Rebranding the “trillion-dollar coin”

So, hopefully you know about the whole #MintTheCoin thing. If you need to get up to speed, Ryan Cooper has a roundup of recent commentary, and the indefatigable Joe Wiesenthal has fanned a white-hot social-media flame over the idea. For a longer-term history, see Joe Firestone, and note that all of this began with remarkable blog commenter beowulf. See also Josh Barro, Paul Krugman, Dylan Matthews, Michael Sankowski, Randy Wray among many, many others. Also, there’s a White House petition.

Basically, an obscure bit of law gives the Secretary of the Treasury carte blanche to create US currency of any denomination, as long as the money is made of platinum. So, if Congress won’t raise the debt ceiling, the Treasury could strike a one-trillion-dollar platinum coin, deposit the currency in its account at the Fed, and use the funds to pay the people’s bills for a while.

Kevin Drum and John Carney argue (not persuasively) that courts might find this illegal or even unconstitutional, despite clear textual authorization. For an executive that claims the 2001 “authorization to use military force” permits it to covertly assassinate anyone anywhere and no one has standing to sue, making the case for platinum coins should be easy-peasy. Plus (like assassination, I suppose), money really can’t be undone. What’s the remedy if a court invalidates coinage after the fact? The US government would no doubt be asked to make holders of the invalidated currency whole, creating ipso facto a form of government obligation not constrained by the debt ceiling.

I think Heidi Moore and Adam Ozimek are more honest in their objection. The problem with having the US Mint produce a single, one-trillion-dollar platinum coin so Timothy Geithner can deposit it at the Federal Reserve is that it seems plain ridiculous. Yes, much of the commentariat believes that the debt ceiling itself is ridiculous, but two colliding ridiculousses don’t make a serious. We are all accustomed to sighing in a world-weary way over what a banana republic the US has become. But, individually and in our roles as institutional investors and foreign sovereigns, we don’t actually act as if the United States is a rinky-dink bad joke with nukes. As a polity, we’d probably prefer that the US-as-banana-republic meme remain more a status marker for intellectuals than a driver of financial market behavior. Probably.

The economics of “coin seigniorage” are not, in fact, rinky-dink. Having a trillion dollar coin at the Fed and a trillion dollars in reserves for the government to spend is substantively indistinguishable from having a trillion dollars in US Treasury bills at the Fed and the same level of deposits with the Federal Reserve. The benefit of the plan (depending on your politics) is that it circumvents an institutional quirk, the debt ceiling. The cost of the plan is that it would inflame US politics, and there is a slim chance that it would make Paul Krugman’s “confidence fairies” suddenly become real. But note that both of these costs are matters of perception. Perception depends not only on what you do, but also on how you do it.

The Treasury won’t and shouldn’t mint a single, one-trillion-dollar platinum coin and deposit it with the Federal Reserve. That’s fun to talk about but dumb to do. It just sounds too crazy. But the Treasury might still plan for coin seigniorage. The Treasury Secretary would announce that he is obliged by law to make certain payments, but that the debt ceiling prevents him from borrowing to meet those obligations. Although current institutional practice makes the Federal Reserve the nation’s primary issuer of currency, Congress in its foresight gave this power to the US Treasury as well. Following a review of the matter, the Secretary would tell us, Treasury lawyers have determined that once the capacity to make expenditures by conventional means has been exhausted, issuing currency will be the only way Treasury can reconcile its legal obligation simultaneously to make payments and respect the debt ceiling. Therefore, Treasury will reluctantly issue currency in large denominations (as it has in the past) in order to pay its bills. In practice, that would mean million-, not trillion-, dollar coins, which would be produced on an “as-needed” basis to meet the government’s expenses until borrowing authority has been restored. On the same day, the Federal Reserve would announce that it is aware of the exigencies facing the Treasury, and that, in order to fulfill its legal mandate to promote stable prices, it will “sterilize” any issue of currency by the Treasury, selling assets from its own balance sheet one-for-one. The Chairman of the Federal Reserve would hold a press conference and reassure the public that he foresees no difficulty whatsoever in preventing inflation, that the Federal Reserve has the capacity to “hoover up” nearly three trillion dollars of currency and reserves at will.

That would be it. There would be no farcical march by the Secretary to the central bank. The coins would actually circulate (collectors’ items for billionaires!), but most of them would find their way back to the Fed via the private banking system. The net effect of the operation would be equivalent to borrowing by the Treasury: instead of paying interest directly to creditors, Treasury would forgo revenue that it otherwise would have received from the Fed, revenue the Fed would have earned on the assets it would sell to the public to sterilize the new currency. The whole thing would be a big nothingburger, except to the people who had hoped to use debt-ceiling chicken as leverage to achieve political goals.


Some legal background: here’s the law, the relevant bit of which—subsection (k)—was originally added in 1996 then slightly modified in 2000; here is appropriations committee report from 1996, see p. 35; and legislative discussion of the 2000 modification.

Huge thanks to @d_embee and @akammer for digging up this stuff.

 
 

86 Responses to “Rebranding the “trillion-dollar coin””

  1. [...] places for UST to mint a trillion-dollar coin makes no sense and seems totally silly to me but this post explaining how the seignorage solution would/should actually work in practice seems perfectly sensible and fine to me so now I’m wishing they’d just go ahead and do [...]

  2. vbounded writes:

    Mr. Waldman, “On the same day, the Federal Reserve would announce that it is aware of the exigencies facing the Treasury, and that, in order to fulfill its legal mandate to promote stable prices, it will “sterilize” any issue of currency by the Treasury, selling assets from its own balance sheet one-for-one.”

    ——————————————————————————–

    Effectively, you are selling fed assets to fund government operations on a one-for-one basis. That sounds deflationary due to hiking interest rates for issuers of the type of assets sold.

    More importantly, the politicians, lobbyists, and gerontocracy benefit from the debt limit. Good luck with those agency problems.

  3. streeteye writes:

    The issue is, I think, that at $1T a year, financing deficits by printing money and sterilizing, would rapidly constrain the Fed’s future ability to withdraw QE, as the Fed sell its Treasurys instead of the Treasury issuing them. Pretty soon, it affects the mix of securities available to the market, impacting policy, and then the Fed runs out of Treasurys to sell. If the Fed goes along with it, it potentially puts the Treasury in the middle of monetary policy, against the Treasury-Fed accord of 1951.

    I wonder if you could avoid some of this if the Treasury borrowed securities from the Fed, banks etc., and sold them, promising to replace them when able. The statute seems to just limit the face value of the debt that can be issued. I think that hypothetically, the same security could be borrowed and sold multiple times. But it doesn’t seem like a very sound basis for a financial system, and eventually you run out of securities to sell. These are only short-term solutions.

