Photo: Wikimedia Commons
This is really thrilling.An arcane idea that started on finance blogs in the summer of 2011– that Tim Geithner should mint a trillion dollar platinum coin to avert the debt ceiling — is now seriously taking off.
The premise of the idea is this: Although the Treasury can’t just create money out of thin air to pay its bills, there is a technicality in the law that says the Treasury has special discretion to create platinum coins of any denomination, and the thinking is that Tim Geithner could make the coin and walk it over to the Federal Reserve and deposit it in the Treasury’s bank account.
But there’s a new debt ceiling looming, and this time, LOTS more people are talking about it.
We noted our surprise back in early December that an actual 3rd party research firm brought up the idea.
Now it’s going even more viral.
In an interview with Capitol New York, Representative Jerry Nadler came out in favour of the solution (Nadler has an above-average understanding of economics in our experience).
Josh Barro at Bloomberg is now endorsing it, and that’s spread a huge conversation about it among DC journalists and policy folks on twitter.
Barro explains why it’s the perfect “solution” to the debt ceiling fiasco:
Hitting the debt ceiling isn’t an option. It’s no way to run the country, and Republicans know that. So, a debt-ceiling increase shouldn’t count as a “concession,” and it’s nutty for Obama to have to give substantive policy ground to get one.
Monetizing deficits through direct presidential control of the currency, in lieu of borrowing, is also no way to run a country. It’s silly, and it’s perfectly legal. Agreeing not to do so is therefore the ideal “concession” for Obama to offer in return for Republicans agreeing to end the threat of a debt-default crisis.
This is basically the right way to think about it. Yes it’s silly to think of funding yourself with a coin, but it’s even sillier to think that defaulting might be a good idea, so you might as well do it.
Now quick detour into economics that must be addressed: Lots of people, when they hear the idea, say one of two things:
- This would cause massive inflation!
- Well if we did this, why not a $100 trillion dollar coin?
Neither of these are legitimate rejoinders.
This would not result in massive inflation, because we wouldn’t have a gigantic injection of new money into “the system.” That is only achievable through massive spending beyond which the economy can handle. But this loophole would in no way let the government spend beyond which Congress has allocated through the budget.
And the point about the $100 trillion coin misses the point as well. The current economic constraint is not what we can raise or spend, but rather a dumb law (the debt ceiling) that we would like to get around legally. A $1 trillion coin accomplishes this goal just as easily as a $100 trillion coin does. Remember, the constraint isn’t money, the constraint is law.
So yes, this is very thrilling, and we hope Obama puts an end to this nonsense tomorrow by unveiling the coin.
Now the question everyone is asking is:
Important Q — whose face would be put on the $1t coin?
— Zeke Miller (@ZekeJMiller) January 3, 2013
Update: Since this post was first published, the talk has EXPLODED.
HuffingtonPost has a huge front-page splash dedicated to the concept.
And there’s a White House petition demanding Obama mint the coin.
And the hashtag #MintTheCoin has gone viral on Twitter.
Even a prominent German newspaper is covering the movement.
And find out everything you need to know about this #MintTheCoin movement below: