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About a month ago when the trillion dollar coin idea was floating around the internet, I had a sneaky feeling we'd see it again. Unfortunately, I was right. The article responsible for bringing this nonsense to the public arena was published by the Washington Post in December. The theory goes:
Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.
Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
Essentially, we would be playing with make believe money (since we're just assigning arbitrary values), pretending it solves all of our debt woes. This is hardly different from me deciding my favorite coffee mug is worth $1,000 and adding it to my household budget as a $1,000 credit.
Following the nasty fiscal cliff debate, Democrats and Keynesians are actually considering the trillion dollar coin nonsense -- seriously. We reached the current debt ceiling December 31 and only delayed sequestration. Hoping to avoid another ugly showdown where the inevitable demand for spending cuts will once again be the largest elephant in the room, Democrats seem content to look at gimicky short-cuts rather than address the cause of the problem -- spending.
In an effort to force the debt ceiling debate, Republican Congressman, Greg Walden from Oregon plans to introduce a bill prohibiting the minting of the trillion dollar coin. CBS News reported:
"Some people are in denial about the need to reduce spending and balance the budget. This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren't so serious about it as a solution. I'm introducing a bill to stop it in its tracks," he said in a statement. "My bill will take the coin scheme off the table by disallowing the Treasury to mint platinum coins as a way to pay down the debt. We must reduce spending and get our fiscal house in order."
Meanwhile, Paul Krugman advocates preparing the molds in the likeness of John Boehner, because, "given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous [trying to negotiate] — far more ridiculous than the notion of the coin." While lawmakers toy with make believe money and imaginary solutions, our fiscal problems remain quite real and will eventually become unavoidable.
General Anthony Clement McAuliffe words (or word, more accurately) sum up this whole situation quite nicely, "nuts!"