  4. Lord writes:

    Minting the coin could have some significant positive benefits, freeing us from the fear of debt and demonstrating it is just another tool we can control at will. I don’t think we should give those up by Fed sterilization policies, rather they should reply they will respond with conventional monetary policy when needed, allowing it to provide fiscal stimulus and ease the burden on the Fed of unconventional policy. The inflationistas will proclaim the sky is falling and the austerity/debt crowd will go mad, but those are additional benefits, not to be foregone. May both learn something from it.

  5. JKH writes:

    The obsession with the $ 1 trillion denomination does seem unnecessary. But the prospect of paying for government expenditures by issuing coins as part of the expenditure process seems equally silly. The commercial transaction requirement will dominate any collector interest. And the denominations will still have to be much larger than $ 1 million to make any headway. And most of it will be returned to banks immediately.

    I’d suggest a deposit at the Fed of $ 25 billion per week instead. Perhaps with some collector program on the side, but that piece is going to be insignificant in funding the government’s needs.

  6. Dan Kervick writes:

    Steve, I understand why the Treasury Secretary might feel the need to outline a “sterilization” scheme, to sooth the fears of people who do not quite understand what’s going on. But really, with clear communication, why should this be necessary? If these coins are minted and deposited, nothing really changes with respect to the impact on private sector balance sheets, and transactions between private sector entities and the government. Tax payments are unaffected; Congressional appropriations are unchanged; debt payment on existing debt is unchanged. The only thing that really changes (if the debt ceiling is enforced) is that a certain amount of asset swaps between the Treasury and the private sector don’t happen. The Treasury gives fewer securities to the private sector, and the private sector gives fewer dollars to the Treasury. Maybe there is some modest impact from that – but if anything the impact is deflationary rather than inflationary, since the private sector reaps a smaller quantity of interest payments.

    Than main point to emphasize here is that even if the Treasury issues its own spending balances, it can’t spend any more dollars into the private sector that it has already been authorized by Congress to spend. Nor can it unilaterally decrease taxes.

  7. Detroit Dan writes:

    Damn good suggestion…

  8. Detroit Dan writes:

    Dan K — The beauty of Steve’s suggestion is that it is pretty much unobjectionable, even at first glance. It would buy some time. During that time, people would think through the logic of the whole thing and learn a bit more about how the system actually works. Presented as a limited and technical emergency tactic, the whole operation would be given some breathing room.

    A trillion dollar coin, on the other hand, would play into Tea Party hands, providing the opportunity for theatrics to distract from rational consideration of the operation…

  9. JVM writes:

    Wouldn’t a steriilzed coin issue amount to considerable tightening in the private sector as interest rates soar? That doesn’t sound like my favorite thing. Or would it be counteracted by treasury buyers changing to other savings vehicles?

  10. Dan Kervick writes:

    What assets would Treasury sell? And how do such sales sterilize the issue of currency?

  11. [...] Rebranding the “trillion-dollar coin” – interfluidity [...]

  12. Mayson writes:

    And there’s even Canadian precedent for million-dollar coins: http://www.mint.ca/store/mint/learn/million-dollar-coin-1600006

  13. beowulf writes:

    The problem Steve is that there are only two kinds of currency,
    1. Federal Reserve Notes with seigniorage flowing to Fed (which simply reimburses Bureau of Printing & Engraving for its costs).
    2. United States Notes with seigniorage staying with Tsy. Alas, total US Notes in circulation is capped by law at $300 million so its not exactly a scalable product.

    There are a couple of alternatives to the trillion dollar coin:
    1. print consols. By the terms of the debt limit statute and a century of tax law cases drilling into the meaning of “face amount” of an obligation; an interest-bearing Treasury bond (discount bonds are counted differently) without a maturity date has no face amount of guarantee principal to add to the public debt. The debt ceiling would not apply to perpetual consols (the T-bond statute doesn’t actually require bonds to mature and Tsy has, in fact, issued consols in the past.

    2. trillion dollar gif. The Fed could go large into the philanthropy business and gift $2 trillion (or howwever much in Treasuries it buys up) to the Bureau of Public Debt. This could all be done online, I imagine, but s photo op with a handshake and a lottery winner-style jumbo check would be awesome. Since the Fed’s originator, present interest holder and future interest holder are all the same party– the US Government- there’s surprisingly no breach of duty/waste of asset issues with the Fed giving away trillions of dollars like this.

    As fond as I am of the trillion dollar coin, the smart play is the trillion dollar gift.. it could be carried out by the Fed pretty much instantaneously and it doesn’t require the President or the Secretary of the Treasury to actually do anything– the Bureau of Public Debt has an established system to receive donated money and Treasuries (which are used to shrink the public debt. As you can imagine, the process is quite scalable.

  14. Agog writes:

    It’s almost as if nobody on the internet has told you guys (or the world’s central bankers) that ‘there is no magic money tree’……

  15. JKH writes:

    SRW,

    I seem to be the only one here who finds your proposal to be unfeasible from a purely operational perspective. I realize you are often not responding to comments these days, but here is my analysis:

    You say:

    “Therefore, Treasury will reluctantly issue currency in large denominations (as it has in the past) in order to pay its bills. In practice, that would mean million-, not trillion-, dollar coins, which would be produced on an “as-needed” basis to meet the government’s expenses until borrowing authority has been restored.”

    At that point, I assume “as-needed” means piecemeal, matching net expenditures, although the balance sheet mechanism isn’t clear from this description alone.

    “It will “sterilize” any issue of currency by the Treasury, selling assets from its own balance sheet one-for-one.”

    I understand your thinking here, but this is a secondary issue, IMO. Elsewhere (several posts and comments at Monetary Realism), I’ve proposed that Platinum easing be fully integrated with the current regular quantitative easing program. Your point about “sterilization” can be part of a larger policy/strategy approach to QE entrance and exit of both types on an integrated basis. The bottom line issue will always be what level of excess reserves is the Fed comfortable with – whether produced by “front door” regular QE, or “back door” platinum QE. (“Front door” produces reserves directly; “backdoor” produces them according to Treasury’s pace of net expenditure from its Fed account, stuffed by pre-funding in the form of platinum deposits, at least in the case of the upfront coin deposit as conceived prior to your post.) In other words, the policy explanation of the excess reserve level must cater (in part) to the broad perception (right or wrong) of excess reserve effects, regardless of whether the origin of those reserves is regular or platinum QE. The rest is a matter of reconciling the conceivable equivalence of regular and platinum QE as the source, which I’ve done at Monetary Realism. But I have absolutely no problem with your general approach to this issue of “sterilization” or integrated Fed balance sheet management of excess reserve levels. So all this is secondary to my main point.

