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Trillion Dollar Coin

Puppycow said:
Anyway, the latest news makes me wonder if the president is considering this option:

Partisan battle lines drawn over debt ceiling



The president keeps saying that the debt ceiling is "non-negotiable", but in practice he has no choice but to deal with congress if he wants to raise the debt ceiling. He has not indicated that he would use the trillion dollar coin option or is even considering it, but he must know that it exists. There are good reasons not to even hint that he is thinking about this possibility, because it could cause panic. Except that repeating that he will not negotiate over the debt ceiling is either a bluff, or it means he must have a backup plan. Maybe the backup plan is to shut down the government until Republicans give in, which is the standard response, but not a desirable one for the economy. But at least one other option, like this one, exists.
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In Politics, the first move in negotations is often to say you have no intention of negotiating....
 
BenBurch said:
In the normal course of events, government spending is balanced (somewhat) by taxation, and this limits the growth of the money supply.
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Considering that Government spending is at $3.5T and the taxation shortfall is $1.1T, that is a pretty loose definition of "balanced (somewhat)".

BenBurch said:
But we have ourselves in a situation where the debt service load is way too high right now, and this is a necessary step.

Right now M2 is around $10T. So paying down a trillion in debt by one coining would be 10% inflationary over the lifetime of the bonds. This is blunted this way because we are not placing that money in circulation, we are merely failing to tax enough to cover the money we are spending and this time we are not covering that with a balancing bond.
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Paying down debt means paying bond holders $1T for their bonds. How is that not putting the money into circulation?
 
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psionl0 said:
Considering that Government spending is at $3.5T and the taxation shortfall is $1.1T, that is a pretty loose definition of "balanced (somewhat)".

Paying down debt means paying bond holders $1T for their bonds. How is that not putting the money into circulation?
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They're paid off on the normal schedule. The govt. just has a trillion in deposits on hand to do it with as they come due.
 
That's probably as likely as any thing else discussed in this thread (it's still just a story at this stage). Of course, every time a bond gets paid off this way, the money in circulation increases.
 
That makes your problem with bond payments, not the coin. These are expenditures congress has already planned, interest payments, bond payoffs, normal allocations. There's nothing new here, other than the accounting trick to prevent Congress from mandating both a certain level of spend and not that level of spend.
 
IMST said:
That makes your problem with bond payments, not the coin. These are expenditures congress has already planned, interest payments, bond payoffs, normal allocations. There's nothing new here, other than the accounting trick to prevent Congress from mandating both a certain level of spend and not that level of spend.
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Except their are no "planned" expenditures or normal allocations as, thanks to Harry Reid and the Dhimwits in the Senate, we have no official budget for the US government.

Which will be demonstrated only a few weeks from now ...
 
People seem to be missing the wider point about this:
The ability for government to print not just $1 trillion, but money of any denomination it desires, effectively means government already has full legal control over increasing the money supply.

This doesn't 'fix' the debt ceiling problem, it obsoletes debt itself, as government can totally fund itself on many 'trillion dollar coins', with the limit being inflation, much as discussed in my thread here:
http://www.internationalskeptics.com/forums/showthread.php?t=250647


This doesn't just circumvent the debt problem; if this money creation capability were leveraged to its full extent, and people fully understood its real potential, it would completely change politics and discourse about it.

Good article here, on how the debate on TDC is being hijacked:
http://neweconomicperspectives.org/...ar-coin-to-save-the-financial-status-quo.html
 
as there's clearly no end to government and academic creativity when it comes to "money" and attempting to defy maths and reality with it, I do think $60T's might be a bit much, but if they're going to bother to mint one, they might as well do at least 25 really.

pay off the debt, have a bit of a holiday, and a nice fresh start with some money in the bank.
 
Shambler said:
People seem to be missing the wider point about this:
The ability for government to print not just $1 trillion, but money of any denomination it desires, effectively means government already has full legal control over increasing the money supply.
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The US constitution specifies that gold and silver coins are to be used as legal money, not the arbitrary and practically unlimited seigniorage tax. So, the idea that any of this is "legal", is ridiculous.

