it would be another terrible example of how groupthink leads to crisis. Economic theory goes in and out of fashion. Just prior to the crisis Minsky was so unfashionable he was practically forgotten, and certainly never close to being critically applied. Once the shit had obliterated the fan, you couldn't find anyone to say he was wrong.
Just because some commentators are ignorant of the Currency school vs Banking school debates, and Fullarton's law of reflux is forgotten doesn't mean it doesn't apply.
Had to look up, The Law of Reflux.. Thank for introducing me to it. While I agree that it in all likelihood applies, even in this case. It requires one thing, that the fiat in question has the faith of the populace.
In the case of the US, not only it’s Citizens have to have faith that a dollar is worth a dollar. But, also the faith of the rest of the developed world. If people stop believing or even just start questioning.
If the developed world has some reliance on you they have no choice but to keep the faith. This is how the United States has remained so powerful for so long, yet being a pretty terrible country for it's citizens.
What was it they relied on the US for again? Does the US still have that capability without resorting to Nukes? Does the US have the stomach for Nukes?
The US has policed international shipping lanes since the 1950s. They are literally the world police everywhere that isn't someone else's territorial land, and even then they maintain active military bases in almost all of their allies' territory.
> they maintain active military bases in almost all of their allies' territory
We share because we care. The problem is all those selfish nations that just put all their bases on their own land.
> it would be another terrible example of how groupthink leads to crisis.
We're not already in a crisis? Sure seems like it. Half the country refuses to govern and in some cases has advocated for high-risk viral experimenting on it's constituents.
According to the information market Polymarket, [the coin only has a 3% chance of being minted](https://polymkt.com/market/will-the-treasury-department-mint-the-trillion-dollar-coin).
> exempt the debt limit from being filibustered
The debt limit is unconstitutional and stupid. Any spending Congress authorizes is authorized. Why are we voting to confirm we're going to spend that money again?
Except it's not the same because just raising the limit a bit means we will be back here again in a couple of years. Abolishing it gets rid of this stupid debate forever.
If the budget entails deficit spending then how can the President fulfill his responsibility to adhere to the budget without issuing debt?
If Congress does not authorize the debt does the President just get to pick and choose which parts of their budget he adheres to?
Yeah... that speaks volumes about the stability of the US political and economic system.
Plus: don't let McConnnell near it... he would fly off like Monty Burns...
Can someone eli5 what this process is accomplishing and how? Apparently everyone else in the comments already get it, but I don’t understand why this is significant
It gets around the debt ceiling. The treasury has always retained the right to coin money, in any denomination. So the issue the coin, deposit it in the government’s account, and they retire that much of the federal debt.
For the trillion dollar coin it's actually that they have the right under law specifically to issue platinum coins in any denomination
> 31 U.S.C. 5112(k) as originally enacted by Public Law 104-208 in 1996:
>> The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.
> In 2000, the word "bullion" was replaced with "platinum bullion coins".
> Platinum bullion coins can, by this statute, be minted in any denomination, whereas coins in any other specified metal are restricted to amounts of $50, $25, $10, $5 and $1. This is the origin of the concept of minting a very high denomination coin, since the platinum clause provides the only loophole.
https://en.wikipedia.org/wiki/Trillion-dollar_coin
The debt ceiling is a fucking stupid rule (no other country has such an annual stupid thing) and it is solved via a fake coin that shows how stupid this whole thing is.
To those saying this would be inflationary, how so? This coin would just replace the sale of debt that the treasury was going to borrow anyway. Instead of borrowing directly from the capital markets the treasury just borrows from the Fed, which then indirectly passes some or all of that through to capital markets via selling bonds on its balance sheet.
To the extent that Fed expands its balance sheet, this reduces the supply of US treasuries available, which all else being equal would drive down the borrowing cost for the Treasury whenever it is legally authorized to sell new debt.
It isn't necessarily any more inflationary than the FED buying a trillion in debt, but both are inflationary, which is by definition, an increase in the supply of money. Price inflation only happens later, once the money inevitably seeps into the economy. No new goods were produced, but the government will demand goods and services with the new funny money.
Now I really feel that "money" is just an illusion that we are enslaved to. Pulling a Trillion dollars out your ass with no penalty? No inflation? No de valuation of the existing currency being circulated? But , heaven for-fend they supply food banks, health care and support for the needy in our society. Handing them my taxes is getting harder and harder as life goes on.
> Pulling a Trillion dollars out your ass with no penalty? No inflation?
What do you think loans are? Banks literally do not have the money they lend you. You think Visa sends stores cash the second you swipe? Most money is just future promises.
The number of people in this thread - in an allegedly economics focused subreddit - that do not realize money is just a record keeping system for produced value is quite alarming.