    “The coins would actually circulate (collectors’ items for billionaires!), but most of them would find their way back to the Fed via the private banking system.”

    This is the puzzling feature for me. The coins can’t circulate unless the holders have paid for them. And the holders can only have paid for them in two ways:

    a) The holders buy them from Treasury (or from the Fed as agent for Treasury), in which case bank reserves are debited, and Treasury’s account at the Fed is credited. There is no change in the size of the Fed balance sheet. Once Treasury has spent those new balances, both the Treasury account and reserves return to their previous levels, other things equal. Again, there is no change in the size of the Fed’s balance sheet. Finally, if such circulating coins “find their way” back to the Fed, the Fed buys them and excess reserves are increased, other things equal. The Fed’s balance sheet increases. That final balance sheet position is the same as it would be had the Fed taken the coin or coins in on deposit in the first place, as has been generally discussed prior to your post. This entire scenario of circulating coins seems problematic though, since I just don’t see how this meandering flow of funds and coins can possibly synchronize with the corresponding real world Treasury demand for balances that must be available to fund net spending as required according to timetable, but in the absence of borrowing.

    b) The second way in which the holders can “pay” for circulating coins is that they receive them in kind from Treasury, in exchange for discharging their own receivable asset from Treasury (e.g. social security and Medicare payments due), when Treasury net spends. This is what I’ve assumed you must mean by your proposal, and yet it makes no practical sense to me. How does Treasury make more than $ 150 billion per month of payments for Social Security and Medicare, and more than $ 50 billion a month in Defense Department expenditures, where in either case the portion of the expenditure that isn’t covered by taxes must be covered as part of an issuance of $ 100 billion a month in platinum coins to cover off the overall deficit funding requirement? In this scenario, how does Treasury distribute platinum coins instead of cheques, in order to cover Social Security payments, for example? So this scenario just doesn’t make sense to me either.

    I must be missing something here. It would be nice if you intervened in comments to correct my misunderstanding.

  16. Dr Zen writes:

    Poor Agog, you are so wrong. Fiat money *is* a money tree. Just because a lot of people make a lot of money and sell a lot of newspapers pretending it isn’t, doesn’t mean it isn’t.

  17. [...] The trillion dollar coin idea explained.  (Interfluidity) [...]

  18. Calvin Harris writes:

    I’ll go along with the trillion dollar coin on one condition. You replace the slug bonds in the ss trust fund and the federal employee trust fund with these new coins.

    LOLOLOLOLLOLOLOL

    We’d see in a nanosecond just how much the proponents of these new coins believe in the credibility of them. It would be knee slapping funny.

    Of course the proponents only want these coins to pay off OTHER PEOPLES DEBTS. Because they know it’s a joke and they don’t want the joke to be on them. But they are quite happy to play the joke on the rest of America.

  19. Dan Kervick writes:

    JKH, I think its Steve’s suggestion that Treasury just takes advantage of the fact that these coins would be legal tender and so uses the coins for its ordinary spending. If the Treasury has placed a $1 million dollar order with a construction company for repair of a bridge, then it can pay the company with a coin that it has issued itself. It does this for the total amount of scheduled spending in excess of tax revenues,and issues no new debt beyond the debt that is rolled over. The coins make their way back to the Fed because the people receiving these coins in payment would almost all deposit the coins in their bank accounts, and the banks would in turn exchange them with the Fed for reserve balances.

  20. Dan Kervick writes:

    We’d see in a nanosecond just how much the proponents of these new coins believe in the credibility of them. It would be knee slapping funny.

    I would be happy to get one of these coins. They would be legal tender. What other kind of credibility do they need?

  21. Dan Kervick writes:

    The last sentence in the previous is mine.

  22. JKH writes:

    Dan,

    That’s also my understanding.

    My question is whether it is reasonable and operationally feasible to expect that $ 100 billion of deficit spending per month can be done by paying with coins. That would seem operationally cumbersome compared to writing checks – depending on the granularity of the required payments each month. I think the payment operation detail and granularity has to be fleshed out to see how this could work.

  23. TANSTAFFL writes:

    And a perpetual motion machine is discovered once again …

    But why stop at one trillion dollar coin? Mint one for every citizen – we’d all be rich !

    Then there’s the design of the actual coin. You could put the visage of Bernie Madoff on one side, and a unicorn on the other. And perhaps inscribe the quote from Animal House on the wisdom of trust.

  24. Peter K. writes:

    The main problem is the Republicans taking the economy hostage. My view is to either let the economy crash and blame them or do the ridiculous trillion dollar coin – with Ronnie Raygun on one side. Let them know how ridiculous their hostage-taking is and that you’re on to them. If you counter them with something reasonable, they’ll just come up with something else more ridiculous next time. Obama’s legacy will be decided in a couple months. I like the phrase “two colliding ridiculousses don’t make a serious” but believe in this case it does.

  25. Dan Kervick writes:

    JKH, yes it certainly does seem more cumbersome than just creating a balance by depositing a single coin and then making payments against that balance in the usual ways.

    Also, I worry that the issuance of large amounts of these coins would enter a speculative secondary market among collectors convinced that the coins will be valuable collectors’ items in the future. I don’t think that would have any harmful first-order effects. But if the whole point of Steve’s alternative plan is to preserve the dignity of the government and avoid the gaudy publicity of the minting and delivery of a trillion dollar coin, then highly publicized speculative games with million dollar coins might not help.

    BTW, I’m sorry I misread Steve’s proposal before. I see that the idea is that the Fed would sell assets to “sterilize” the coins issuance, not that Treasury would sell assets. I still don’t see why the sterilization is necessary. If some volume of already-authorized spending carried out via the issuance of coins is inflationary, then it it would have been inflationary anyway if carried out via security issuance. When the Treasury issues securities, it prints up a financial asset and swaps it for some non-circulating savings. So the high-velocity money it injects is not sterilized by the low-velocity money it extracts.

  26. Peter K. writes:

    I mean a reasonable coinish solution could kick the can down the road on Republican hostage-taking, but Obama could do that with deal like the one in 2011. The non-crazy Republicans keep coming to the table in the end. He could offer spending cuts other than SS and Medicare benefit cuts.

  27. Agog writes:

    Dr. Zen,

    No shit.

  28. Diego Espinosa writes:

    SRW,
    On sterilization, I’m not sure you’re right.

    The $1m coins are equivalent to Treasury issuing the pvt. sector a zero-coupon perpetual security totaling $1tr. This security has infinite duration.

    If the Fed “sterilizes”, it takes away from the pvt. sector a perpetual coupon-paying security (Excess Reserves). This security has overnight (inter-FOMC meeting) duration.

