There’s That Trillion Dollar Coin Again….

Monetary Realism’s in-house counsel, Beowulf (aka, Carlos Mucha) originated the idea of overcoming the debt ceiling by minting a trillion dollar coin.  So it’s nice to see the idea getting some attention (see here).   Anyhow, the US Treasury has the legal authority to instruct the US Mint to create a coin of any denomination and simply deliver it to be deposited in the US Treasury account at the Federal Reserve.

It sounds rather silly of course.  But it highlights how ridiculous the whole debt ceiling debate is to begin with.  After all, the debt ceiling is only reached because Congress ALREADY voted to spend the money that would cause us to get there.  The whole debt ceiling debate is mindbogglingly silly.  The same politicians who use it to hold the US economy hostage passed the bills that got us here in the first place.  It’s like eating a dozen cheese pizzas, tying a knot in your intestine and then threatening your stomach not to digest the food because it might kill you.  Yes, that would be stupid because it is.


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • SS

    This debate really highlights how broken the US political system is.

  • DanH

    ” It’s like eating a dozen cheese pizzas, tying a knot in your intestine and then threatening your stomach not to digest the food because it might kill you. ”

    Good one!

  • JKH

    pizzas, intestinal knot, stomach threat

    awesome model

    and DSGE compatible to boot

  • rp1

    They should mint a giant quadrillion dollar coin out of all the tungsten in Fort Knox. We’re ok until we hit 10^15 people!

  • Johnny Evers

    But Congress has not voted to spend (borrow, print, whatever) this money.

  • Ramanan


  • DanH

    The only reason the debt ceiling gets hit is because the government issued the debt to finance the spending that was passed. So of course they’ve already voted to spend the money. It wouldn’t get spent if they hadn’t already voted on it.

  • Nils

    Great analogy, because that would also make you literally full of shit ;)

  • Cullen Roche


  • Frederick

    The annoying thing is that this isn’t even about politics. It’s about common sense. You can’t vote on a bill and then come back and say you didn’t mean to vote on that bill. That’s what the debt ceiling is in essence. It’s beyond stupid.

  • Johnny Evers

    Most spending is now outside the legislative purview. It’s driven by entitlements or by executive decisions.
    If you really put a budget with a $1.6 trillion deficit before the House it would fail.

    What’s really ridiculous here is the idea that there should no limit on deficit spending.

  • Cullen Roche

    I don’t think anyone is saying there should be no limit. I certainly don’t say that. But this is a fictitious and very silly way to go about constraining spending.

  • Johnny Evers

    It’s the best way we have because people can relate.
    If you want to remove the debt ceiling entirely, as Geithner suggests, without putting any future constraints on borrowing (percentage of GDP, tieing it to growth rates, putting in safeguards to stop borrowing once the economy recovers … whatever)then you are going to get some blowback.
    The onus is on Geitner, Obama, etc., to present their plans honestly.

  • Cullen Roche

    Well, that’s where I disagree with TG. The debt ceiling is stupid, but that doesn’t mean there shouldn’t be other ways of measuring the spending constraint.

  • Bond Vigilante

    Why not mint 56 coin worth each 1 trillion. Because then the debt problem of the US is solved.

    The entire debate about the debt ceiling is Kabuki.

  • Cowpoke

    They could mint that trillion Dollar coin; However,they could only use it for Outside money.

  • Cowpoke

    Matter of fact, thre Treasury already has a magic coin called the Federal Reserve Balance Sheet. It can grow much larger than any silly trillion dollar coin can..haha

  • john

    The debt ceiling is only to anchor inflation expectations on the worlds reserve currency. If the debt ceiling is eliminated, inflation expectations worldwide would rise and hasten the end of the us dollar as the reserve currency. The US dollar already needs to be replaced due to its failure to sustain its purchasing power over time.

    Nations will not continue to hold reserves in a currency that cannot be recycled into that nations debt if the debt has negative rates of return. We are seeing this play out slowly today on a world wide scale. This is just simple math.

    This is the Keynsian endgame. MMR and MMT are recycled failed philosophies as old as time itself. The reason they continually fail and recover under different names is because they attempt to deny the laws of physics by getting out more than you put in. These monetary tricks easily fool the general public and MMT and R is just at the forefront of mass thinking. They are the biggest fools of all, like the Grand Marshals of the suckers parade.

