Trillion Dollar Coin

[LTC8K6]

Originally Posted by Puppycow

If the numbers in that story are true, I wonder why platinum is so cheap compared to gold?

Supposedly there are only 16 tons of platinum in the world, but there are 165,000 tons of gold. And yet the price per ounce is almost the same.

According to this, 133 tons of platinum are mined every year, so there must be more than 16 tons of it.

ETA: He also fails to understand a basic concept: A trillion dollar platinum coin does not imply that there is a trillion dollars worth of platinum to back it up because we are not on a platinum standard. Just as a hundred-dollar bill does not imply that the paper it is printed on is worth $100 or that it can be redeemed for $100 in gold or any other precious metal. This is still fiat money, even if it is a coin made of precious metal.

ETA2: Even the link he gives as a source contradicts itself on this point:


If 130 tonnes (a 'tonne' is more than a 'ton' btw) are mined every year, then clearly there are much more than 16 tons "ever mined".
Furthermore, 25 cubic feet does not equal 7.6 cubic meters. There are over 35 cubic feet in one cubic meter. It probably should be a cube of 25 feet per side, or 15,625 cubic feet.

Yeah, the numbers did seem odd given the relative prices.

[LTC8K6]

I commented at ZH's source, asking them to correct their article on platinum.

[Pulvinar]

Originally Posted by StankApe

IF they made this trillion dollar coin, deposited it, then 6 months later it was "stolen" and melted down what would that do to the economy?

I'd bet it would do nothing since they could simply replace it with a backup duplicate coin and never report the loss. Anyone trying to sell the stolen coin would then just be laughed at.

[Puppycow]

Originally Posted by ravdin

In what way is ballooning our already outrageous debt and sticking future generations with the tab doing what is right?

It would not increase the debt. In fact, it would decrease the debt by $1 trillion.

Right now, every week the Treasury Department auctions off new treasury bonds and t-bills. Each time the Treasury Department does this, the government's debt increases. The money raised from these auctions is used to pay for government spending. If they used the trillion-dollar coin gambit then they could stop having these auctions (indeed, if the debt ceiling is not raised, they cannot have any more of these auctions) which increase the national debt, and instead pay for government spending with money created out of thin air (essentially; the cost of the platinum for the coin is small enough to be ignored).

There is an argument to be made against this idea, but the argument that it would "balloon" the debt is not the right one, because it does the opposite.

[Brian-M]

Minting a single 1 trillion dollar coin is a bit silly. After all, sooner or later they may need another, and another. I say they should mint a couple of thousand 1 trillion dollar coins while they're at it, that way they can be sure that they always have enough. [/devil's advocate]

Plus, what coin could be more appropriate for the president to flip when making the tough decisions?

[Puppycow]

Originally Posted by Brian-M

Minting a single 1 trillion dollar coin is a bit silly. After all, sooner or later they may need another, and another. I say they should mint a couple of thousand 1 trillion dollar coins while they're at it, that way they can be sure that they always have enough. [/devil's advocate]

Plus, what coin could be more appropriate for the president to flip when making the tough decisions?

They could keep the mold and mint another one when needed. They have to be very careful because once this precedent is set, it could lead to big inflation problems later. A thousand trillion dollars of new money would almost certainly cause hyperinflation. That's just crazy talk.

The government would no longer have to make any hard choices: Do you raise taxes and/or cut spending? Well, if you 'poof' all this new money into existence, you no longer have to face that decision. In fact, you can cut taxes and raise spending! Everybody's happy! But understand that this will lead to very severe inflation.

[StankApe]

Originally Posted by BenBurch

Planning to steal it?

No! lol , just wondering IF it was stolen, AND melted down (in other words out of circulation permanently) AND reported as stolen, what affect, if any, would it have on the economy?

Would it be like $1 trillion in cash was removed from circulation at once?

What would the consequences be? if any

[Puppycow]

Originally Posted by StankApe

No! lol , just wondering IF it was stolen, AND melted down (in other words out of circulation permanently) AND reported as stolen, what affect, if any, would it have on the economy?

Would it be like $1 trillion in cash was removed from circulation at once?

What would the consequences be? if any

The government would just make another one.

If the coin was melted down, then it would only be worth the price of the platinum in it. The coin would weigh maybe one ounce, which is about $1,500 worth of platinum.