    Both swaps are done for for l.t. bonds.

    The net effect of the two transactions is the duration of pvt. sector assets increases significantly, from o/n to infinite. If the private sector prefers not to hold this duration risk, it will swap the zero coupon perpetual (the $1m coin) for real goods/assets. The effect would be inflationary.

  29. dwb writes:

    I think you are spot on: once we hit the debt ceiling, the President is required to break as few laws as possible. To do that, and still finance authorized appropriations, the Treasury can sell assets like gold reserves or print money. But in the case they print money, they are probably not allowed to print a trillion dollars at once, they have to mint coins as needed to satisfy obligations.

    As an aside, whether printing money (minting coins) is more or less inflationary than the Fed buying bills/bonds depends a lot on how permanent the market sees the increase in the monetary base, and whether the Fed can keep expectations anchored around the the “Evans” rule. Once we head into extreme measures like minting coins, all bets are off IMO on the expectations front.

  30. JKH writes:

    SRW (and Dan):

    Let me explain further the rationale behind my counter-proposal in the my first comment above:

    “I’d suggest a deposit at the Fed of $ 25 billion per week instead. Perhaps with some collector program on the side, but that piece is going to be insignificant in funding the government’s needs.”

    I think you have pointed out some important pragmatic concerns about the proposal in general, but in proposing a different specific solution, you have somewhat conflated two different issues.

    The first issue is the funding of deficit spending.

    The second issue is the payment mechanism for deficit spending.

    I think it’s really the funding issue that you’ve zeroed in on – in the sense of the “ridiculousness risk”.

    The funding issue is a choice, but let’s just assume that the choice has been made to fund deficit spending through platinum coin issuance, for the reasons found in the background discussions to this situation.

    I think the “ridiculousness risk” you’ve identified has mostly to do with the size of the coin denomination as typically discussed – $ 1 trillion.

    There’s actually no reason for this, because it’s no more necessary to pre-fund $ 1 trillion in Treasury balances at the Fed through platinum coin issuance than it is to pre-fund $ 1 trillion through bond issuance in the normal course. There is a periodic pace and synchronicity to funding and deficit spending that can be achieved more moderately in either case, through a more measured pace of funding. That occurs obviously with periodic Treasury bond issues in normal operations. And it could occur as I’ve suggested with weekly platinum issuance of $ 25 billion (or monthly of $ 100 billion for example). This strips out the denomination scariness in the ridiculousness quotient. It is also incremental, which allows the entire process to accommodate the pace at which Congress is able to revert to a more sane approach in correctly acknowledging the implicit determination of funding requirements once spending has been approved, thereby hopefully someday rejecting the insanity and basic unfairness of a debt ceiling hostage negotiating strategy.

    With that denomination risk removed, it becomes a matter of the Fed acknowledging its own valid role in facilitating spending already approved by Congress, by accepting smaller periodic deposits of platinum directly from Treasury over time.

    So that process would involve no spending using platinum as a medium of exchange – in other words, the second issue of the payment mechanism for deficit spending is left unchanged, and remains as it has always been done – with cheques and bank account transfers, sourced from a Treasury account that is kept sufficiently flush but not unnecessarily flush.

    Examining the SRW proposal to somehow use platinum coins as an actual medium of exchange, I do see significant operational problems related to granularity of payments, as well as the sheer awkwardness and perhaps redundancy of the payment mechanism itself. In fact, I really can’t see this being done unless Treasury creates paper claims on platinum as the medium of exchange – rather than platinum itself. Treasury would use these paper claims to pay all counterparties for deficit spending. These would be like cheques – except they would be claims to platinum coins. I expect virtually all counterparties would then take those claims to their bank and request bank deposit credits in exchange, and instead of asking for physical platinum coins. The result would be that the Fed would credit bank reserves, while simultaneously requiring a platinum deposit from Treasury, and holding the platinum as an asset against the reserves just created.

    You can see how it all ends up amounting to the same thing.

    So I think the SRW concern primarily has to do with the optics of funding – which can be resolved through smaller denomination periodic platinum deposits, rather than large denomination batch deposits. It doesn’t need to be about the deficit spending payment mechanism.

    The rest of it is resolvable from an optics perspective on the basis of the kinds of discussions that have already occurred in the blogosphere, IMO. There can be a full integration of regular QE with platinum QE, as I have discussed at Monetary Realism. And the issue of “sterilization” which SRW has raised can be fully integrated into normal Fed deliberations on what the entire QE effect (regular and platinum) is for excess reserves. That “sterilization” issue is an ongoing one for the Fed in terms of regular QE policy and strategy (exit strategy is itself a riff on sterilization), and it is a legitimate one in a pragmatic world, and for platinum this would simply be bootstrapped onto the existing regular QE policy deliberations.

    Finally, I’ve always been slightly puzzled by the prominence of the $ 1 trillion denomination assumption in platinum discussions. It is in effect a diversion from the potential for pragmatic use of the idea. It is not necessary at all. But I think the reason for its prominence is for its effect as a shock recognition factor in depicting an accurate understanding of how the monetary system actually works. But this sort of approach to “drive for show” isn’t necessarily what one wants to achieve when one needs to use the idea to “putt for dough”, in order to achieve some pragmatic funding purpose in the context of a real world in which $ 1 trillion becomes a hyperinflation warning flare for those who might believe in that sort of depiction of hyperinflation risk.

  31. JKH and all — Thanks a ton for the comments. I don’t enjoy or relish at all being the sort of self-important prig who doesn’t participate in comments. I wish I could say it was because I’ve been busy in some wonderfully productive way, but quite the contrary. Shit’s bullshit and all fucked up, as they say, and has been for about the last year. That and my quasipolicy that if I participate I try to respond to nearly everyone has made my appearances in the comments very rare. I’m hoping to find some semblance of the ever-elusive neoclassical long-terms stable equilibrium in my own life — a pony too! Then maybe then I’ll participate (and blog) more often.

    I’m not going to respond to nearly everyone here, alas. But, I’ll make a general remark and respond to JKH’s questions.