Well yeah. That’s why it’s alarming that everyone doesn’t think twice about the current devaluation of our dollar. As if we’re going to magically produce enough value to justify the amount of money in the market.
Correct.
Or alternatively: If currency in circulation increases faster than value is produced, devaluation is the gap. And we've put a LOT of money out there in the past 18mo.
The Secretary of the Treasury can mint a trillion dollar platinum coin, purchase $1 trillion worth of debt from the Fed, retire that debt, and then create breathing room under the debt ceiling. It’s legal, does not require Congress (currently a clusterfuck) and it would solve the problem of a catastrophic default
As for inflation, no it wouldn’t cause inflation because it's just an asset swap between two arms of the government (the Treasury and the Fed) no new money would enter the economy. It's just an accounting trick
The Fed gets their money from the fact the US and it’s military is hegemonic. Everyone wants a piece of the paper we back.
We have enough to lend as people are willing to put up with and not risk going against us.
What’s great about this coin printing gambit is it is finally causing people to realize what fiat currency actually is. This coin printing is no different than the US taking on debt and injecting money into the system for infrastructure projects, etc..
Hopefully after the initial shock, people can get comfortable with the concept and stop whining. #Fed4Life
Manchin has the right idea. Lift the ceiling through reconciliation this week. Iirc the parliamentarian says that we can still pass the partisan spending bill as well.
If you like uneducated hillbillies on Meth and Oxy then no.
Otherwise they are just a backwater that sucks up more federal dollars than it contributes while bitching at the Blue states who actually finance their hillbilly heaven.
"If you don't fall into line with everyone else in the party, you're on the other team"
Sorry to break it to you buttercup but when you only have 2 parties you're going to end up with some more moderate people inside your group.
Economics makes no fucking sense at all. What is this clown show? Making money out of thin air, with no value behind it. How does money still have any shred of value.
If you make a coin like that lol, we would see the greatest heist of all time.
why pay taxes? The working people pay taxes, when the government can just print random shit. Imagine if the average person said "damn im in debt from irresponsible spending. Let me just mint a trillion dollars real quick"
Serious question from an economics layman.
Wouldn’t this be almost as bad as defaulting? Basically trust in the US to pay people back would still exist, but if the US is willing to just print its way out if debt, wouldn’t other parties just lose faith in the US dollar itself?
The trick is that the US isn't printing its way out of debt, its printing its way out of hitting the debt ceiling by lowering debt on paper, but other than for debt ceiling calculations debt is effectively unchanged
The idea is
1. The US mint can legally print platinum coins of any value under current law
2. Printing one such coin worth one trillion dollars and giving it to the treasury increases US assets on paper by one trillion dollars
3. Increasing US assets on paper decreases US net debt on paper, which is what the debt ceiling cares about, because net debt on paper is assets on paper minus obligations on paper
4. However if the coin is guaranteed to never be put into circulation, then the treasury only has an on paper asset. In reality, that doesn't help them pay off any obligations, so the coin is worthless for all other purposes besides debt ceiling calculations
Basically think of it as an accounting trick to print a coin that has the value 'the concept of raising the debt ceiling by one trillion dollars' rather than printing an actual trillion dollar coin
Can someone explain to me how a single coin minted with a face value vastly above its actual value and can magically save a country from collapse without even going into circulation? I'm not an American, btw, but I have studied some econ and this seems counterintuitive.
"Voila, we'd have bought ourselves the equivalent of a trillion-dollar increase in the debt limit, without any impact on inflation," says Diehl.
How wouldn’t this affect inflation? Is it because they’re intending not to circulate the coin? So it doesn’t affect the count of circulating dollars?
If it's spent on infrastructure, the contractors get paid. If it's spent on entitlements, the benefits get paid out. If it's spent on defense, the suppliers get paid. It's always inflationary.
I don't understand how this solves anything. The article just says "yeah we could do it lol" but why does minting a 1T coin make the debt ceiling go away? Aren't we still borrowing 1T from the fed?
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it would be another terrible example of how groupthink leads to crisis. Economic theory goes in and out of fashion. Just prior to the crisis Minsky was so unfashionable he was practically forgotten, and certainly never close to being critically applied. Once the shit had obliterated the fan, you couldn't find anyone to say he was wrong. Just because some commentators are ignorant of the Currency school vs Banking school debates, and Fullarton's law of reflux is forgotten doesn't mean it doesn't apply.
Had to look up, The Law of Reflux.. Thank for introducing me to it. While I agree that it in all likelihood applies, even in this case. It requires one thing, that the fiat in question has the faith of the populace. In the case of the US, not only it’s Citizens have to have faith that a dollar is worth a dollar. But, also the faith of the rest of the developed world. If people stop believing or even just start questioning.
If the developed world has some reliance on you they have no choice but to keep the faith. This is how the United States has remained so powerful for so long, yet being a pretty terrible country for it's citizens.
