The $1 trillion coin solution to the debt ceiling crisis

The idea of the trillion dollar coin is back, it seems. This idea is so gobsmackingly stupid that it has attracted the approval of Paul Krugman.

Here is the background: the US debt ceiling crisis is coming to a head. Some time ago, in the 1990s, a loophole in a law change, as I understand it, crept in. The US Treasury would have full authority to act without any further Congress or Presidential oversight to mint commemorative coins to any denomination of value. Back in one of the earlier debt ceiling crises in 2009, some chat emerged that caught the attention of politicians and others, to solve the crisis in this way.

The Treasury mints a 1 trillion dollar coin and deposits it with the Federal Reserve. The Treasury could then withdraw funds from the Fed, backed by its coin held as security, and use those funds to pay Federal government expenses. Debt crisis solved with no need to increase the debt ceiling!

Now, the idea went nowhere in 2009. However, in recent months the idea has resurfaced with this new debt crisis. If you think the idea is just nonsense, you’d be right. But, few people are attracted to nonsense ideas as is Paul Krugman. In one of his Twitter threads early this month he explained how it would work and that it would not be inflationary. He went onto say that he thought most people don’t understand this stuff correctly. Standard Krugman dismissal.

Krugman is getting more weird the older he gets. To my mind, if this would work for a 1 trillion coin, why be so stingy and mint only 1? Why not mint a 10 trillion coin and really get serious about withdrawing funds from the Fed and splash them all around? The Dems would have have invented magic money. Krugman doesn’t like to be challenged in public. He goes red in the face and blusters then accuses his interlocutors of not understanding economics. Consequently he severely limits public stage debates and sticks to friendly outlets such as the New York Times. On Twitter, he seems to write garbage and just ignore genuine counterpoints.

Fortunately Treasury Secretary Janet Yellen has publicly stated that the Treasury will not be minting that coin and as an idea, it is mischievous. Well said, Janet.

Some ideas are so stupid that only intellectuals believe them, said George Orwell.

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