    For people who have already understood the economics of the “trillion dollar coin”, this proposal doesn’t offer any economic improvement whatsoever over that idea. On the contrary, it would create additional costs: lots more platinum would be used, for example, and the Fed might find itself trading inefficiently to make a show of sterilizing new currency. The benefit of this proposal, and I think it is a very real in the sociopolitical world we actually live in, is simply that it violates convention and precedent less aggressively than the trillion dollar coin proposal. Though there’s lots to criticize in Will Wilkinson’s piece, but I think this is very good:

    it seems to me that the Treasury is “not allowed to just print money” at the order of the executive in about the same sense that the executive is “not allowed” to order the air force to drop nukes on Brooklyn, or “not allowed” to order the assassination of American citizens. Which is to say, it’s just not done, until it is. The American habit of making a fetish of their written constitution tends to blind them to the fact that power is constrained at last by conscience, convention, and credible threats of social, institutional, and physical reprisal, not paper law. The pundit class’s interest in the statutory niceties of the president’s authority to mint platinum coins tells of both a touching faith in the subordination of executive power to public procedure, as well as a longing to transcend the actual democratic process through the singular will of a great leader supplied with a gleaming totem of grail-like generative power.

    The laws in practice are about what the government can get away with, and we’ve done too much of letting the government get away with stuff that ought to shock our collective conscience. I think that outrage is an underrated commodity in sociopolitical life, and I think that we are running very short on that precious fuel for justice. I think it’s terrible that we’ve grown to shrug off giant underhanded bailouts for banks none of whose leaders are financially ruined or criminally prosecuted, drone assassinations of people who’ve been condemned by no public legal process in countries with which we are not at war, etc. The world of perception is beyond “science” (unless you want to convene focus groups and crap), but minting a trillion dollar platinum coin and walking it to the Fed strikes me as a very aggressive violation of custom and people’s sense of fair play, where as super-reluctantly and temporarily and bending-over-backwards-to-apologize-and-mitigate-problems issuance of odd-but-not-entirely unprecedented coinage is much less of a violation. The additional costs — the metal, the churning at the Fed — are a price we should pay to observe the forms and customs that help us believe in a sometimes-but-unfortunately-not-always-self-fulfilling way that the government is at least striving to play fair in a world that sometimes throws us all curve balls.

    In terms of operational issues, the basic idea is that the Treasury would sell the coins to the private sector, creating inflows to its reserve account at the Fed. Some of those “sales” would be to collectors (and, um, drug dealers and stuff — there’s one downside of the proposal that have to be attended to!), but mostly they’d be to private banks (booked as deposits by the Treasury or as sales) who would then mostly send them to the Fed and have their reserve accounts credited. Thus, the Treasury converts the coins to reserves, and the coins end up at the Fed, exactly as in the $1T coin variation. But the process observes some comforting forms. The whole thing is roughly analogous to the no-primary-market-purchases rule for the Fed. Having the Treasury sell bonds to banks who then sell them to the Fed is dumb from a straight economic efficiency perspective, but it comforts people relative having one hand of government buy from another or the straight-out money finance that the two-step actually engenders. One might argue (I think I sense this in some of Dan’s comments) that, rather than creating noneconomic charades, it’d be better to educate the public about how our monetary system really works and then let it function efficiently. But, though Dan and JKH and I might find a lot of common ground about how we think the monetary system really works, a lot of even very elite economists won’t accept our characterization. Trying to make solving real-time problems contingent on persuading very resistant high-powered egos and dramatically altering the public’s view of the economic world strikes me as a bit too ambitious, although it would be better if we could do all that.

    If the Fed altered its behavior not-a-whit when Treasury began this program, that is it performed exactly the open-market operations it would have performed had the program not existed, then the issuance of platinum coins would be a form of quantitative easing. Coins would still end up at the Fed — Diego, that’s what happens when the private sector prefers overnight rather than perpetual, it deposits perpetual at the Fed in exchange for overnight rather than bidding up prices. The Fed stands ready to exchange reserves for currency at will.

    But the Fed wants quantitative easing to be its bailiwick, so what the Fed should do as a matter of efficiency is sterilize the issue of coins only partially. If the Fed would have done 50B of QE in a month and the Treasury issued 100B in coinage, it should sterilize 50B. But that’s hard for the public to grasp. So, though I hate the inefficiency and the transaction cost subsidy to primary dealers, I think it’d probably be worth eating the cost of having an office of the Fed literally monitor coin issuance and sell assets one for one, and let the usual OMO desk at the NY Fed repurchase some of those assets consistent with the FOMC’s QE programs.

    Again, the platinum coin would be a lot cheaper and easier to administer, and JKH’s reasoning about how it would in itself be QE and how the Fed would want to respond to that is all good. But I think this is a case where it’s worth bearing some “frictional costs” in order to keep things very clean and clear for the general public.

    (This isn’t just some pathology of government! For example, one of the idiotic things I do is supervise a small business in Romania. I often insist on paying bank transfer fees inefficiently, because doing so creates clearer statements for me than what I get when payments are made through cash accounts. Romanian banks pay higher interest on personal than business deposits, and despite significant balances, I don’t distribute funds from the business to its owner and then have them “reinvested” as needed, although I could. These are all costs I’m willing to bear for “K.I.S.S.” Having separate accounting of Treasury-coinage sterilization and QE operations amounts to the same thing.)

    I’ve got to run, and will be literally on the road all day. I don’t think I’ll be back in the comments of this post. Again, I am really sorry for my general nonparticipation in comments. (And I have to hit send and run right now. No editing! Sorry for that too.)

  32. JKH writes:

    rats – I think you probably didn’t see my last comment, just before you hit send

  33. Steve Roth writes:

    Three cheers for JKH, as usual.

    Treasury:

    “Instead of issuing bills and bonds to meet our legal obligations as they arise, we will issue currency (in the form of platinum coins) to meet our legal obligations as they arise. We must do this because we are required by statute to meet those legal obligations. We will deposit the currency at our bank, which deposits will allow us to make our payments efficiently and easily using existing payment systems.”

    Fed:

    “Don’t worry, we’ll manage it fine.”

  34. JKH writes:

    But I think we’re about on the same page with regards to the $ 1 trillion optics issue.

  35. Steve Roth writes:

    beo: you might know — is treasury required by statute to pay all expenditures and service all debts enacted by congress? I assume so, but… what statute(s)?

  36. Steve Roth writes:

    @SRW: Very interesting. Dan et al point out rightly that things would be much easier to understand if government just issued dollars instead of bonds (which get turned into dollars by the fed and the repo market).

    But you’re saying, I think: given the rather byzantine system we’ve got, it would be less confusing if we issued platinum coins like we issue bonds. People are used to that byzantine method.

    The larger issue is the control-transfer from the Fed to the Treasury. If the Fed finds that it needs to sterilize, but runs out of bonds to sell, congress effectively controls monetary policy. Scary.

    I suppose the Fed could then start selling platinum coins. Buy why would dealers buy them if they could just hold bank deposits (reserves)?

    Which brings us, I suppose, to negative IOR. In the scenario described, would that be a sufficiently effective monetary instrument for achieving discretionary monetary policy (to the extent that it’s ever fully “discretionary”…)?