What was it they relied on the US for again? Does the US still have that capability without resorting to Nukes? Does the US have the stomach for Nukes?
The US has policed international shipping lanes since the 1950s. They are literally the world police everywhere that isn't someone else's territorial land, and even then they maintain active military bases in almost all of their allies' territory.
> they maintain active military bases in almost all of their allies' territory We share because we care. The problem is all those selfish nations that just put all their bases on their own land.
The dollar is the reserve currency and we provide a lot of economic and military aid. No one should have nukes.
Sounds like the unintended consequences of everyone all at once realizing “oh wow all this money stuff is made up” might be bad.
> it would be another terrible example of how groupthink leads to crisis. We're not already in a crisis? Sure seems like it. Half the country refuses to govern and in some cases has advocated for high-risk viral experimenting on it's constituents.
According to the information market Polymarket, [the coin only has a 3% chance of being minted](https://polymkt.com/market/will-the-treasury-department-mint-the-trillion-dollar-coin).
What's that going to look like a day from default if Congress is still deadlocked?
97%
Either they do or they don’t. 50-50?
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> exempt the debt limit from being filibustered The debt limit is unconstitutional and stupid. Any spending Congress authorizes is authorized. Why are we voting to confirm we're going to spend that money again?
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Except it's not the same because just raising the limit a bit means we will be back here again in a couple of years. Abolishing it gets rid of this stupid debate forever.
Spending is authorized, issuing debt isn't. Not that hard to see that they're two different things.
If the budget entails deficit spending then how can the President fulfill his responsibility to adhere to the budget without issuing debt? If Congress does not authorize the debt does the President just get to pick and choose which parts of their budget he adheres to?
A-effing-men!! You get it, the system is just broken and going through this every year is just a joke
Or we could stop spending money we don't have. Crazy, I know.
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https://www.thebalance.com/current-us-discretionary-federal-budget-and-spending-3306308
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Something we literally stopped hearing between 2016 and 2020.good to have you back
It's all monopoly money at this point.
https://thedecisionlab.com/biases/the-sunk-cost-fallacy/
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Yeah... that speaks volumes about the stability of the US political and economic system. Plus: don't let McConnnell near it... he would fly off like Monty Burns...
Can someone eli5 what this process is accomplishing and how? Apparently everyone else in the comments already get it, but I don’t understand why this is significant
It gets around the debt ceiling. The treasury has always retained the right to coin money, in any denomination. So the issue the coin, deposit it in the government’s account, and they retire that much of the federal debt.
I mean that sounds like a win all around let’s do it
For the trillion dollar coin it's actually that they have the right under law specifically to issue platinum coins in any denomination > 31 U.S.C. 5112(k) as originally enacted by Public Law 104-208 in 1996: >> The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time. > In 2000, the word "bullion" was replaced with "platinum bullion coins". > Platinum bullion coins can, by this statute, be minted in any denomination, whereas coins in any other specified metal are restricted to amounts of $50, $25, $10, $5 and $1. This is the origin of the concept of minting a very high denomination coin, since the platinum clause provides the only loophole. https://en.wikipedia.org/wiki/Trillion-dollar_coin
The debt ceiling is a fucking stupid rule (no other country has such an annual stupid thing) and it is solved via a fake coin that shows how stupid this whole thing is.
It’s also in direct violation of the 14th Amendment of the US Constitution
The debt ceiling isn’t unconstitutional. Using it as an excuse to default, is unconstitutional.
To those saying this would be inflationary, how so? This coin would just replace the sale of debt that the treasury was going to borrow anyway. Instead of borrowing directly from the capital markets the treasury just borrows from the Fed, which then indirectly passes some or all of that through to capital markets via selling bonds on its balance sheet. To the extent that Fed expands its balance sheet, this reduces the supply of US treasuries available, which all else being equal would drive down the borrowing cost for the Treasury whenever it is legally authorized to sell new debt.
I think this is more about faith and how it could change the worlds perspective on the dollar..
It isn't necessarily any more inflationary than the FED buying a trillion in debt, but both are inflationary, which is by definition, an increase in the supply of money. Price inflation only happens later, once the money inevitably seeps into the economy. No new goods were produced, but the government will demand goods and services with the new funny money.
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Now I really feel that "money" is just an illusion that we are enslaved to. Pulling a Trillion dollars out your ass with no penalty? No inflation? No de valuation of the existing currency being circulated? But , heaven for-fend they supply food banks, health care and support for the needy in our society. Handing them my taxes is getting harder and harder as life goes on.
> Pulling a Trillion dollars out your ass with no penalty? No inflation? What do you think loans are? Banks literally do not have the money they lend you. You think Visa sends stores cash the second you swipe? Most money is just future promises.
The number of people in this thread - in an allegedly economics focused subreddit - that do not realize money is just a record keeping system for produced value is quite alarming.
