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Hey Monkeys,

I realize that online polls aren't exactly the height of rigor when it comes to sampling, but this sort of result from Thursday makes me wonder. As you can see, the one I voted for (e.g. the correct answer) is in the minority.

Also, let me point out, this whole "trillion dollar coin" idea is not, in any way, shape, or form, even remotely possible. Why you ask? Because while the US Treasury can make all the trillion dollar platinum coins it wants, until the Federal Reserve requests it, it's just a piece of platinum with the number "$1,000,000,000,000" on it, and it's worth exactly it's weight in platinum. You see, each Federal Reserve Bank is required by law to pledge collateral at least equal to the amount of currency it has issued into circulation. In other words, just because the US Treasury makes a piece of currency, doesn't make it legal tender.

What is insanely astounding - and really quite terrifying - is as Jared Dillian pointed out yesterday, Paul Krugman is in favor of such an idea! Which, strangely, goes against what Paul Krugman in 2008 seemed to suggest in 2008 when he noted (correctly):

The monetary base is bank reserves plus currency in circulation. It's what the Fed controls directly: monetary base only gets created or destroyed through Fed actions.

So, we have a few things happening here: 1) The trillion dollar coin idea will never be implemented because the US Treasury isn't in charge of money creation; 2) Astoundingly, serious economists bought into an idea that is easily debunked by a 5 minute google search, or a 2 minute call to the NY Fed; 3) Paul Krugman is getting stupider and stupider every day which, is likely a sign of a serious degenerative disease. Based on the speed of his mental degeneration, back in the 1980s (the work that got him the Nobel prize began with a paper in 1979 & 1980) he must have been the smartest person on the planet.

In conclusion, the trillion dollar coin idea is unworkable, implementation is impossible. As a group, it is our responsibility to mock and belittle anyone who thinks otherwise. It's for their own good.

tl;dr - If you think the "trillion dollar coin" idea is a good idea, please jump off a bridge.

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Comments (24)

  • sayandarula's picture

    the question is worded kinda funky. "if necessary" implies a hypothetical situation in which the minting the trillion dollar coin would be, well, necessary. in which case we should... because we should always do what is "necessary".

    get it? it's a semantics thing.

    Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?

  • glide9811's picture

    Frankly, I don't understand the hysteria surrounding the debt ceiling issue. The Republicans are trying to use this deadline as an opportunity for some much needed spending cuts, just as Obama used the fiscal cliff to force Republicans to raise taxes on the rich. It is very simple politics, yet people are acting like Republicans are terrorists who are holding the country hostage so they can steal money from the poor. It is absolutely maddening.

    This coin is a perfect example of the messed up political situation we are in. How in God's name is this being floated as a potential "option"?? And why are people supporting this? All that needs to be done is for Democrats to get down to business and negotiate with Republicans over spending cuts, but the Grand Bargain seems to be a complete anathema to people.

    The worst part is that everyone knows exactly how this is going to play out. Both sides are going to shout and get nothing done until the day before we are set to default, when finally they will agree to the smallest of budget cuts. Gotta love the status quo.

    /rant

  • BTbanker's picture

    "Is it necessary for me to drink my own urine? No, but it's sterile, and I like the taste."

  • In reply to BTbanker
    mikesswimn's picture

    BTbanker:
    "Is it necessary for me to drink my own urine? No, but it's sterile, and I like the taste."

    holy shit that was awesome. sb for you.

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • lasampdoria's picture

    Haha good stuff BT

    "Those who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."- Benjamin Franklin

  • In reply to lasampdoria
    lasampdoria's picture

    "Those who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."- Benjamin Franklin

  • Eliz Namwa's picture

    Does a "CHECK" from the U.S. Treasury constitute an "issuance of CURRENCY"? How about an "electronic" transfer of funds directly from the U.S. Treasury? Our "MONEY" is 'collaterialized' ONLY by "the full faith and credit of the U.S. Government (read super-strong military and economy (sic)). Mint truck-loads of the "COIN" and use this "debt-free"(SEE "U.S. Notes") new-found "money" for the betterment of all U.S. Citizens-SEE "The Economist" 12-Point Plan in "Comments" section...

  • Eliz Namwa's picture

    Mint a truck-load of the "Coin" and deposit directly into the U.S. Treasury. To be disbursed as "electronic" transfer of funds and U.S. Treasury Checks. This debt-free" (SEE "U.S. Notes") 'new-found' "Money" should be used for the betterment of all U.S. Citizens--SEE 12-Point Plan in the "Economist" Comments section. Our current "money" is "collateralized" ONLY by the "Full Faith and Credit of the U.S. Government" (read super-strong Military and economy (sic))--NOT by ANY 'precious' metals...

  • lasampdoria's picture

    "Those who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."- Benjamin Franklin

  • W. WHITE's picture

    Where did this whole idea come from anyway? I don't understand why this is even being discussed by any member of the government

    "I must create a system or be enslaved by another man's." William Blake

  • karypto's picture

    Sell Alaska back to Russia, boom deficit solved.

  • Haur's picture

    The collateral is needed only for actual currency. No collateral is needed for checks/electronic transfers. So this has no impact on the trillion dollar coin.