  37. JKH writes:

    SRW,

    I see your point regarding the analogy with the existing system of indirect flows of treasury bonds that end up held by the Fed. But getting down and dirty on operational detail once again, I don’t see how the banks or the banks’ customers are motivated to buy these platinum coins in quantities sufficient to fund the deficit – assuming as you do that natural demand would be quite small compared to the supply of coins that would end up at the Fed. The difference between bonds flows and the analogous system of platinum flows is that there is an economic motivation to bid for bonds and a very natural source of demand for them. There isn’t demand to anywhere near to the same degree in the case of platinum. It really would be an artificial replication of the bond flow system in that sense. In fact, I’m not sure what the motivation would be to buy platinum coins – there’s no opportunity for capital gain in the cycle, as there is in the case of the bond flow system. The coins must be sold at face value – not at some market auction value.

    I also see your point on the optics of direct money creation. But I think this is where’s Beowulf’s logic must come home to roost with regard to the prudent obligation of the executive branch to fund government’s payment obligations, as noted specifically and legally and by default in the coin clause. The nature of the funding obligation overrules any concern about the optics of the funding circuitry, IMO. And the coin clause does appear to be designed to allow for exceptional treatment in priority – rather than replicating treatment similar to bond funding circuitry.

    (And as noted a few times, I agree in general terms with your point regarding pragmatic integration of sterilization policy for regular and platinum QE effects.)

    This upcoming debt ceiling hostage taking and negotiation is going to be a tough business.

  38. JKH writes:

    Steve Roth 12:14

    perfect – in terms of coordinated Treasury and Fed statements of responsibility

  39. Why stop with one or two trillion-dollar coins? Why not make a thousand of them … we would all be rich!

    We could solve the debt ‘problem’ once and for all (until it’s necessary to make 20,000 of them)?

    The entire argument presumes that folks in charge have any idea what they are about … which presumption is false. We are in an entirely new and different world, one with declining energy availability. There is only one concept that we must grasp, one concept that will be without exception the organizing principle for the human race for the foreseeable future:

    LESS.

  40. Troy writes:

    whether printing money (minting coins) is more or less inflationary than the Fed buying bills/bonds depends a lot on how permanent the market sees the increase in the monetary base, and whether the Fed can keep expectations

    IMO inflation comes from below, not above — no wage inflation, no inflation.

    We are in an entirely new and different world, one with declining energy availability

    There are immense rents to be wrung out of some fat pigs before increased energy costs have a noticeable effect on the economy.

    Again: no wage inflation, no inflation.

    Household gasoline costs are not the largest line item — housing and medical services are, and each of these sectors have trillion-dollar rents embedded in them, and also have very little exposure to gasoline as an input cost.

    Higher energy costs may hit corporate America, but they’re not hurting for money:

    http://research.stlouisfed.org/fred2/series/CP/

    Plus this nation has a lot of NG to exploit. decades’ worth. And we haven’t yet begun to do PV right.

    http://www.oynot.com/files/images/world-insolation-map-04-1250×691.gif

  41. beowulf writes:

    “The obsession with the $ 1 trillion denomination does seem unnecessary. But the prospect of paying for government expenditures by issuing coins as part of the expenditure process seems equally silly”

    I suppose the name “trillion dollar coin” did create a certain amount of path dependence. :o)

    “This upcoming debt ceiling hostage taking and negotiation is going to be a tough business.”

    Well, if the President opens talks by announcing the hostage has escaped and is now safe and sound in an undisclosed secure location, what exactly is left to talk about?

  42. Miley Cyrus writes:

    Counterfeiting.

  43. beowulf writes:

    As to Steve’s question, the 14th Amendment creates the duty to pay all obligations (broaader than just T-bonds, there’s also civil servant wages, contractor invoices, Medicare invoices– anyone who’s provided goods and services to Uncle Sam has a constitutional right— enforceable in the Court of Claims– to receive payment). The duty to pay out on valid appropriations is 31 USC 321(a)(1).
    “The Secretary of the Treasury shall…issue warrants for money drawn on the Treasury consistent with appropriations”

    Bear in mind, a warrant has a different meaning in the govt world than it does the investment one. When a judge issues a warrant, he’s not giving the police a permission slip to arrest or search someone he’s commanding the police to do so. I’m looking at one i have handy, I’ve always loved the last line– HEREIN FAIL NOT. by contrast, a stock warrant, is, well, permission slip to buy stock at a set price ON or before a set date in the future. Essentially, its a call option. I’

  44. beowulf writes:

    Sorry, meant to close with, I’m confident in saying that any judge reading “issue warrants for money drawn on the Treasury” would read into that a certain, shall we say, HEREIN FAIL NOT-ness.

  45. auresdelmulo writes:

    With other MMTers here, I’d like to raise a question with you. We presume that there is a debt to be paid by the trillion dollar coins. But suppose there isn’t. Then buying the securities from the Fed without Congressional authorization would be illegal. So, we first must determine if there really is a national debt in the securities at the Fed.

    I am a former advocate of the use of $10 Tillion coins to buy back the securities and also for the Treasury to obtain Federal Reserve notes debt-free in order to do deficit spending in the future. But on the point of buying the national debt, does that debt really now exist? I reason this way:

    Congress has a deficit and the Treasury seeks to obtain money to cover the deficit for spending. Treasury issues securities (IOU’s with future date of redemption) and these are put up at auction for large banks to bid on through bidders at the auction. Some banks get the securities and the Treasury gets its money. At this point there *is* a debt of the United State to the banks holding the securities. But the banks have taken a big hit in their reserves when the “loan” was sent to the Treasury, and that has reduced their ability to make loans, which is their livelihood. They may take the securities back to the auction and put them up for bids. The Fed may come along at the point where the securities are now close to maturity or having matured and buy the securities, with the best bids, from the banks. It will pay by money it creates out of thin air, or more properly by just crediting the reserves of the banks in question. So now, I assert this automatically and implicitly redeems the debt for the government by the government, because (1) the Fed is a creation of the Congress in the FRA of 1913 as amended, and (20 the Fed pays for them using an exclusive power of government to create money of the realm. Regardless of what everyone tells you, and maybe even the Fed tells you (I don’t know what their explicit position is on this), just seeing what is done and by whom is sufficient to conclude that the Fed redeems the debt of the government to the banks that was obligated in the securities sold the banks by the Treasury. It’s like the Emperor’s New Clothes. Oh what a beautiful big debt he has! Yes, it terrifies me to think of it. Look at how the we now owe the Fed for the obligations of the securities. because it has acquired them. And then someone young and innocent says, “But I don’t see a debt here. I see that the Fed has redeemed the debt automatically and implicitly in buying the securities with money it creates out of thin air. The Fed is also government. Even the Fed’s FAQ’s says so. It is structured to be independent of influence of government by prohibiting sales of securities directly to the Fed; by terms for governing members of the Fed that extend beyond two terms of the President or members of Congress; by allowing by law the Fed to fund its operations from transaction fees of 6% on the interest of the securities purchased, which means the Fed doesn’t have to rely on the good opinion of Congress to get appropriations for Fed operations. But aside from those structural stipulations, the Fed is a government agency, the issuer of money.
    Seen in this way we see that when the Fed buys the securities, redeems the debt, the Treasury’s money from the banks is now “debt free”. The Fed’s money given the banks, equaling what the Treasury got from them is new money introduced into the economy. Money being fungible we might reorient our thinking and say that the Treasury got free money from the Fed and the banks just ended up like they were before. So the Treasury is spending with new money even thought it is old money. This illustrates the way the Treasury and Fed collude together in creating new debt-free money and spending it into the economy.