  • EconFan

    what would make analogy even greater would be to tie in the unconstitutionality(14th amendment) of the debt ceiling :)

  • Peter D

    The problem is that deficit and debt (cum. deficit) are not a measure of govt spending. They are an outcome of complex system where the deficit can (and usually does) grow when govt slashes its spending at the wrong moment. The deficit is an emergent phenomenon and actually better thought of as a lagging indicator of economic performance (there are some who think that large deficits are themselves a cause for economic downturns but this view should be resoundingly rejected by logic and observation by now.)
    The spending should be constrained but not by the size of the deficit or debt (again, these may grow exactly as a result of cutting the spending!) but by political process and checks and balances – as they are now. Automatic stabilizers such as unemployment insurance are themselves a result of the political process – it is true that maybe the current members of Congress never voted for those to be enacted but then you could say the same thing about any past law.

  • Peter D

    You may wanna check how the idea of hitting borrowing targets/constraints is playing out in the UK. It is funny (and sad) to see how they keep missing the targets despite their best efforts at austerity – totally blind to the fact that it is austerity itself that is cause of them missing the targets…

  • Cullen Roche

    MR is just a description of the monetary system. It doesn’t propose anything about the debt ceiling. This post is my opinion and those of Carlos based on our understanding of the laws and system as it currently exists in the USA. The MR (not MMR by the way and certainly not MMT) school of thought says nothing about which policies should or shouldn’t be implemented. It’s simply an understanding. That’s all. It’s my opinion that, when you understand MR you also understand that the debt ceiling is a silly constraint that achieves little. We should have a real constraint managed by an independent body such as the CBO whereby spending is actually analyzed and constrained based on its actual impact on inflation and living standards.

    You can understand MR 100% and still think the debt ceiling serves a purpose. That’s your opinion and it’s fine by me.

  • dilletaunted


  • Johnny Evers

    ‘…. constrained based on its actual impact on inflation and living standards.’

    Too vague, too prone to subjective factors. Economists can’t even agree on the rate of inflation out there.
    Also giving power to an ‘independent’ body to make these decisions is a fantasty. Who picks the ‘independent’ body?

  • Cullen Roche

    Reader spell check. Can’t beat it. Thanks!

  • Cullen Roche

    How about automatic tax cuts/raises targeting real GDP of 3%? Then the deficit becomes (even more) elastic. That covers just about everyone. The supply siders, the conservatives, the Keynesians and the inflationistas. And politicians can still pass their subjective spending bills….

  • nothingtosee

    analogies are never completely accurate, but they come close.

    There is a point where your credit cards are high…REALLY high ,and if you make the conscious effort to get your debt paid down, and to do so efficiently, instead of paying until you’re dead… that means tightening the belt.

    i get it, you have to spend money to make money in business, and if you cut spending, you cut some business opportunities. with austerity the goal is to cut as much spending as you can, without removing the ability to keep the bread and butter. this means anything speculative is canned, despite some potentially fruitful ideas.

    to throw a third analogy out there. you’re retired, you’re feeble and cant work if you wanted to. you don’t live in a country with any social support systems….you do have some savings. You can buy bonds with these and BARELY skimp by with rent and food… or you can place your cash into a very volatile market, but if the market goes down at all you risk losing EVERYTHING. (in the sense that your standard of living changes drastically when your land lord kicks you out, your possessions are to be sold off or thrown away because you cant store them, etc, etc. most people would buy bonds in this case, versus risking it all on something that will likely prove pay better in the long run…because you cant afford any risk.

    blend all three of those analogies and you have Austerity.

  • Peter D

    Yes, but who says that the supposed credit card is REALLY high right now? What is an objective indicator that it is so? Where is the evidence that the deficit is too high (as opposed to the plenty of evidence that it is too low?)
    Now, since for a sovereign issuer of currency the only real danger is never strict default but demand-pull inflation (that is, injecting too much money relative to the available goods and resources), then the only indicator of such a sovereign “overextending the credit card” is exactly this inflation – current and expected. And here by any measure you look at these indicators say nothing of the sort of “deficit is too high” and in fact say the opposite

  • Peter D

    You just need a sort of Taylor rule and some MMT/MR folks are actually proposing it, e.g.:
    But to try to constraint debt by slashing spending without considering the current economic cycle is the stupidest thing out there. Because it works exactly in the opposite direction from the one intended.

