By Ian Katz
Jan. 8 (Bloomberg) -- The looming showdown between
President Barack Obama and congressional Republicans over
raising the $16.4 trillion federal debt limit has made
alternatives including minting a trillion-dollar coin or
invoking a constitutional amendment to pay the bills part of the
So far, the Obama administration isn’t participating.
The proposal is for the Treasury Department to mint a platinum
coin worth $1 trillion and deposit it at the Federal Reserve to
give the U.S. enough money to pay its debts.
OK, If this happens what's your money worth?
"What's in your wallet?"
I vacationed in Brazil in the 80's...I know what hyper-inflation and currency devaluation looks like.
Buy food, water and a gun. - Think of it as an insurance premium.
Have you tried to buy a gun or ammo lately? Most everything is sold out or is selling for a premium. It's like a run on banks. Everyone is afraid that Obama is going to limit gun ownership or restrict ammo sales. I wanted to buy a new Sig 9mm semiauto with laser gun sites but I'm going to wait until the hysteria has died down.
you were the one advcating for the colonic....
This is a spending problem, I do think the debt ceiling must be raised...but services must be cut and fraud must be stopped.
- new anacedotal evidence, I was speaking to a friend of my family who tells me his brother is collecting welfare (or some check from the US govt.), he is not a citizen and now back in the Domincican Republic. The money hits his bank account here and he accesses the funds via ATM in the Dominican Republic. - Now go Advocate for THAT.
Spending should be cut. The debate is about what spending. Social services are a necessary part of government to prevent things that are preventable that are not profitable for any corporation to prevent. Defense is a necessary part of government to prevent attack from places that want to rule or punish us.
The question is which to cut. And no, a 50-50 compromise is not a good idea. The biggest cuts have to come from the unfunded war and defense spending because we need to resize our defense posture to the real-world threat climate, not the hoodoo that W and his Blue Meanies promoted. Whatever happens to social services and regulation has to be based on making those more effective and efficient, because the problems they're solving simply aren't going away.
But what you don't do is simply turn off the spigot to everyone all at once. That's like stopping your airplane in mid flight because you can't afford the fuel costs of the rest of the flight. Only the dude with the parachute thinks that's a reasonable idea.
They had an expert on the air last night and he stated the coin would have too weigh as much as a jet airliner. Raising the Dept Limit has been a give-me for ever until this admistration got into power, just another power struggle.
It's a coin, not an ingot. It can weigh half a gram and if it says "One Trillion Dollars" on it, that's what it's worth.
As for what it would be worth to a collector, once taken "out of circulation"... tens of millions, maybe hundreds of millions of dollars. But it's the sort of thing that the Mint would put in its collection and never sell.
Depositing the coin, then withdrawing at the normal spending rate, is no different from doing it in dribs and drabs using bonds.
The coin can't be spent, so it's not in the money supply. Its ownership is slowly shifted from the treasury to the Fed, as the Fed sends withdrawals of cash to the treasury to be spent. That's when the money enters the money supply. Then what can the Fed do with it? Who can deliver $1T in value for the coin? It's even possible the treasury can decommission the coin the instant they own none of it. And, unlike a bond, the coin can't be sold to a private investor who could then collect interest from the treasury. The coin doesn't collect interest anyway. So long as bonds are in the hands of the Fed, when the treasury pays the coupon the interest is by law given back by the Fed. So to the Fed and the treasury the $1T coin is identical to a $1T bond, and to the public it's not transactable so it's not anything but a historical artifact.
All this is is a legal classification of the treasury's printing rights that the treasury isn't limited in using. It's identical to the congress raising the debt ceiling by $1T in one vote, something that makes zero ripples in the economy.
You're far, far worse off if the congress doesn't raise the debt ceiling and the treasury doesn't mint the unspendable coin, because then all of the government cashflows disappear, and the overmoneyed aristocracy takes over. Being the biggest spender makes you the biggest power. You do not ever want that power given to a non-democratic entity.