Its time to issue the trillion dollar coin

[rdking647]

the hell with the GOP. issue a coin. its legal and it doesnt have any messy constitutional questions like using the 14th amendment.
and it avoids a default

[lumberjack_jeff]

1. Big political downsides.

To the rubes, it looks exactly like it sounds.

[rdking647]

4. not if its presented right

and teh rubes have already bought the tea party nonsense,this is a last gasp measure to stop default.

[kenny blankenship]

8. They like precious metals (shiny!) and they like Reagan (truthy!)

put 'em together in a platinum coin, and make Reagan the face of a debased currency.

[girl gone mad]

14. Debased currency?

[kenny blankenship]

20. The OP doesn't envision a coin that is actually worth a trillion dollars

only one that is stamped with a trillion dollar face value. Maybe it's worth a thousand dollars in metal. Reducing the precious metal content of a coin and keeping the face value the same is "debasing" it. Saying that a coin has a value that is fantastically larger than the value of the metal that comprises it is the same thing. And any value stamped onto a coin with Reagan's face is too high, so our trillion dollar piece of currency starts out debased in at least two ways.

[girl gone mad]

24. Ok, thanks.

I thought you were asserting that the dollar would be debased.

[CleanGreenFuture]

2. Ummm...forgive me, but...say what?

[lumberjack_jeff]

3. .

http://www.dailykos.com/story/2011/07/11/993352/-Coin-Seigniorage,-the-Debt-Limit,-and-the-Presidents-Duty

[Fearless]

5. Google hyperinflation and you will see why this is a TERRIBLE idea.

Also try "historical hyperinflation" and see the pain this causes average people.

[madinmaryland]

9. Which is worse? Defaulting or this?

[Fearless]

13. The debt ceiling needs to be raised.

Hyperinflation is worse than defaulting. Google Hungary WWII hyperinflation... better yet look for photos of them throwing the currency into the streets or burning it for heat.

[leveymg]

12. The Fed didn't hyperinflate the money supply when it lent $16T to banks in QE2.

If the Treasury stops issuing checks, the Fed will cover the losses to the banks (and indirectly the public) by lending the difference, at least for a while. Call this QE3. Please see the thread at: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x1604107

[Fearless]

16. Hyperinflation happens over time.

Many months of sustained money creating will drastically devalue the dollar. Changing the COLA at the same time will bankrupt seniors. Additionally the Fed lent money to banks in secret. This would be very public and very international. You would lose investor confidence very quickly... leading to the government having to make more... leading to confidence sliding again... leading to the government creating more. It is a vicious cycle. And it will only spiral downward.

[leveymg]

18. Many months without a deal could create enormous uncertainty in markets, so I agree. But, the point

is the world won't end on Tues., no matter what happens between now and then.

The Treasury will probably reprogram funds to pay off foreign bond holders while the Fed covers domestic account-holders.

[Fearless]

19. I agree on the uncertainty.

But, we must be careful about the true value of the dollar... those on fixed incomes will be hurt badly if there is even 25% inflation over the next five years (it was 11-12% over the last five). Especially if COLA is altered.

[leveymg]

21. Agree again. That's why the SS "reform" plan is DOA, or should be.

It's assumptions are based upon a period of relatively low inflation. No doubt the US Dollar is about to be devalued, which is not entirely a bad thing. Jim Baker did it in 1987 -- look up "Paris Accord" -- and made the Japanese bond holders swallow 1/4 of the Cold War debt.

We'll do it again - there is no other choice.

[girl gone mad]

15. It's an asset swap, and not inflationary.

Treasury mints two coins that will sit in a vault at the Fed, not be circulated. They use the profits to pay off existing debts. which will have the same effect as Congress raising the debt ceiling would have.

[Fearless]

17. You don't get something for nothing.

For money to have value it must have the faith of its consumer. The dollar will suffer if we print money out of thin air.

[girl gone mad]

22. We've been "printing" trillions to save Wall Street.

Our money gets its value from taxation, not faith. It's possible for the government to spend too much money and cause inflation, but we would need to be closer to full employment and full productive capacity. This isn't something for nothing. It's exchanging a proof platinum coin for USD credits. Not much different than exchanging a piece of paper for USD credits.

[Fearless]

26. I am looking at an international level concerning our debts abroad

and the exchange rate... which harshly impacts things like gas prices incidentally. I believe you are looking nationally, which is fine, but the world market influences the US market.

[leveymg]

23. It's a loan between banks, not printing money - Fed already did $16T QE2.

This will just add to that. Not a catastrophe.

[Fearless]

25. It is a loan only if someone has the money to loan in the first place.

[leveymg]

27. Not if both sides agree a loan has occurred.

It's all just notional value, anyway. Paper and bytes. The Fed's ability to fund banks is not dependent upon the issuance of Treasuries. Please, see the thread here for a longer discussion: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x1604107

There will be no default -- at least as far as people who have US bank accounts -- no matter what happens between now and Tues.

[Fearless]

28. The problem is that international lenders will not see this as legitimate.

The value of the dollar will plummet like it did during the Civil War, or like Hungary in WWII.

[leveymg]

29. They don't care so long as the value of their T-bills doesn't drop, a lot.

Everyone's expecting a devaluation of the Dollar, anyway. That will cover a substantial percentage of the balance of accounts crisis.

[kenny blankenship]

6. With Ronald Reagan's smiling face on it.

[NightWatcher]

11. and inscribed with "Up Yours, Baby"

[Poll_Blind]

7. It's better than the 14th Amendment, by far. The only real "good" option is to...

...get a clean debt ceiling raise and let the Bush Tax Cuts expire. That would free up $3.8 TRILLION from the 10-year debt.

But driving the US over a cliff. That's not acceptable.

I recommend the following excellent video on the DU Video Forums: Yves Smith on RNN 3: Ways Around the Debt Ceiling

PB

[Initech]

10. Like I said they tried this on the Simpsons, it didn't work.

[rdking647]

30. Its time to issue the trillion dollar coin

the hell with the GOP. issue a coin. its legal and it doesnt have any messy constitutional questions like using the 14th amendment.
and it avoids a default

[HopeHoops]

31. On a serious note, we really need $1000 and $5000 bills and the penny is obsolete.

[phasma ex machina]

32. .

[chill_wind]

33. Whose face shall we put on it? n/t

[phasma ex machina]

35. Mammon

[in_cog_ni_to]

38. OBAMA'S! That will REALLY send them over the edge. n/t

[kenny blankenship]

39. Reagan

he started this bullshit long ago. Let him finally have his own coin - the portrait of a spendthrift.

[Speck Tater]

34. Stamp the denomination on a round cracker so when it's value goes down too far we can eat it. nt

[Fearless]

36. Google hyperinflation. That's why this is a terrible idea.

I explained it to someone else earlier. Also google historical hyperinflation.

[ret5hd]

37. are you against raising the debt ceiling also?

the effect on money supply is the same.

[Fearless]

42. No it isn't.

If we don't raise the debt ceiling interest rates skyrocket. If we print exorbitant amounts of money we cause hyperinflation.

I am for raising the debt ceiling. Borrowing money is not the same as fabricating it.

[ret5hd]

43. Who are you borrowing it from? the fed fabricates it.

[ileus]

40. That would make one hell of a good collectors coin some day.

[geardaddy]

41. Just don't let Homer use it in the pop machine

or take it to Cuba.

[onenote]

44. a gimmicky solution that will actually not solve anything

It won't be taken as a serious measure by the markets.