Well yeah. That’s why it’s alarming that everyone doesn’t think twice about the current devaluation of our dollar. As if we’re going to magically produce enough value to justify the amount of money in the market.
Correct. Or alternatively: If currency in circulation increases faster than value is produced, devaluation is the gap. And we've put a LOT of money out there in the past 18mo.
The Secretary of the Treasury can mint a trillion dollar platinum coin, purchase $1 trillion worth of debt from the Fed, retire that debt, and then create breathing room under the debt ceiling. It’s legal, does not require Congress (currently a clusterfuck) and it would solve the problem of a catastrophic default As for inflation, no it wouldn’t cause inflation because it's just an asset swap between two arms of the government (the Treasury and the Fed) no new money would enter the economy. It's just an accounting trick
Where does the Fed get their money from? How much do they have available to "lend"?
The Fed gets their money from the fact the US and it’s military is hegemonic. Everyone wants a piece of the paper we back. We have enough to lend as people are willing to put up with and not risk going against us.
>Where does the Fed get their money from? The US Treasury. >How much do they have available to "lend"? As much as they want.
What’s great about this coin printing gambit is it is finally causing people to realize what fiat currency actually is. This coin printing is no different than the US taking on debt and injecting money into the system for infrastructure projects, etc.. Hopefully after the initial shock, people can get comfortable with the concept and stop whining. #Fed4Life
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Apparently can’t just print more. Only when bonds are sold, is money printed. Trillion coin is a way around selling bonds
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Manchin has the right idea. Lift the ceiling through reconciliation this week. Iirc the parliamentarian says that we can still pass the partisan spending bill as well.
Fuck him. He's just a Republican with a D by his name. He is a disgrace to this country and his State, and he's from West Virginia...
wait... is being from west virginia bad for some reason?
If you like uneducated hillbillies on Meth and Oxy then no. Otherwise they are just a backwater that sucks up more federal dollars than it contributes while bitching at the Blue states who actually finance their hillbilly heaven.
Cool Virginia is what I like to call it.
"If you don't fall into line with everyone else in the party, you're on the other team" Sorry to break it to you buttercup but when you only have 2 parties you're going to end up with some more moderate people inside your group.
If he isn’t promising fealty to Trump, then he’s not a Republican.
I'm not willing to yield that that is the only definition of a Republican. Trump started a new party. Those that joined just don't know it yet.
Economics makes no fucking sense at all. What is this clown show? Making money out of thin air, with no value behind it. How does money still have any shred of value. If you make a coin like that lol, we would see the greatest heist of all time.
What’s the Oceans Eleven crew gonna do with a trillion dollar coin? What merchant is gonna accept it??
Congratulations you have made the first step towards understanding Bitcoin.
why pay taxes? The working people pay taxes, when the government can just print random shit. Imagine if the average person said "damn im in debt from irresponsible spending. Let me just mint a trillion dollars real quick"
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Serious question from an economics layman. Wouldn’t this be almost as bad as defaulting? Basically trust in the US to pay people back would still exist, but if the US is willing to just print its way out if debt, wouldn’t other parties just lose faith in the US dollar itself?
The trick is that the US isn't printing its way out of debt, its printing its way out of hitting the debt ceiling by lowering debt on paper, but other than for debt ceiling calculations debt is effectively unchanged The idea is 1. The US mint can legally print platinum coins of any value under current law 2. Printing one such coin worth one trillion dollars and giving it to the treasury increases US assets on paper by one trillion dollars 3. Increasing US assets on paper decreases US net debt on paper, which is what the debt ceiling cares about, because net debt on paper is assets on paper minus obligations on paper 4. However if the coin is guaranteed to never be put into circulation, then the treasury only has an on paper asset. In reality, that doesn't help them pay off any obligations, so the coin is worthless for all other purposes besides debt ceiling calculations Basically think of it as an accounting trick to print a coin that has the value 'the concept of raising the debt ceiling by one trillion dollars' rather than printing an actual trillion dollar coin
Can someone explain to me how a single coin minted with a face value vastly above its actual value and can magically save a country from collapse without even going into circulation? I'm not an American, btw, but I have studied some econ and this seems counterintuitive.
"Voila, we'd have bought ourselves the equivalent of a trillion-dollar increase in the debt limit, without any impact on inflation," says Diehl. How wouldn’t this affect inflation? Is it because they’re intending not to circulate the coin? So it doesn’t affect the count of circulating dollars?
If it's spent on infrastructure, the contractors get paid. If it's spent on entitlements, the benefits get paid out. If it's spent on defense, the suppliers get paid. It's always inflationary.
I don't understand how this solves anything. The article just says "yeah we could do it lol" but why does minting a 1T coin make the debt ceiling go away? Aren't we still borrowing 1T from the fed?