[Shambler]

Well, cutting taxes and increasing spending would lead to inflation if done indefinitely, yes, but depending on precisely how you spend the money, it can be used to pump up the economy back to full employment, and right a lot of other economic issues such as unsustainable debt, before you have to jump taxes back up to curtail inflation.

All depends on the current state of the economy (if in a downturn, lots of room for spending before inflation hits), and how the money is spent (some ways of spending are less inflationary than others)

[StankApe]

Originally Posted by Puppycow

The government would just make another one.

If the coin was melted down, then it would only be worth the price of the platinum in it. The coin would weigh maybe one ounce, which is about $1,500 worth of platinum.

Yeah yeah I get that, but , for the sake of argument (and I should have clarified further) they couldn't make another one. They broke the mold, congress and the Prez all passed and signed a resolution that said "never again!"

what would the consequences be?

[BenBurch]

Originally Posted by StankApe

No! lol , just wondering IF it was stolen, AND melted down (in other words out of circulation permanently) AND reported as stolen, what affect, if any, would it have on the economy?

Would it be like $1 trillion in cash was removed from circulation at once?

What would the consequences be? if any

The Fed would collapse. Theoretically. In practical terms they would just find some obscure mint policy that allowed replacement of something once and apply it to this with a shoehorn.

[psionl0]

Originally Posted by BenBurch

Public opprobrium does not matter much to a lame duck was the point I was shooting for. And obviously missing.

And the point I was shooting for is that the claim in the CNN item that ". . . since the money from the coin would never go into circulation it would not cause any inflation" was laughable.

I don't know what that has to do with the popularity of the president (unless you think that Obama is stupid enough to be sucked in by such an argument).

[BenBurch]

Originally Posted by psionl0

And the point I was shooting for is that the claim in the CNN item that ". . . since the money from the coin would never go into circulation it would not cause any inflation" was laughable.

I don't know what that has to do with the popularity of the president (unless you think that Obama is stupid enough to be sucked in by such an argument).

No, of course it is inflationary, and some inflation is also a good thing under some circumstances. Inflation cheapens debt.

[rjh01]

I think the idea of just producing the coin and storing it is just plain stupid. The government spends more money than is being raised in taxes. In order to pay for the deficit it must do one or more of the following
1. print more money (then use it)
2. borrow money from the domestic market
3. borrow money from overseas
4. sell assets
5. produce and then sell assets

The first option is OK if the economy is growing fast enough. Otherwise it will produce inflation. This would be especially true when the people who get the money start spending it.
The second option will raise interest rates. There is a limit to how much money can be raised by this method. It could cause the economy to be in trouble from the high interest rates.
The third option could raise the value of the dollar. If the economy does not grow fast enough then the government will have problems repaying the money or raising more money. America got out of trouble after WW2 because the economy grow a lot.
The forth option is great, but there only a certain amount you can sell.
The fifth option is great but again very limited in what you can do.

[Puppycow]

Originally Posted by rjh01

I think the idea of just producing the coin and storing it is just plain stupid. The government spends more money than is being raised in taxes. In order to pay for the deficit it must do one or more of the following
1. print more money (then use it)

Oh, the money would be used alright. The coin itself would be stored at the Federal Reserve Bank, but the money it represents would be credited to the Treasury Department and would definitely be used. IOW, this is option 1 in your list.

[psionl0]

Originally Posted by StankApe

Yeah yeah I get that, but , for the sake of argument (and I should have clarified further) they couldn't make another one. They broke the mold, congress and the Prez all passed and signed a resolution that said "never again!"

what would the consequences be?

In theory, there would be no consequence. The coin itself is just a token and, as Puppycow has pointed out, the money it represents has already been spent into circulation.

Of course, if news of the theft of the coin got out then in a worst case scenario, it could seriously undermine confidence in the USD causing its value to collapse.

[Brian-M]

Originally Posted by Puppycow

They could keep the mold and mint another one when needed. They have to be very careful because once this precedent is set, it could lead to big inflation problems later. A thousand trillion dollars of new money would almost certainly cause hyperinflation. That's just crazy talk.

The government would no longer have to make any hard choices: Do you raise taxes and/or cut spending? Well, if you 'poof' all this new money into existence, you no longer have to face that decision. In fact, you can cut taxes and raise spending! Everybody's happy! But understand that this will lead to very severe inflation.

