General Question

Strauss's avatar

If the US Treasury were to mint a $1T coin, how would that be different from printing the same amount of paper currency?

Asked by Strauss (22347points) 3 weeks ago

According to this article in Business Insider, there is a loophole in the law that theoretically allows the US Treasury Department to mint a $1 trillion platinum coin, deposit it at the Federal Reserve, and then continue paying its bills as normal. This would supposedly eliminate the need for Congressional brinksmanship with the debt level and avoid the periodic threats of government shutdown to serve the political needs of one party or the other.

Since the value of the $1T coin is determined by face value (as opposed to, say, the actual value of the metal in the coin) how would it be different from printing the same amount in normal currency for deposit in the Federal Reserve?

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8 Answers

elbanditoroso's avatar

As I read the article, the law says it must be a platinum COIN, not something on paper. I guess that the assumption is that coin is solid and permanent, while pieces of paper are ephemral.

kritiper's avatar

No one would be able to use the coin. Same as the old $1,000 and $10,000 paper bills. Deposits and withdrawals can be made (via banks) with credit (numbers) instead of real, actual cash money.
A friend of mind doesn’t believe this. If what he thought was true, there would be countless armored cars and trucks running all over the place, every day, hauling money here and there.

When I make a deposit in my bank, the bank works to verify the credit that is supposed to come to my account. Then they add the correct number/credit to my account while subtracting the dollar amounts (numbers/credits only) from the other accounts.

dabbler's avatar

The biggest difference is that they are separate entities.
The Treasury Dept is part of the Executive Branch, while the Fed is a privately owned set of banks.
The Fed creates cash by fiat for the U.S. government by printing and electronic funds transfer into commercial banks.
The Treasury department is not authorized to print cash or generate those electronic funds, either. But it does have the vestigial right to make coins.

It was pondered that to side-step some congressional debt-ceiling blockades The president could order the treasury to mint a 1T$ coin and deposit that somewhere to cover the ongoing expenses of the federal government while the grandstanding knuckleheads who already spent the money in their legislation, can’t see themselves to accommodate it with raising the debt ceiling. It didn’t come to that yet, barely.

filmfann's avatar

Printing currency to pay your debts causes inflation, since the value of your currency is decreased. That said, routinely raising the debt ceiling without controlling your debt is wreckless.

Ltryptophan's avatar

Once it’s minted does the bearer have the right to the face value ?

dabbler's avatar

@Ltryptophan yes, but we’re talking about the U.S. Treasury not just anyone.

Ltryptophan's avatar

Perhaps a tornado could come and fling it into the ocean.

Strauss's avatar

I doubt it. A coin like that would never see circulation. It would likely be minted at a. US Mint which would be near a Federal Reserve Bank, such as Denver, where the Denver Fed is 0.8 miles from the Denver Mint. Transport would in all likelihood be heavily guarded.

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