how the $1 trillion coin minted by the United States and deposited into the treasury doesn’t help resolve the outstanding debt without ramifications.

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how the $1 trillion coin minted by the United States and deposited into the treasury doesn’t help resolve the outstanding debt without ramifications.

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Anonymous 0 Comments

It will at a certain point, but i think alot of folks in the thread are missing the point where about how debt works. You dont have to pay off all of the debt all at once. It’s spaced out months/years/even decades. The yearly servicing of this 25+ trillion dollar debt is roughly 300 billion a year ( easily paid by the us gdp)

So on a smaller scale:

you buy a house, you took a loan 1 million dollars at 10% interest rate. you are now 1 million in debt. The bank wants a 100k$/year interest on this loan.

you make 500k a year and have 100k in savings. your debt is 2x your yearly income.

The loan makes you pay 100k a year on interest, but you say that’s fine because you make 500k.

Now you want to take out a car loan because you need to commute to work. The car dealer says, no problem ask the bank for a loan. The bank says, sorry, you’ve reached your 1 million dollar limit and you can’t borrow more, even though your salary can afford both the mortgage on the house and the extra from this car loan.

So what do you do? you take some money from under your mattress and say here ‘s a 100k from my savings, and consider it against my debt amount, and hte bank says fine, your total debt is now only 900k

then you can borrow that extra 100k again.

Anonymous 0 Comments

The idea of the $1 trillion coin is a way for the US government to pay off its debt. But it’s not that simple, it would have consequences like inflation, creating new money, bypassing the legal limit of debt, and damaging the confidence of investors. It might seem like a quick fix but it would cause more problems than it solves.

Anonymous 0 Comments

Because currency is an abstraction of wealth. Wealth is generated through productive labor. There is nothing inherently valuable in a few square inches of green paper, but there’s a lot of inherent value in a basket of groceries – you can eat them and not starve. You have a motivation to perform the labor of growing vegetables. But maybe you suck at growing vegetables. So you go hunt a mammoth instead and then trade mammoth meat to the basket-maker and the vegetable farmer so everyone can eat. Hooray!

At some point, though, society starts becoming more complex until we end up declaring that this small stack of green paper is worth this basket of vegetables. It’s not the paper that’s valuable, it’s the vegetables that are valuable. And what makes them valuable is the labor that went into growing and harvesting them, and the utility they provide (not starving).

A lot of very smart people are put to work figuring out how much wealth (i.e., labor) is being generated year by year. That tells them how much money to print. If more money is printed than labor is generating wealth, then that devalues labor and it no longer becomes worth what it should be. I.e., inflation gets even worse than it already is.

A complicating factor is to whom the government owes this debt. A huge majority of ‘debt’ is held by US Treasury bonds. US Treasury bonds are considered one of the stablest investments on the planet. It won’t get you a lambo, but you’ll never lose your shirt putting your money in Treasury bonds. And it’s basically money the government owes its citizens. The coin trick runs the very real risk of blowing up that market; which would be bad for everyone.

Anonymous 0 Comments

You could do it but it is legally questionable and would reek of desperation which the markets would negatively react to which would mean an increase in borrowing costs to US government most probably in the billions of dollars range. This guy provides a more detailed explanation. https://youtu.be/vSN3K_Etxyw

Anonymous 0 Comments

> Minting a $1T coin would absolutely work to eliminate part of the country’s outstanding debt.

> Minting a $1T coin would absolutely have ramifications – though the form and severity of those ramifications are very much an open question.

The usual critique is that “printing money” like this is literally debasing the value of all money in circulation – not only by the direct effect of “watering down” the value of what is currently out there, but also by knock-on effects where the currency itself may be seen as less valuable as a foreign long-term investment if it is likely to be “watered down” again in the future. This then also feeds into the fear of inflation (or hyperinflation) that this kind of process might induce.

Conversely, even if the coin were minted without any immediate inflation or similar side-effects, that fact *itself* could lead to different consequences. Presumably, if minting the first $1T coin worked so flawlessly, then minting a second, or third, etc. becomes increasingly more likely. Continuing this process would eventually wipe out the entire debt, and if the national debt could be wiped out via this “printing money” scheme, then that would have drastic political ramifications.

Anonymous 0 Comments

Because it’s a gimmick and everyone knows it’s a gimmick. I cannot arbitrarily declare my house’s value. No one would ever pay $1 trillion for the coin. It is a stupid charade.

Anonymous 0 Comments

Because its just an accounting trick, it doesn’t actually do anything meaningful except allow the Treasury to do what it was already doing, but without Congress passing a new law. Its not crediting new money, its not taking the place of taxes, its not ignoring any debt or anything, all its doing is telling the Treasury “you are allowed to burrow an additional $1 trillion” which is no different than if Congress increased the debt limit by $1 trillion.

The issue with the coin isn’t economic, but legal and political. Is this something the President can even do? And if he does do it, will this have other legal or political consequences later? And even if it does, is it a good idea for the President to find legal tricks to do things because Congress refuses to?

Anonymous 0 Comments

You need to understand what money is first. It is a medium of exchange but also *stored labor*.

When government prints money it devalues all past labor (savings) and future labor (wages falling behind inflation) for everyone in the whole country. But it ALSO devalues debt (including their own) and they get to spend it… which is why they do it.

The reason currency gets devalued is rate of exchange. If a country has 100 labor and $100 in circulation (in the hands of the population, etc) then each dollar can afford 1 unit of labor. If they print a bunch more money suddenly each dollar can only afford a fraction of a unit of labor. It’s pretty easy to see from there how it hurts savings. Beyond that is little more complicated.