This doesn't 'fix' the debt ceiling problem, it obsoletes debt itself, as government can totally fund itself on many 'trillion dollar coins', with the limit being inflation, much as discussed in my thread here:
http://www.internationalskeptics.com/forums/showthread.php?t=250647
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I actually agree with this. Of course, it's still illegal, and I don't consent to it. But since no one cares that we're breaking the law, if we as a society decide that we're going to ignore the Constitution and any notion of fair weights and measures and debase our currency, it should at least be done by the US Treasury and fully politicized for the purported benefit of the public, rather than relegated to a quasi-private central bank who will instead do things like loaning $30 billion to a proxy for the central bank of Libya.

This doesn't just circumvent the debt problem; if this money creation capability were leveraged to its full extent, and people fully understood its real potential, it would completely change politics and discourse about it.

Good article here, on how the debate on TDC is being hijacked:
http://neweconomicperspectives.org/...ar-coin-to-save-the-financial-status-quo.html
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Why stop at a $1 trillion dollar coin? Lets make everyone in the US, at the very least, a millionaire. What's that, $300,000,000,000,000, over a quarter-quadrillion? Sounds like a plan for prosperity!
 
Tippit said:
Why stop at a $1 trillion dollar coin? Lets make everyone in the US, at the very least, a millionaire. What's that, $300,000,000,000,000, over a quarter-quadrillion? Sounds like a plan for prosperity!
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That's the biggest problem I see with this; they wouldn't stop. Pretty soon, maybe ten years from now, there'd be dozens of those things. Inflation would be rampant. Big Macs would cost $11,000.
 
jhunter1163 said:
That's the biggest problem I see with this; they wouldn't stop. Pretty soon, maybe ten years from now, there'd be dozens of those things. Inflation would be rampant. Big Macs would cost $11,000.
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Nonsense.

We could have done this at any time in the past and we did not.

And we will see that it was inflationary. And that will be sufficient reason to never do it again and never to allow so-called "conservatives" to lower taxes and increase spending ever again.
 
BTW, do understand that this is just a means of indirect taxation.

We inflate the currency by 10% and everybody's money and cash equivalents are devalued by that amount. Real assets won't be touched as much, and like any flat tax this is a regressive tax.

I'd much rather we simply raised the highest tax rate to 70% above $1M and hired a few thousand new auditors so that every single return above $500K gets audited every year.

But if the GOP are too spineless to do this, then coin it.
 
Tippit said:
The US constitution specifies that gold and silver coins are to be used as legal money, not the arbitrary and practically unlimited seigniorage tax. So, the idea that any of this is "legal", is ridiculous.
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It's obviously legal, that's the reason the entire idea has gained so much media traction.

Your entire debasement/seigniorage-'tax' (and other incorrect redefinitions of economic terms) etc. arguments, which basically amounts to lots of really diversionary/obfuscatory ways of saying "it's inflationary", I've already entirely debunked in the other thread, and your remaining argument in that thread appears to be in favour of deflation, which is again easily debunked.
 
LTC8K6 said:
I don't think a $1T platinum coin would pass a legal challenge. It's pretty clear that the law meant these coins, which the gov't already produced in bullion and proof forms, and which already have a baseline value.

http://www.usmint.gov/mint_programs/american_eagles/index.cfm?Action=american_eagle_platinum

http://www.usmint.gov/mint_programs/american_eagles/?action=american_eagle_platinum_proof

I can't see any way producing a similar coin and saying it's worth $1T instead of $100 would ever fly in any way, shape, or form.

How can your 1oz platinum coin be worth $1T when mine is only worth $1700.00?
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Yes. The law only allows bullion coins where the value would be based on the value of the metal making up the coin (although bullion coins sometimes trade for slightly higher values). Although the law allows for the platinum coins to be produced in any denomination, the actual value is derived from the value of the metal. I don’t think simply stamping $1T on a bullion coin would pass a legal test that it is actually worth $1T.