  • Johnny Evers

    I spoke to a young woman yesterday with $58,000 in student loan debt making $28k in a dentist’s office.
    I think it’s safe to say her debt is too high. If she had borrowed that money to become a doctor, perhaps not.
    So the key is growth. Are we as a nation borrowing money to spur growth (infrastructure, education, R&D?) or are we borrowing money to fund the retirements of seniors, who as a class have more assets than younger people? I say its the latter.
    And I don’t think we’re improving our standard of living by doing so. We’re degrading the cost of living by mismanging our resources. And we *do* have inflation, despite official efforts to downplay it. In fact, our policy is to *create* inflation (but only asset and price inflation, and not wage inflation). The news yesterday that housing values went up 6 pct last year (degrading the ability of young people to buy homes) was trumpeted as good news!

  • Johnny Evers

    I’m not sure what exactly you mean there. It sounds as if you want free rein to borrow until growth hits a certain target?
    Your assumption then is that deficit spending spurs growth.
    Possibly true, but I think deficit spending inhibits future growth. So what you’re proscribing is permanant deficit spending and a greater and greater role on the government to run the economy.

  • Cullen Roche

    No, we can have whatever size govt we want. You could slash all entitlement and defense spending tomorrow. But I’d still propose to let the tax structure float in an elastic form whether the govt is huge or small.

  • Chredon

    I was under the impression that Article I, Section 8 of the Constitution gave Congress the power “To coin Money, regulate the Value thereof, and of foreign Coin.” When did that change? When did Congress give Treasury the power to determine what coins would be minted and what their value would be? And if they gave it, could they not just as easily take it back?

  • beowulf

    ALL spending begins with an appropriation. Social Security has an appropriation, Medicare has an appropriation, even debt service has one, What makes entitlements (and debt service) different is that they’re permanent (unless and until a future Congress changes them) and formula-based (instead of sum certain).

  • Pierce Inverarity

    No, he’s not. Deficit spending need not exist if the U.S. were to get into a current account surplus. You seem to refuse to acknowledge these accounting identities because they interfere with your politics. If the U.S. is in a current account deficit, and it is, the only way the economy can continue to grow (in GDP terms) is via a) private credit growth (i.e. expansion of inside money) and/or b) government deficit spending. If the U.S. were suddenly to become a net exporter of goods, the government wouldn’t necessarily have to deficit spend any longer for the economy to grow in GDP terms. Or, if the private sector saw growth prospects higher than they are, private money creation would begin to pick up again. But the fact of the matter is, we still have a large credit overhang in the private sector that, without deficit spending, could take decades (look at Japan) to get out of. Is that what you want?

    Please, please, please learn about the accounting identities.

  • Ramanan


    Your site has this “confirm you are NOT a spammer” button.

    How does it really work?

    Are spammers morally bound to not confirm :)

  • Pierce Inverarity

    14th Amendment

  • Johnny Evers

    So many questions.
    Why is adding public debt to an economy sadled with a large overhang of private debt the answer?
    Is it because public debt can eventually be printed away, or rolled over forever? Is that the end game?
    Or, if the problem is the private debt, why not directly knock it down — debt jubilee, anyone?
    If private credit debt can grow the economy, how do you explain the crash of 08-09, when private credit debt grew too large. Won’t the same happen with a too-rapid expansion of public debt? Or again, is public debt not really debt but creating a financial instrument (Treasury debt = money).

  • Pierce Inverarity

    All money is debt/credit of some sort.

    Public debt is a financial asset to the private sector. Just like private debt is an asset to the private credit issuers. The difference here is that the government issues these assets for the public good.

  • beowulf

    Right, but Congress has delegated its power to create money has been to the Secretary of the Treasury (for coinage and a limited amount of currency) and the Federal Reserve System (for currency and bank reserves). Congress can always vote to take back anything they’ve delegated and then, if two-thirds of both Houses concur, override a presidential veto.