Only if they spend or borrow against the coins, or use their value to determine the level of government spending.

If they just put them in a piggy-bank to be kept on the mantlepiece as if they didn't exist, no inflation results. At least, not until a burglar steals the piggy-bank along with the VCR and spends the coins down at the racetrack.

[balrog666]

Except: The Congress shall have Power ... To coin Money, regulate the Value thereof, Constitution, Section 8


Oh, wait, when has the Constitution mattered to the Ohole?

[rjh01]

Originally Posted by Puppycow

Oh, the money would be used alright. The coin itself would be stored at the Federal Reserve Bank, but the money it represents would be credited to the Treasury Department and would definitely be used. IOW, this is option 1 in your list.

Then the coin itself is irrelevant. It need not be produced. Just asking as everything else happens that you mentioned.

[Puppycow]

Originally Posted by balrog666

Except: The Congress shall have Power ... To coin Money, regulate the Value thereof, Constitution, Section 8


Oh, wait, when has the Constitution mattered to the Ohole?

And Congress passed a law authorizing the Secretary of the Treasury to carry out the coinage of money, and the law contains the following provision:

Quote:

(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

So there you have it, all perfectly legal and constitutional.

Originally Posted by rjh01

Then the coin itself is irrelevant. It need not be produced. Just asking as everything else happens that you mentioned.

I think it does need to be produced as a formality. Else, where does the money come from?

[Puppycow]

Anyway, the latest news makes me wonder if the president is considering this option:

Partisan battle lines drawn over debt ceiling

Quote:

This week, Treasury Secretary Timothy Geitner reported that the U.S. government has reached its borrowing limit: $16.4 trillion. This means that Congress and the president have roughly two months to work out a deal to raise that limit. Republicans are saying no deal without spending cuts.

President Obama returns from Hawaii to a capital city in full inaugural regalia. Republicans have their demands on spending cuts, but Mr. Obama has an inflexible demand of his own: no negotiations over raising the debt ceiling.

The president keeps saying that the debt ceiling is "non-negotiable", but in practice he has no choice but to deal with congress if he wants to raise the debt ceiling. He has not indicated that he would use the trillion dollar coin option or is even considering it, but he must know that it exists. There are good reasons not to even hint that he is thinking about this possibility, because it could cause panic. Except that repeating that he will not negotiate over the debt ceiling is either a bluff, or it means he must have a backup plan. Maybe the backup plan is to shut down the government until Republicans give in, which is the standard response, but not a desirable one for the economy. But at least one other option, like this one, exists.

[balrog666]

Originally Posted by Puppycow

And Congress passed a law authorizing the Secretary of the Treasury to carry out the coinage of money, and the law contains the following provision:

So there you have it, all perfectly legal and constitutional.



I think it does need to be produced as a formality. Else, where does the money come from?

Is it Constitutional for the Congress to cede such authority to the Executive branch?

[rjh01]

Originally Posted by Puppycow

And Congress passed a law authorizing the Secretary of the Treasury to carry out the coinage of money, and the law contains the following provision:

So there you have it, all perfectly legal and constitutional.



I think it does need to be produced as a formality. Else, where does the money come from?

The money would come from the same source as if the coin was produced. As you say it is nothing but a formality. Makes no difference in reality.

[Puppycow]

Originally Posted by balrog666

Is it Constitutional for the Congress to cede such authority to the Executive branch?

Yes. Congress makes the laws and the Executive branch carries out the laws. That's standard procedure. Congress has not "ceded" the authority; they have the same authority to change the law that they have always had. The Treasury Department and US Mint have always been in charge of coining money and printing money. (Or, at least since The Civil War.)

[Puppycow]

Originally Posted by rjh01

The money would come from the same source as if the coin was produced. As you say it is nothing but a formality. Makes no difference in reality.

But it makes a legal difference. Legal formalities are necessary. The Treasury Secretary can point to the precise part of the law that says he can do it. If you think he can just skip the part about actually making the coin, you would have to find another legal basis that allows him to do that.

[LTC8K6]

I don't think a $1T platinum coin would pass a legal challenge. It's pretty clear that the law meant these coins, which the gov't already produced in bullion and proof forms, and which already have a baseline value.

http://www.usmint.gov/mint_programs/...eagle_platinum

http://www.usmint.gov/mint_programs/...platinum_proof

I can't see any way producing a similar coin and saying it's worth $1T instead of $100 would ever fly in any way, shape, or form.

