5 ms·

Can someone explain why minting a platinum coin is in any way more effective than writing "IOU $1 Trillion" on a napkin?

• thedudeabides5 5y ago
  Because the 'ping' sound it makes as the coin hits the ground is much, much more satisfying than 'brrrrrr'
  • mkr-hn 5y ago
    It's also much harder to slide a napkin into a payphone on a string and pull it back out to bankrupt the phone company.
• wcoenen 5y ago
  The goal here is to circumvent the debt ceiling. Writing a $1T IOU would add $1 trillion to the liability side (i.e. debt) of the bookkeeping (and presumably also to the asset side in the form of an addition to a federal reserve account), while minting a $1T coin only adds it to the asset side.
  • Uehreka 5y ago
    So then why not a note? And is there a rule somewhere that a physical thing needs to be minted at all?
    • wcoenen 5y ago
      It has to be a platinum coin because subsection (k) of https://www.law.cornell.edu/uscode/text/31/5112 https://www.law.cornell.edu/uscode/text/31/5112 is the special case that allows for issuing any denomination. Notes are a liability of the Federal Reserve. Meaning they can be traded for balance on a Federal Reserve account. The treasury can't just create liabilities for the Fed out of thin air, I mean that would be wrong ;-) (edit: just joking. The $1T coin would also be deposited at the Federal Reserve. I don't know why it can't be a note, other than that's how the law was written.)
      • jjk166 5y ago
        Thank you, this is the answer I was looking for
• sixothree 5y ago
  Wasn't the IOU congress spending the money in the first place? And this coin allows us to pay for the IOU.
  • djur 5y ago
    Exactly right. This is already authorized spending.
• akomtu 5y ago
  Because then the US would look like Zimbabwe.
• andrewla 5y ago
  Because the Mint has the legal authority to mint such a coin. But the Treasury department cannot issue debt in excess of the debt ceiling. Congress can fix all this with a stroke of a pen, but eliminating the debt ceiling or lowering appropriated spending below what the debt ceiling would require. This is just a cheap trick to allow the executive to bypass the debt ceiling/government shutdown shenanigans.
• rsj_hn 5y ago
  I guess when you focus on the physical act there is no difference between someone coming into your house and taking the fridge, or someone you hired coming into your house and taking the fridge. In both cases it is someone taking the fridge, so they must be the same right? But when it comes to authority, the constitution requires issuing IOUs that come with the full faith and credit of the US goverment originate in an act of congress. This is because "full and faith and credit" is not something that the executive can do on its own. The constitution also gives the executive the right to mint coinage, but only up to spending limits, except for a loophole for various collectible coins made out of platinum. These were not intended to circulate, or be deposited at the Federal Reserve in exchange for reserves, which is why I am skeptical about the legality of using this coin. It would also be a huge political embarrassment. But if they cannot deposit it for reserves, then no one is going to get their bill paid with the trillion dollar coin. In the past, congress had to pass a bill for each debt issuance, which was too much work as debt issuance ramped up. Then congress went to a debt ceiling authorizing the issuing of debt up to a certain amount. This was intended to give the administration flexibility. For the same reason, many spending programs authorize payments "up to" some amount in order to support flexibility. Should the executive do this, you can be sure this flexibility would disappear and things would get much more painful for the executive. Now if you don't see anything wrong with bypassing congressional authorization because conceptually writing an IOU on metal and paper is the same, then we fundamentally disagree. It's not about the act, but the authorization behind it.
  • bryanlarsen 5y ago
    This isn't bypassing congressional authorization -- it already has it. Congress has both authorized and forbidden the spending above the debt ceiling.