One TR Coin
This article on the Economist talks about the issue of the debt ceiling which has been a big issue in the news. This article then talks about this very odd movement to combat the debt ceiling. This involves a loophole in legislation where we could apparently mint a coin with a value of a trillion dollars and it has to be made out of platinum. The idea is that we mint the coin and "pay it" to the federal reserve and this would allow us too still pay bills while the politicians argue over the debt ceiling still. Even more surprising to me at least this idea has support from Nobel Prize award winning economist Paul Krugman.
While there is some mild support for this coin there are other obvious legal concerns. It would also undermine the Fed and create a situation where the Fed becomes more reliant financially on congress which I think is a terrible thing. The question however is would this be better then the government defaulting on its debt? I think while the effects of this coin wouldn't be great, it would be better then any outcome where the government defaults. The effects of that would be felt throughout the world and would be devastating. So I think this coin should only be minted as an absolute last minute necessity to avoid that.
2 comments:
When I read the news about a coin with a value of trillion dollars, I thought it was just a joke. However, it was not at all. The United States have been increasing their debt ceiling all the time when it needed to. Warren Buffett once said, "You just pass a law that says anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election". If people from congress pass this coin, it will have a huge number of negative consequences in the end.
I have read something about this in the past, and it is odd how our country has formulated it laws regarding the minting of currency. I am also curious as to how this would help with the current debt issue. Simply creating $1 trillion in circulation is bound to have some extreme effects on the market, but I guess we wont know unless we try.
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