Posts Tagged With: Debt Ceiling

Trillion Dollar Coins – What Could Possibly Go Wrong?

Thankfully, there are statutory limits that prevent the Treasury from printing paper currency to fund its operations. Otherwise, do you seriously believe that common sense would be enough to stop them from doing so?

But were you aware of the fact that there is no limit to how high of a denomination they can assign to the platinum coins struck by the U.S. Mint?

According to subsection (k) of 31 USC 5112, which governs “Denominations, specifications, and design of coins”:

(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

Trillion Dollar CoinIt has been suggested that in order to avoid yet another battle over raising the debt ceiling, the President simply needs to instruct the Mint to strike a few one trillion dollar coins which could then be deposited at the Federal Reserve. The Fed could then shift the money into the Treasury Departments accounts and magically fund government operations for the next 2 years.

According to Joseph Gagnon of the Peterson Institute for International Economics, this would not create any added inflation since the U.S. Government would only be using the money to keep spending at existing levels and not throwing the extra money into the economy. I’m not an economist and I cannot say for certain this would not add to inflation, but you would have to assume that the Federal government would control its spending enough to not be tempted to repeat this in the future in order to finance ever larger deficits. If it did, I suppose they could always counter act the effects by having the Fed print less money, right? Right???

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