    And the Treasury could use similar procedures to get money for other expenses, like the transaction fees owed to the Fed, by issuing securities, having banks buy them, then having the Fed buy these securities and redeem the debt to the banks. And taxpayer money wouldn’t be needed. Taxes only come in through the non-deficit part of the spending as money taken out of the economy to control for inflation.

    As for those who would prefer totally relying on the Treasury for money creation and issuing, that is possible. But explain to me how there would be a role for some agency to control inflation by controling interest rates and buying and selling T securities? The Fed needs those securities to control inflation by selling them to banks to draw money out of the economy and to set interest rates. If we buy them all back, what would the Fed have to work with if we over indulge in deficit spending and produce inflation?

    Anyway, I think the issue of the national debt lies at the center of a lot of the conflicts and impasses in Congress, especially now surrounding the debt ceiling. If there is no national debt at the Fed, does the debt ceiling have any meaning and any effect on Treasury issuing securities, knowing that they will eventually be bought up by the Fed?

    Recently (Jan 4, 2013) there were postings of articles at Bloomberg News and Forbes about how the administration is thinking of using the $10 Trillion coin minted by the Treasury at the Mint. That aroused a lot of negative and hostile reactions to the idea. But that is to be expected for what is a revolutionary concept for many, that we have fiat money, and the Fed creates it out of thin air. That has had the effect of creating some awareness of the issues surrounding the national debt. Do the American people really understand what it is? If they were to look closely at how the Fed gets the securities and what the Fed is with respect to the government, would they think there is a national debt to worry about in the first place? I was trying to argue that the idea of the $10 trillion coin has uses, but it may not be relevant to the national debt, IF there is now no national debt to redeem that way.

  46. JKH writes:

    “Well, if the President opens talks by announcing the hostage has escaped and is now safe and sound in an undisclosed secure location, what exactly is left to talk about?”

    true

    although it appears O is already negotiating with himself, since Treasury has hit the debt ceiling and is now on a respirator, shuffling internal accounts on an emergency basis

    meanwhile, Geithner is leaving quickly within this time frame, presumably to avoid personal risk of physical hostage taking

    :)

  47. [...] 1) From Steve Randy Waldman @Interfluidity [...]

  48. [...] interfluidity.com – Tagged: #MintTheCoin View on Counterparties.com → Amazon.com Widgets var [...]

  49. [...] about this: no one’s going to mint a trillion-dollar platinum coin. Nor is anybody going to mint a million million-dollar platinum coins. But it would probably be stupid for anybody in the government to say that they’re not going [...]

  50. pebird writes:

    Good lord … does anyone think about the possible political ramifications in all this?

    Let’s assume it is legal and operationally possible. What might happen after the platinum “coining”?

    The debt ceiling is a political constraint imposed by Congress to 1) look “fiscally prudent”, 2) have an additional hammer over the Executive Branch.

    You can’t change political behavior with monetary gymnastics.

    Once the government debt is “paid off” with platinum coins, Congress would (in the face of public outrage) lower the debt ceiling to something like $500 billion or other small amount.

    The problem is that the real economy still needs large amounts of spending to absorb the productive capacity. Despite the political kabuki of the current debt ceiling confrontations – a 10% increase in a $16 trillion debt ceiling provides sufficient spending space to keep the economy from collapsing (assuming Congress approves a deficit budget).

    With a lowered debt ceiling – say to $1 trillion (because all the debt has been eliminated) – even if Congress approved a 50% increase in the debt ceiling, that would do nothing for the economy. Congress gets austerity power without even asking for it! Congress would be bound by public opinion to drip out small increases in the debt ceiling – probably just enough to cover interest payments.

    “Oh, we can always print more coins.” Sure, as long as Congress doesn’t change that law – you want to give me odds they won’t?

    It is ironic that MMT would end up giving the government the power to impose austerity. But that is most likely the end game with this platinum coin gimmick.

  51. Lord writes:

    Is anyone sure of the intentions of debt ceiling crowd? One can speak of negotiations but it is not obvious that they don’t want default (for forced spending cuts), or don’t want platinum coined (for forced debt liquidation). They may prefer either to more debt and may want it.

  52. Troy writes:

    Congress would (in the face of public outrage) lower the debt ceiling to something like $500 billion or other small amount.

    Wouldn’t pass the Senate, wouldn’t survive a veto, just like everything else originating in the House these days.

  53. Troy writes:

    the 14th Amendment creates the duty to pay all obligations (broaader than just T-bonds, there’s also civil servant wages, contractor invoices, Medicare invoices– anyone who’s provided goods and services to Uncle Sam has a constitutional right

    Yes, but the question is who gets paid with what exactly.

    AFAIK, the UST can’t write checks the Fed can’t cash.

    Can UST issue warrants, like how the CA SOS does from time to time?

    Said warrants could be redeemable to the IRS in lieu of normal money and would thus trade at face value.

    I deposited a warrant received from CA into my Wells account last year, no drama.

  54. [...] Get ready to mint that coin – Paul Krugman Rebranding the trillion-dollar coin – Steve Randy Waldman The trillion-dollar coin is all fun and games until someone puts an eye out – [...]

  55. [...] at the Fed, and use the money to fund the federal government. Steve Randy Waldman proposes to mint a million million-dollar coins instead and pay creditors with them directly, what you could call the #mintthecoins [...]

  56. [...] Steve Randy Waldman also weighs in on the controversy. SRW thinks “The benefit of the plan (depending on your politics) is that it circumvents an institutional quirk, the debt ceiling. The cost of the plan is that it would inflame US politics, and there is a slim chance that it would make Paul Krugman’s “confidence fairies” suddenly become real. But note that both of these costs are matters of perception.” He thinks Treasury will reluctantly issue coins in the Million Dollar, rather than the Trillion Dollar range, to continue spending, and that the Fed will “sterilize” this spending selling assets to absorb an equal amount of money in the private sector. He thinks that’s all that would happen and that it would be a “big nothingburger.” [...]

