borrowing authority of the United States," Carney said. But it's hard to imagine that the president would choose to anger Congress with an idea started by a Georgia lawyer called Beowulf in the comments section of an economics blog or the subject of a Simpson's episode. 

[dolby5]

"...if Mr. Obama approves the minting of the coin, he would do it by bypassing Congress' effort at checks and balances."

This would be true if this Congress' intent was "checks and balances"--but it's been clear for several years that their intent, at least in the House, is economic terrorism: "Do what we say or we'll blow up the economy."
Since the U.S. doesn't negotiate with terrorists, the trillion dollar coin trick seems reasonable.

[Initiator-US]

The Congress has no power these days when it comes to "checks and balances" on matters that have to do with Monetary Policy. The only power they have is to change the Federal Reserve Act of 1913, which they have not done since, well, around 1913.

The "checks and balances" are all "handled" by the international syndicate of privately owned banks that own 100% of the shares in the twelve private Regional Federal Reserve Banks, and those twelve Regional Banks direct the private Federal Reserve System, which is no more a part of the Federal Government than is the package delivery service Federal Express!

Capiche?

This is why our present Monetary Policy is now as if an unworthy corpse best to be put to rest, no longer of minimally adequate service to the American People, and must be transformed now, or else it will fall of its own accord as logically forced by none other than arithmetic itself, since this Policy requires our Overall Public and Private Debt (now around $67.5T) to grow by around 9% each year, else our economy will begin to falter and then fail.

Speaking of faltering, have you been keeping up with our economy since the spring of 2008?

Over the past four years, our Overall Public and Private Debt has been growing at only about 3.8% per year, suffocating many businesses and damaging most through lack of money, and with misdirected folks yelling that our debt is growing too fast since all that they seem to notice is that much of the Private Debt that more than doubled from 2001-2008 (from $20.8T to $43.9T) is being "quietly" shifted to Public Debt through bailouts and such, while mean-spirited but well-heeled politicians blame this on the continuance of government services to the People of America.

It's our choice, we get to fix our Monetary Policy soon, or watch it fall by force within the next several years.

For more details on the above and how to fix this, check out www.causes.com/causes/810177-unite-to-solve-our-financial-and-climate-crises/actions/1724987

[Initiator-US]

Correction to previous comment: Over the past four years Private Debt has grown at around 3.8% per year on average as compared to 9.8% per year on average for 2001-2008, whereas over the past four years Overall Public and Private Debt has grown at about 5.5% per year as compared to 9.5% per year on average for 2001-2008.

These disparities are bringing our economy and People to our knees, with the growth in the National Debt not at all being the real determining issue, and yet that is where all the attention is being misdirected.

Think about that and you will be troubled, but then you will be amazed -- you will understand better how we can come again to rule our domain!

[ammo17]

are they going to sell these coins on t.v.?and what is the cost? i figure between 5 & 10 dollars each plus shipping and handling.

[StephenMcWV]

Print a trillion dollar coin. Print 1,000 billion dollar coins. Print 100,000 million dollar coins. Sell them to collectors who will squirrel them away and they will never go into circulation. Just raised $3 trillion and not added to the money supply. Used money already in circulation. (If anyone would buy them).

Print them, buy dollars for free from the Federal Reserve at no interest. No need to borrow anymore. Buy more interest free money and pay off all debts. Keep buying interest free money from the Feds to spend: on free healthcare for everyone, on doubling Social Security payments to everyone, on doubling and extending unemployment to everyone that does not want to work, on hiring more government employees and doubling their pay for anyone that does want to "work," on building (and tilting at) windmills and all other green stuff, to pay the interest on any outstanding debt that we did not buy back with the free money from the Feds. Some say this is what causes inflation.

It is no different from running up the debt, in the long run, we just don't pay the interest. Either we do it quickly and get it over with now and WE feel the pain, OR we continue to do it slowly as we now are, and it is our grandchildren that will feel the pain. Screw our grandchildren. Gimme Gimme Gimme.

[seabass6251]

This has got to be the stupidest thing ever proposed.

[jaykay3141]

Or we could declare every dime is worth $100 and go up from there. Fiat money is fiat money no matter what you call it.

PS Coins are _minted_ not printed. Bills are printed.

[JdonEstabro]

The $100 platinum coin is aprox. 1oz, 2.39mm thick with a diameter of 32.7mm ....To make something proportionate we need 62,500lbs of .9995 platinum to make a coin that's almost 8 feet tall and about 7 inches thick. Stick a few of those in the National Reserve....

[isaac32767f]

Didn't read the article, did you?

[REDBEAR57]

There is really no money anyway - it is all just data

[Riverjump]

Hilarious. We think we can print money to buy our way out of stoopid decisions made by congress. My White City puzzle bank's price just went to a cool half-a-mil.

[lairdp]

That's not what is going on. Congress passes laws mandating spending. Note: the Executive branch cannot refuse to spend money once it's mandated by Congress, because that would allow the Executive Branch to ignore Congress, for example, by not actually implementing a service which Congress has passed a law to fund, which is unconstitutional. The problem is that Congress also invented a debt limit, about 100 years ago. If Congress mandates spending but refuse to raise the debt limit to fund the spending, the options are:

1) The executive branch decides to honor the Congressionally mandated spending and ignore the debt limit, triggering a legal crisis. Arguably the constitutional requirement for the Executive branch to implement the laws that Congress passes trumps the more recent law inventing a debt limit, but it would certainly be a messy fight.