Anonymous 0 Comments

An important bit that others have mentioned but is sometimes getting buried is that *the coin would not be used to pay debts*. The government would do whatever it would have done in the financial markets in the absence of a debt limit, so the economy, value of the dollar, etc. would be unaffected.

The coin would just be used to keep the nominal value of the US debt below the debt ceiling. The government would have all the same debt it wanted to have (and that Congress in fact demanded it have), but there would also be a “trillion dollar coin” sitting in the bank that makes the total value of the debt 1 trillion less and so below the ceiling.

Here’s a metaphor: Congress has asked the President to publish an edition of War and Peace with a page limit of 50. The Department of Formatting has done everything it can to shrink the font sizes and margins but can only get the text down to 51 pages. Out of desperation, the President declares that the book actually starts on page 0. Nothing is cut from the book, but the highest page number is now 50, thus fulfilling the letter (if not the spirit) of Congress’ irrational demand.

Anonymous 0 Comments

Money is tough and a lot of these answers miss the point. The debt ceiling is the dumbest thing in finance and it’s strictly political, not economic at all. It’s like if my partner refused to let me pay our joint credit card bill because she didn’t like the fact that I purchased a Persian rug that was out of our price range and didn’t match her tastes. I wouldn’t be able to go get a new credit card with the same terms from the bank because I didn’t honor my last agreement.

Money is a store of value, a medium of exchange, and up until 1971 it was generally backed by a fixed amount of gold held in a bank vault in Fort Knox or Manhattan or a few other hard-to-rob places. This gold standard was $35/ troy ounce (31.10 g), set in 1944 by some dudes in a ski hotel in a New Hampshire town called Bretton Woods.

In 1971 when Nixon took us off the gold standard (for a few reasons), the amount of dollars that the US Treasury could now mint was technically infinite.

What **didn’t change** between 1970 and 1971 was that money has to be **credible**. There are loads of historical banknotes in existence (German marks, confederate states dollars, etc.) that are valuable in the same way a baseball card is valuable, but not valuable in the sense that you can actually pay debts with them (well I guess technically you could, but that would be a form of bartering, and not payment.) These extinct bills are not credible because people ceased to believe they are worth anything because they think that other people don’t think they’re worth anything. If that sounds like a giant circular reference, you’re on track.

In 1970 the US dollar was credible because people believed we had the ability (which we probably did?) to exchange all dollars in the entire economy (plus or minus 1%) for an equal amount of gold because we had enough gold to do a physical exchange. In 1971 the money was credible because nothing bad happened when it was no longer backed by gold (“what good is gold in practice anyway?”, one might fairly argue. “It’s shiny!”, one might fairly respond.), and everyone still accepted it in exchange for labor and investment payouts.

Right now one (simplified) transaction the Treasury could make is:A. Print a single $31.42 trillion billB. Deposit that bill in the Treasury’s checking account held at the TreasuryC. Look across their balance sheet, noticing they now have 31.42 trillion dollars, and pay back all the debts they’ve incurred and still owe various investors from over the last 234 years, which also happens to be $31.42 trillion.D. Look down at $0 Cash, $0 Debts, and effectively start over with a clean slate.

That would work perfectly if everyone had a sudden case of amnesia and it was wiped from the history books. There are a few financial / economic problems with this. I have no idea what the legal consequences of this would be as I’m not an expert at all in that area, but honestly those are the least of your problems.

There are currently ~2.2 trillion dollars currently circulating in the economy (I think that’s a global number but I’m not sure). US GDP (the economic value of everything we do as a country in a full calendar year), is roughly $23 trillion. After step D above, there would be 15x more money in circulation, essentially flooding the economy with a about 18 months of all US economic production overnight. This would be a disaster for most people.

The value of money is in a constant dynamic play of supply and demand. When you increase the supply / availability of something by 15x overnight, the value of that thing goes down, which is why OPEC and oil production are so closely controlled and monitored and fought about. Who doesn’t want money, though, right? After all, there’s not a physical storage issue for money like there would be for oil, especially because all those transaction steps would most likely happen digitally anyway. For a short time, yes, everyone would be glad to pad their bank accounts and take what was available to them. Except. The people that would be paid back are the *existing US creditors* (read: retirees, foreign investors, the US govt itself, and the Federal Reserve).

This means that the **supply of money has increased dramatically** for those who already own the majority of legitimate wealth producing assets: machines, land, factories, software companies, anything unrelated to crypto, etc.

But the **supply of wealth producing assets has stayed the same.** Therefore, the prices of wealth producing assets will sky-rocket in real dollar terms, further widening the wealth inequality gap. (Same supply, more demand; investors don’t like to hold cash, the like to own assets). Increased demand drives up prices, and the value of each incremental dollar is less and less.

US social unrest increases, the confidence in the management of the treasury and federal reserve decreases, the value of the dollar decreases… it’s just a messy situation. No silver bullets.

TL;DR: The government has to honor its debts and maintain a level of financial stability that maintains the “full faith and credit” of the United States in order to maintain is position as global financial hegemon. No games allowed.

If you want a country playing this financial engineering game with disastrous consequences, China and her real estate market is a great place to start. This school of thought is also sometimes espoused by people who identify as “modern monetary theorists”.

Trust in your financial system is a game you can play liberally until you can’t, and when you can’t there’s no restart button.