I’ll admit it, I initially clicked on the news story I came across on this topic simply because it had the words one trillion dollar coin in the title. I mean that’s just stupid right? It sounds like something that might happen in a science fiction movie, and the hero fo the movie would have to steal it from a super hi tech vault or something. Come on guy, gimme a break, who the hell ever heard of a one trillion dollar coin or even thought that it might ever exist? Nobody, that’s who. I don’t think it’s even ever happened in any science fiction books, although thinking about it, it probably has happened in one that nobody except the nerdiest of the nerds out there has bothered to check out. Before I start talking about this I want to state that I’m not an economic expert so if I’ve screwed up anything I apologise, but I was really fascinated by the concept of a trillion dollar coin and wanted to write about it but there was a lot of economic jargon being thrown around so I hope I got it all right. Ok Here goes.
So the U.S. government/treasury/whatever seem to actually be considering making a one trillion dollar coin to help them out of their current debt crisis. I was kind of aware that Obama wasn’t exactly helping the economy that much during his presidency (Sick Chirpse mentioned that in here when we were saying that we thought Obama was a way better choice than Romney for presidency because he wasn’t a neanderthal idiot regarding his social policies) but I didn’t really realise that they were about to hit a $16.4 trillion debt ceiling pretty soon. That’s a lot of debt, although it isn’t the country’s debt. In short the debt ceiling is an accepted amount of money that the U.S. treasury can borrow in order to finance its operations. However, the debt ceiling has increased under successive recent political regimes which kind of implies that the government is borrowing more and more money from the banks in order to finance its operation. In short, this is a concern because it pretty much implies without saying it that the government is getting into more and more debt.
So what’s the best way to curve debt? I have got an AS level in economics but I don’t really remember, but I think there were a few variables you can look at when trying to eliminate debt and I’m pretty sure that something like lowering inflation rates or interest rates or encouraging growth and cutting public spending and increasing tax could probably help out, although obviously every situation is different and obviously some of those options aren’t going to be very popular with the general populace for obvious reasons. Or you could just make a trillion dollar coin.
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Obviously printing new money – or a new trillion dollar coin – comes under the blanket of inflation although I’m pretty making new money would increase the inflation rate and even though it would eliminate some of the debt now it wouldn’t solve the problem long term because it would only increase the inflation rate, meaning that the country would probably continue to be racked by debt in the future. It’s a very short term solution. So when I saw this stupid idea about the trillion dollar coin I thought it was really, really dumb.
But then I looked into it and it turns out that the American economists have amazingly already considered my concerns and actually devised a framework to get around it. Apparently if it were created, the one trillion dollar coin would NOT actually be entered into the money system (so you couldn’t just walk around town with your shiny trillion dollar coin picking up all the bitches unfortunately) it would sit in a heavily secured vault in the Federal Reserve. As it was secured in the Federal Reserve, it would now be part of the Federal Reserves funds, so they could use the value of the coin to pay its bills to avoid defaulting once they reach the debt ceiling. Sound stupid? Yeah, it does, but I guess there’s a fine line between stupidity and genius right?
You might be asking how the hell the US government could mint a coin and just say it was worth one trillion dollars? Well, that’s a good question and one that I had thought of too and so had the US government. There’s some legislation that the US government passed that allows the treasury to print platinum coins and determine their value – this was originally meant to be used for the manufacture of commemorative coins but unfortunately now means they can make a trillion dollar coin just like that. My question is this – why not just make it 10 trillion? That would solve 10X the problems right?
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I’m not sure I really understand the economics behind us but it seems kind of stupid that the US government can get out of trouble just by making a magical coin, although the fact that it would be kept in a vault in the Federal Reserve does mean that my idea for a science fiction movie where the hero has to steal it might become a reality. Maybe I should just try and write that screenplay right now. But yeah it stills seems really really stupid. Most economists seem to think it’s a dumb idea from what I’ve read, but they do all agree that it COULD actually happen and the fact that so many people are talking about it certainly lends some credibility to the idea.
I can kind of see it being like a Doomsday situation whereby if they actually are dumb enough to do it, it will signal the end of the United States as the leading world power because it really does reek of desperation and failure even to be discussing it as a solution. Incredibly (or obviously, considering this is 2013) this whole idea came about because someone (a lawyer from Georgia with the screen name Beowulf) talked about it in a blog post and the whole thing went viral. 2013 huh?
Also there’s an old episode of the Simpsons which deals with the concept of a trillion dollar note and it doesn’t do the nation ANY GOOD (Mr Burns ends up stealing it and then trying to sell it to Fidel Castro or something) and if life has taught me anything, it’s that we should probably listen to the Simpsons. If you want to check out that episode, there’s a couple of clips from it HERE (can’t figure out how to embed sorry) and it’s called ‘The Trouble With Trillions.’
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