  • Soros's picture

    Eliz, you need to learn yourself something. The US treasury writing a check or creating a coin is the same as YOU writing a check or creating a coin. Also, no one said US currency was backed by "precious metals," we left the gold standard a while ago.

    I don't understand the idea of this trillion currency being a coin, or in trillion dollar denominations at all. If we wanted, we could print trillions of dollars and pay off all of our debts with no question. However, inflation would be ridiculous and no one would loan us money anymore, if they even accept the uninflated $.

    If you want to see where this was already tried, google zimbabwe trillion dollar bill.

  • DCDepository's picture

    The Democrats are really off their rocker on this one. First, they start by saying that the 14th Amendment requires that the debt of the US government be "unquestioned"; however, the historical context of this is that during Reconstruction the US government had substantial war debt and the 14th amendment was partially put in place so that future southern state Senators couldn't question the LEGALITY of the war debt. The 14th amendment has nothing AT ALL to do with paying debts--"unquestioned" in its context is simply talking about elected officials questioning the legality of Civil War debts. Then the Democrats claim that the President has the right to enforce the words of the 14th amendment even though the 14th amendment clearly lays out that Congress (and only Congress) has the express authority to carry out the tasks of the 14th amendment. It's truly mind numbing.

    Then you've got Democrats who are arguing the above based on a false assumption, the assumption that the Washington Post puts forth in its moronic poll question--that not raising the debt ceiling would cause the US to default on its debts. Well, that's clearly not the case at all since the Treasury could use its discretion to spend tax revenue on paying debts rather than on Congressional appropriations. The US would only default on its debt if the executive CHOSE for the US to default on its debt. After you point out this little fact to liberal Democrats they then turn around and say, "Well, current appropriations are a form of debt. You can't just renege on your promise to pay on future contracts and on future spending." Yeah, except this happens every single day where the federal government delays contracts, given that contracts are based upon appropriations and the ability of a department to acquire appropriations. But liberal Democrats have now concocted a new form of "debt"--budgets!

    We live in an insane time in American history. The Democrats would be hilarious they weren't so criminally insane.

  • Eliz Namwa's picture

    What and where is the "pledged collateral" at the FED for all "currency" now in "circulation"? Is it simply "the National Debt" or some derivative thereof? How do "U.S. Notes" factor into this equation? Whatever happened to the "multiplier effect" on how "money" is actually leveraged upwards as 'bank bookkeeping entries'...how is it possible for the FED to have 'pledged collateral' for the true engine that 'creates' money--lending by thousands of National, State, Local Banks, Savings & Loan Associations, Credit Unions, etc.? The "monetary base" of the FED is subject to the "multiplier effect" and therefore is NOT actually 'controlled' by the FED but by the dictates of many "Lending" institutions...

  • Eliz Namwa's picture

    A simple 'solution' to inflationary/Zimbabwe/'Banana Republic' concerns is to FIRST implement and establish a permanent Mandatory Wage and Price Contol Administration (SEE Canada, et. al.)--SEE 12 Point Plan enumerated in "Economist" Comments section...

  • In reply to BTbanker
    andres17's picture

    BTbanker:
    "Is it necessary for me to drink my own urine? No, but it's sterile, and I like the taste."

    Pardon my intrusion, but urine is only sterile inside the bladder. Once it passes the urethra, it is not sterile anymore.

  • andres17's picture

    I think this trillion dollar coin has been a topic overblown by the media. And the people are eating it up. This is a non-issue. Neither side, Democrats or Republicans, are even considering this.

    Regarding the backing of the dollar, it is a fallacy that it is backed by anything. The government can print as much money as they want. In fact, I believe (correct my if I'm wrong) that the monetary based increased from 800 Billion dollars in 2008 to almost 3 Trillion dollars today. Where did all that backing came from? Note: I don't believe U.S. treasury notes is a form of backing. You can't back a dollar printed today with the promise of a future generation of Americans paying that debt.

  • NOMNOMNOMNOM's picture

    You're misreading the article. That paragraph has no bearing on the trillion dollar coin discussion. The treasury can send money to the Fed to be deposited in its account. It doesn't matter whether that money comes from tax revenues or a trillion dollar coin. The money deposited in that account can then be used to pay the Treasury's bills.

    This business of pledging collateral has to do with the way the Fed performs its accounting because the currency is not backed by gold or anything else. The Fed can create a liability on its balance sheet out of thin air and at the same time create a new cash entry on the asset side of its balance sheet any time it wants to. Money is generally injected into the economy through open market operations, that is purchasing government debt, MBS, gold certificates, etc. That is where the idea of collateral comes in. It has nothing to do with the Treasury's ability to mint a trillion dollar coin. Congress has the power to mint whatever coins it wants according to the Constitution. It has delegated this power to the Fed and the Treasury with some restrictions, but the trillion dollar coin was written into the law by Congress as an exception to these restrictions. There is no metaphysical or legal necessity that prevents Treasury from doing this.

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  • mikesswimn's picture

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • mikesswimn's picture

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • In reply to bigtool05
    sayandarula's picture

    Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?