  57. [...] Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such “small” denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits. [...]

  58. [...] Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such “small” denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits. [...]

  59. [...] This is the idea put forth by Interfluidity, in a superb blog post. The argument is basically that you can achieve the same debt ceiling work around by small denomination platinum coins until the debt ceiling is hiked. [...]

  60. [...] This is the idea put forth by Interfluidity, in a superb blog post. The argument is basically that you can achieve the same debt ceiling work around by small denomination platinum coins until the debt ceiling is hiked. [...]

  61. hcg diet writes:

    Great. Thank a lot for doing such a good job. I’ll return again to find out more and inform my neighbors about your posting.

  62. [...] published at Intefluidity PERMALINK Category: [...]

  63. [...] good too…) Why Paul Krugman should be President Obama’s pick for US treasury secretary Rebranding the “trillion-dollar coin” Micro Up, Macro Down? (I think this gets at a really key issue of economists vs. everyone else) [...]

  64. Dan Kervick writes:

    Once the government debt is “paid off” with platinum coins, Congress would (in the face of public outrage) lower the debt ceiling to something like $500 billion or other small amount.

    Congress can’t pass a law unless the President is willing to sign it.

  65. Doly Garcia writes:

    I’m surprised nobody has noted one obvious operational issue with minting a million million-dollar coins. Presumably it wouldn’t look good to make those coins less than one troy ounce (31 grams). A million of them would be then at least 31 tons of platinum. The world production of platinum in 2010 was 245 tonnes, according to Wikipedia. Presumably the US government trying to buy one eighth of the world market would have a huge effect on prices of platinum.

    On the other hand, the Forbes list of world billionaires has only a few more than a thousand. So presumably there wouldn’t be anywhere near a million buyers (whatever you want to say about the super-rich, there aren’t so many of them). The plan would be safe if there were, say, one or two thousand (to be on the safe side) million-dollar platinum coins with a decent look and weight (a few ounces at least), and the rest were made paper-thin since they are just an accounting gimmick. The only problem with that? Optics again.

    However, the exercise would serve to drive home a good point, which is that it’s perfectly unclear how all that debt will be ever repaid, without defaulting or doing something that will feel like default to the receiving side, whatever it’s called. I don’t agree with the Republican notion that it’s vital to try to cut the deficit, because I believe that deficit simply can’t be cut to a reasonable size, whatever anyone does. But it’s time that everybody wakes up to that fact.

  66. [...] Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such “small” denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits. [...]

  67. [...] Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such [...]

  68. [...] Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such “small” denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits. [...]

  69. [...] Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such “small” denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits. [...]

  70. Gradivus writes:

    I don’t believe the story about the $1 trillion coin, but if true the face should be of Alfred E. Newman, with the motto “What, me worry?”

  71. a Finance guy writes:

    Why not issue a fixed number of $1 million coins, say 1 million of them ($1 Trillion total value) and ask the Fed to auction off 10,000 of them each year for the next hundred years. This would be in keeping with the original intent of the platinum coin law, would solve the debt ceiling conflict for a considerable time, would obviate the need for Fed sterilization and would eventually cause millionaires and billionaires to replace the high denomination coins with minimal “real” value, for real money from their bank accounts that they would probably never spend in any other way.

  72. Bill writes:

    What will be really intriguing after they mint the trillion dollar coin, is the plot to steal the trillion dollar coin! It will take some Hollywood commando squad with Arnold, Jesse and Sly Stone to go get it back, I’m sure.

    Thus the trillion dollar coin will provide as much entertainment value after it’s produced as it is providing now while it’s just a gleam in some folks’ eyes.

  73. [...] amount of revenue coming in doesn’t match expenditures. This is where it might be useful, ,as Interfluidity suggests, to have some smaller denomination platinum coins on hand to manage cash flow when things got [...]

  74. [...] da amount uv revenue comn' n' doesn’t match expenditurez. Dis be whea it might be useful, ,az Interfluiditee zuggeztz, ta be some smalla denominashun platinum coinz on hand ta manage cash flow when thingz got [...]

  75. [...] da amount uv revenue comn' n' doesn’t match expenditurez. Dis be whea it might be useful, ,az Interfluiditee zuggeztz, ta be some smalla denominashun platinum coinz on hand ta manage cash flow when thingz got [...]

  76. Lord writes:

    There is something good about the coin missed in all this. It provides a means for us to collectively deleverage without creating a depression. Economists generally treat debt as irrelevant, one man’s debt is another’s asset, and in normal times this is substantially true. During and after a financial crisis though, this is anything but. Debtors find themselves with assets too low and debts too high and creditors find themselves with debts too risky, or losses. While the private sector can deleverage as the public sector increases leverage, the private sector is as afraid of their leverage as of government increasing its leverage. Functionally, the Fed can buy up all the Treasuries but as long as they exist, the fear will be they come back to haunt us, as indeed they will to some extent when the Fed wants to sell them though not to the extent people fear. Allowing us to collectively deleverage, we can reduce those fears for both private and public debt and this is likely the best method of easing when the zero bound is reached. The debt ceiling and platinum coin may be silly, but this ability to collectively deleverage is not.

  77. [...] at the Fed and thus avoid a nasty debt ceiling fight with Republicans. Steve Randy Waldman has more technical details on it. It’s an incredibly interesting idea and at first, I was on board, but over the past [...]

  78. [...] accommodate seductiveness payments, Treasury should packet a gold silver to cover a difference. As Steve Waldman argued, use a billion dollar instead of a trillion dollar silver — and usually as a final [...]

  79. [...] Interfluidity has the legal background: here’s the law, the relevant bit of which — subsection (k) — was originally added in 1996 then slightly modified in 2000. [...]

  80. [...] Rebranding the “trillion-dollar coin.” [...]

  81. [...] meet interest payments, Treasury should mint a platinum coin to cover the difference. As Steve Waldman argued, use a billion dollar instead of a trillion dollar coin — and only as a last resort to [...]

  82. [...] account at the Fed, and use the electronic proceeds to continue paying its bills…another variation of the same, proposed by steve randy waldman, would be to mint a million million dollar co……and Joe Firestone and economists at the University of Missouri-Kansas City have been [...]

  83. [...] meet interest payments, Treasury should mint a platinum coin to cover the difference. As Steve Waldman argued, use a billion dollar instead of a trillion dollar coin — and only as a last resort to [...]

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