How can your 1oz platinum coin be worth $1T when mine is only worth $1700.00?

[LTC8K6]

The mint even says that the platinum coins it sells are the coins authorized in 1996.

It defines a bullion coin as a coin traded at current bullion prices.

It also says this:

A bullion coin is a coin that is valued by its weight in a specific precious metal.

[IMST]

Originally Posted by LTC8K6

I don't think a $1T platinum coin would pass a legal challenge. It's pretty clear that the law meant these coins, which the gov't already produced in bullion and proof forms, and which already have a baseline value.

http://www.usmint.gov/mint_programs/...eagle_platinum

http://www.usmint.gov/mint_programs/...platinum_proof

I can't see any way producing a similar coin and saying it's worth $1T instead of $100 would ever fly in any way, shape, or form.

How can your 1oz platinum coin be worth $1T when mine is only worth $1700.00?

Yours isn't worth $1T 'cause the treasury hasn't stamped $1,000,000,000,000 on it.

[IMST]

Originally Posted by LTC8K6

The mint even says that the platinum coins it sells are the coins authorized in 1996.

It defines a bullion coin as a coin traded at current bullion prices.

It also says this:

A bullion coin is a coin that is valued by its weight in a specific precious metal.

This wouldn't be a bullion coin by that definition.

[Beerina]

Originally Posted by madalch

i'm going to start checking the c douches of congress.

ftfy

[BenBurch]

Originally Posted by LTC8K6

...

I can't see any way producing a similar coin and saying it's worth $1T instead of $100 would ever fly in any way, shape, or form.

How can your 1oz platinum coin be worth $1T when mine is only worth $1700.00?

Fish around in your pocket and get a quarter.

How much do you think the metal in your quarter is worth if you melted it down?

Nowhere near a quarter.

In the un-melted state, though, it is worth a quarter because that is what it says on it.

[LTC8K6]

The coins referenced by that law were already authorized and made at the time. This is crystal clear, imo. The law is clearly talking about traditional bullion and proof coins, like the other coins in the law, and those coins were authorized and made starting in 1997.

The law itself says "bullion" and "proof" coins, and those words have definitions.

We also recently passed the Palladium Bullion coin act...but apparently never got around to making the coins...

[LTC8K6]

Originally Posted by BenBurch

Fish around in your pocket and get a quarter.

How much do you think the metal in your quarter is worth if you melted it down?

Nowhere near a quarter.

In the un-melted state, though, it is worth a quarter because that is what it says on it.

If it's a 90% silver one, about $5.50...

[LTC8K6]

http://www.coinflation.com/coins/basemetal_calc.php

Looks like the melt value is about 5 cents for a standard modern quarter.

Nickel and copper prices have been so high in the past that laws had to be written to make it illegal to melt down certain modern coins...

The current melt value of a nickel is still slightly more than a nickel.

http://usatoday30.usatoday.com/money...ban-usat_x.htm

[Piscivore]

Simpsons did it!

[BenBurch]

Originally Posted by LTC8K6

If it's a 90% silver one, about $5.50...

Good luck finding one of those I didn't find and sell!

[!Kaggen]

Interesting article about the legality and constitutionality of the coin

http://neweconomicperspectives.org/2...tionality.html

[daenku32]

Still more useful than those 50 cent coins.

[LTC8K6]

Originally Posted by BenBurch

Good luck finding one of those I didn't find and sell!

I have quite a few of them. My father and I collected coins for many years, and I still have every coin.

[kellyb]

Originally Posted by Puppycow

I remember this idea came up the last time that there was a face-off over the debt ceiling.

I think the argument against it is that it would be breaking a taboo: The Fed is supposed to control monetary policy, not the president or congress, but this would essentially mean the Obama administration taking direct control over money expansion. That itself does not necessarily make it wrong, but it might be reason to be cautious. The idea of having an independent Fed is to make monetary policy decisions not based on short term political considerations but instead in terms of achieving the Fed's twin mandates of price stability and full employment. It's very tempting for the government to abuse this power. Doing it might spook the bond market.

And if they didn't do it last time, maybe there was a good reason.

Krugman seems convinced that even if it did spook the bond market, the vigilantes would still be unable (on their own, at least) to bid up the interest rates.