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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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?
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.
> 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.
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
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.
The idea of the $1 trillion coin is a way for the US government to pay off its debt. But it’s not that simple, it would have consequences like inflation, creating new money, bypassing the legal limit of debt, and damaging the confidence of investors. It might seem like a quick fix but it would cause more problems than it solves.
It will at a certain point, but i think alot of folks in the thread are missing the point where about how debt works. You dont have to pay off all of the debt all at once. It’s spaced out months/years/even decades. The yearly servicing of this 25+ trillion dollar debt is roughly 300 billion a year ( easily paid by the us gdp)
So on a smaller scale:
you buy a house, you took a loan 1 million dollars at 10% interest rate. you are now 1 million in debt. The bank wants a 100k$/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.
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