The coins meant for general transactions where the value is not based on bullion or numismatic value are the cent to the dollar. Only the dollar does not have specification for weight and materials. A dollar coin could be made of anything as long as it meets the diameter and appearance requirements. For this plan to work, I think the Treasury would have to mint one trillion dollar coins out of a cheap material, although that would still be quite costly.
 
BenBurch said:
BTW, do understand that this is just a means of indirect taxation.

We inflate the currency by 10% and everybody's money and cash equivalents are devalued by that amount. Real assets won't be touched as much, and like any flat tax this is a regressive tax.

I'd much rather we simply raised the highest tax rate to 70% above $1M and hired a few thousand new auditors so that every single return above $500K gets audited every year.

But if the GOP are too spineless to do this, then coin it.
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The idea though, that money creation is always inherently inflationary, is perhaps the biggest and most successful conservative scaremongering myth in existence; it's not actually true that it is always inflationary, because there are ample ways of spending the money that carry a low enough inflation penalty.

I'd really encourage people to not accept on its face, the idea that money creation always leads to inflation, because properly understanding the real causes of inflation, provides a very significant and important change in perspective on how economics works.

Always look at individual examples of how/where money is spent, because that is what determines how inflationary it is; take all claims that money creation will be inflationary with skepticism, because most of that is pure scaremongering and indoctrination, and if you don't challenge it you come to believe it yourself too; think critically.


For starters, one of the primary causes of inflation is demand-pull inflation, i.e. too much demand chasing inadequate supply; this means that where there is excess supply, i.e. where supply can be increased to meet increased demand, there will not be inflation.

So straight away, look at the huge amounts of surplus supply in the economy: Surplus labour (unemployed) and surplus industry (including construction); combining these with money creation, is mostly non-inflationary, with worker wages being the primary inflationary potential.

You can even use this to fight inflation, because the upcoming energy crisis, will cause severe inflation due to the price of fossil fuels increasing; if you put people to work on power infrastructure, such as nuclear/renewables and other power sources, to remove dependance on oil, you can fight future inflation, and all countries are going to need to put in a huge effort to do this, in the coming decades, and it may already be too late to avoid economic trouble from this coming energy crisis.

So, never take the idea that money creation is always inflationary, as an accepted truth; it is one of the biggest falsehoods, one of the biggest pieces of bad economics and propaganda around.
The main time money creation becomes inflationary, is when production in economies is overheating, i.e. when there is full employment and no capacity for increased production.
 
BenBurch said:
BTW, do understand that this is just a means of indirect taxation.

We inflate the currency by 10% and everybody's money and cash equivalents are devalued by that amount. Real assets won't be touched as much, and like any flat tax this is a regressive tax.

I'd much rather we simply raised the highest tax rate to 70% above $1M and hired a few thousand new auditors so that every single return above $500K gets audited every year.

But if the GOP are too spineless to do this, then coin it.
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This is the first intelligent post I've seen you write. If you want more progressive taxation, then raise capital gains, dont debase money. Of course, this won't solve the spending and government graft/waste problem, at all.
 
BenBurch said:
BTW, do understand that this is just a means of indirect taxation.

We inflate the currency by 10% and everybody's money and cash equivalents are devalued by that amount. Real assets won't be touched as much, and like any flat tax this is a regressive tax.

I'd much rather we simply raised the highest tax rate to 70% above $1M and hired a few thousand new auditors so that every single return above $500K gets audited every year.

But if the GOP are too spineless to do this, then coin it.
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I once got a piece of advice I've never forgotten and passed on a few times myself: no one's ever gone broke from paying capital gains taxes. I don't know where you came up with those particular numbers, but at least in principle I could get behind a marginal increase in capital gains taxes.

Just so it's clear, to me that would mean that given your numbers, a person reporting $1,000,001 in capital gains would pay 70 cents more than a person reporting an even $1M.

I'd very much enjoy seeing Nancy Pelosi having to pay a progressive tax rate. Yes indeed.
 
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