President Obama’s administration has brought new meaning to the word “change”—as in coinage, specifically a $1 trillion platinum coin. The Treasury Department briefly considered the minting of a trillion-dollar coin (or two) as a way to get around the problematic federal debt ceiling. Apparently, an obscure law permits the Treasury Department to mint coins, but only if they are made of platinum. Normally the the minting or making of actual money (coinage or paper) is the job of the Federal Reserve (the Fed), the nation’s central bank.
Of course, such a coin would not actually contain a trillion dollars’ worth of the precious metal, presumably only enough so that the words “ONE TRILLION DOLLARS” and “IN GOD WE TRUST” were visible. In today’s markets, platinum is about equal in value to gold, roughly $1,680 per ounce. But a “coin” with enough platinum in it to be worth $1 trillion would have to weigh about 18,600 tons!
After all, the money used in and by the United States is a fiat currency. It is backed not by the value of actual precious metals but by “the full faith and credit” of the United States. If the government says the coin is worth ONE T-R-I-L-L-I-O-N DOLLARS!! then it is—so long as the Fed agrees and accepts the coin for deposit in exchange for putting said trillion bucks into the Treasury’s account.
The Federal Reserve indicated, however, that it did not agree. Treasury then withdrew the proposal, meaning the government must go back its more conventional ways of continuing deficit spending. Congress and the president will again have to reckon with raising the debt ceiling to avoid a potential default. House Republicans have passed a bill that would temporarily raise the debt limit without tying that extension to spending cuts. The bill would, however, deny legislators in Washington their pay until they get serious and pass a budget.
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- Treasury, Fed Rule Out Trillion-Dollar Coin in Debt-Ceiling Fight
Read this article to understand how the trillion-dollar-coin proposal relates to the debate over the debt ceiling.
(Source: politico.com, January 15, 2013)
- Economics Is Platinum: What the Trillion-Dollar Coin Teaches Us
This article explains the reasonableness of the trillion-dollar-coin proposal, given the fact that the United States controls its own monetary policy (and already uses a fiat currency).
(Source: bloomberg.com, January 14, 2013)
- The Treasury Has Already Minted Two Trillion Dollar Coins
This dire economic analysis of the trillion-dollar-coin proposal expresses serious concern over the practical impact of fiat currency in an age of massive federal deficits and public debt.
(Source: Forbes.com, January 15, 2013)
- History Lesson: Why Did Congress Create a National Debt Limit?
This article discusses how the federal government came to have a “debt ceiling” in the first place.
(Source: Washington Post, January 14, 2013)
- Lawmakers Call House Republicans’ “No Budget, No Pay” Plan “Unconstitutional”
This article explores the latest development in the debt-ceiling debate: the House proposal that would withhold legislators’ pay until they pass a real budget.
(Source: Fox News, January 21, 2013)