2) The executive branch decides to ignore Congress and decide which laws to implement and which to ignore, shutting down or cutting whatever they feel like, to stay under the limit, triggering a legal crisis. Oddly, Republicans appear to be arguing for this position, despite the fact that it would give Obama unilateral power to do things that they would oppose, though they may not have thought that through.

3) The executive branch finds a loophole, the $1 trillion coin for example, allowing them to implement the mandated Congressional spending without exceeding the Congressionally invented debt limit. This appears to be legal, and avoids the legal crisis,

[Initiator-US]

A trillion dollar coin WILL cause inflation, since inflation is not directly tied to the National Debt, but to the volume of money in circulation. If we minted seventeen such coins, and paid off this Debt, think of the inflation that would cause, which is one reason why we do not do it.

Better is the simple yet astonishing idea of ending all taxation at all levels of government, and replacing those revenue streams with 70% of the interest paid on the Overall U.S. Public and Private Debt, with the mechanics of that dispersed throughout our Nation and States through reliance on their own Sovereign Agency underlying their taking again responsibility for their Monetary Policy Duties, which for the past century have been outsourced to the private bank called the Federal Reserve, which is itself wholly owned and directed by a private group of international banks.

This Overall Debt, generally a little over four times our National Debt, presently totals around $70T (trillion) with an interest paid on that Overall Debt in 2012 alone estimated to be over $6T, which is almost double our federal budget!

This idea is like a flat tax, as it applies across the board in a standard way, but without the fuss and muss of taxes.

If you agree that replacing taxation with a hefty percentage of the interest that we pay on borrowing money pulled out of our own thin air (i.e., our own money, when it comes right down to it) is a better idea than trillion dollar coins or being forced down the Fiscal Slope by the Debt Ceiling, check out the details at http://www.causes.com/causes/810177-unite-to-solve-our-financial-and-climate-crises/about

[Initiator-US]

It does not matter if it is held or not. It is deposited to an electronic account, and those funds are spent. Only 3% of our money in circulation is actually made up of physical money, with the rest being in electronic form only. There is only about $2T (Trillion) in ready circulation (i.e., cash, checking, savings, CDs, etc.), so adding $1T to that $2T means that there is suddenly $3T in circulation (or, could be if the $1T is spent by the federal government), and so fairly quickly, there could be 50% more money in active circulation, so prices could rise accordingly. Think it through, and you might agree.

[Counselor12]

One $ trillion coin won't work because only Congress has the constitutional power to coin money and regulate the value thereof. Republicans would block it. Courts would probably decide for them.

There's a twice successfully used alternative (greenbacks.) They saved the nation in the Revolution and the Union in the Civil War. And they could make an armistice in our current class war. It's high time the mainstream media stopped ignoring and started to remind Americans about greenbacks. Congress has the Constitutional power to coin any amount of money needed. It can even do this without debt, without issuing bonds. Look up "United States Notes!" By more and more people advocating creation of greenbacks, we can turn the heat up on Congress's endless stalling act. We've had 4 years of severe deflation for millions of households. Paying back household consumer debt is going painfully slow. And given endless automation and offshoring of production,nothing but another bubble will return employment temporarily to normal. A big program of Shared Employment Compensation could help. Employment benefits the general welfare of all Americans. So federal aid to small and medium sized domestic businesses and entrepreneurs and inventors to subsidize new American hires could help get unemployment and consumption to return to normal. We need controlled, targeted "reflation" of housing and jobs. Greenbacks can be created in electronic form and direct deposited to bill-paying accounts of the personal shared employment recipients, the formerly jobless, his mortgage company, her student loan account. Such direct depositing will help control the inflationary velocity of physical money. Bankers endlessly terrorize people about hyperinflation. And they believe they've got Congressmen so corrupted that they could never be gotten to do this. Is there another real way out of our near stagnation? If not, we must start advocating that Congress create and distribute greenbacks.

Illegitimi non carborundum.

[lairdp]

"only Congress has the constitutional power to coin money and regulate the value thereof"

Exactly. And when Congress passed the law authorizing the Treasury to issue platinum coins of any value.

So when you say "Republicans would block it" it's too late. Congress already authorized the Treasury to do what's being discussed. And if Republicans want to pass a new law taking away that authority, Democrats could certainly block it.

[lairdp]

You're exactly right that "only Congress has the constitutional power to coin money and regulate the value thereof". But what you apparently missed is that Congress already passed the law authorizing the Mint to print platinum coins of any denomination. So it's too late for Republicans to block it.

[dpattan]

This whole concept is stupid. This is what our leaders think up now.

[facelessdrone2005]

Gotta love how the proposal didn't come from Obama and he hasn't said a word about it, but it's all his fault. I suggest that Tsigili and Democrats-Are-Communistic wear tin-foil hats to protect them from the psychotronic radiation generated by Obama. This way, they can create gold bars using only the power of thought and thereby solve the deficit. Now, that of course is at least as stupid as the Trillion dollar coin, but Obama hasn't said a word to refute it. Therefore that proposal is also Obama's fault.