  • beowulf

    Congress has already eaten lunch but is now refusing to pay the waitress. Besides being pretty jerkish, this does nothing to help you lose weight.

  • beowulf

    “The deficit is an emergent phenomenon and actually better thought of as a lagging indicator of economic performance”

    THIS is a great point Peter. I think many (most?) people have cause and effect backwards. They think a bad economy is caused by a big deficit instead of vice versa. This misunderstanding has led to a lot of unnecessary suffering. its like Keynes said, take care of employment and the deficit will take care of itself.

  • Johnny Evers

    Congress wants the filet mignon. It doesn’t have the money right now, but can borrow to pay the waitress and give the borrower an IOU.
    How many of these IOUs can it issue?

  • Cullen Roche

    It can issue as many as it wants to meet a policy target. That’s why we should implement Elastic Deficit Targeting. You can cut the govt all you want around that. But keep a specific target on RGDP at some level and keep tax rates elastic to get us there.

  • beowulf

    To give credit where credit is due, this was something I mentioned on a couple of boards and that was about it, meanwhile Joe Firestone was beating the drum on this idea for months last year on different websites. To put it in Islamic terms, all I did was issue the fatwa, Firestone was the one out waging jihad (probably a bad analogy). :o)

    Of course, there are also those who say this idea didn’t really jump from the blogosphere to the real world until Cullen started touting it.

  • Waitingtoretire

    And the conclusion is… is different for different people……………duh. There is not a single answer.

    America has been a nation of borrowing to consume. If that is growth, so be it.

    Many of the current retirement seniors have the means to look after themselves but not all. In future years this ratio will change for the worse…..

  • Peter D

    “Are we as a nation borrowing money to spur growth (infrastructure, education, R&D?) or are we borrowing money to fund the retirements of seniors, who as a class have more assets than younger people? I say its the latter.”

    You can say whatever you want but you need to substantiate it with some objective measure because otherwise it is just your unsubstantiated opinion. I agree we don’t spend enough on R&D and infrastructure – and there is plenty of evidence that it is so – but where is the evidence that we spend too much on entitlements?
    In fact, if you look at the projected deficits, into the next ten years or so, you’d see that most – and it it really a lion’s share – comes from health care costs (and not SS, by the way). And if you consider Medicare and Medicaid entitlement spending – well, turns out they grow slower than private sector insurance costs, so, they are actually more efficient in that respect, which shows that the problem is not with the programs themselves but with the dysfunctional healthcare system. Shifting the cost to the private sector will not solve the problem but in fact make it worse, since the private sector is much more susceptible to high debt than the govt sector and in this particular case also less efficient. So, basically, solve the healthcare cost problem and there is no long-term debt problem at all.

  • hangemhi

    the answers to your questions, Johnny, are pragcap 101. how can you have failed in understanding really, really simple MR after all this time on this blog?

  • hangemhi

    The $1T coin idea was on the Rachel Maddow show tonight. Look out mainstream, here we come (and Fox will vilify it immediately afterward)

  • Cowpoke

    Pierce, well said and plain spoken. If I may,I would like to add one small (rather large) human caveat, you stated ” The difference here is that the government issues these assets for the public good.”

    I would be more inclined to say OR include that the Govt issues these assets for their political base.

    Remember, JFK famous speech when he is quoted ad nauseum
    As not what your country can do for you but what you can do for it.. Well, In reality it is in fact the opposite, we exists as a nation based solely on what we can all get out of the deal.
    Just political food for thought.

  • Johnny Evers

    Hangemhi, most of the assumptions here are old and tired Keynesian conventional wisdom, which you won’t challenge.
    And you don’t seem to admit to your one big idea — that federal debt doesn’t have to be paid back, because a Treasury is simply another form of money. Logically, that’s what you’re saying, and it opens up all kinds of possibilities and risks; again, which you don’t seem to want to examine.

  • Peter D
  • Johnny Evers

    Peter, Medicare and Medicaid are entitlement programs. The evidence that we spend too much is that we have to borrow $2 trillion a year to fund them and we don’t get the same health outcomes at the Europeans do for less the cost.
    It’s not my point here to discuss health care, but clearly those two welfare programs are driving future deficits.

  • Hans

    “The problem is that deficit and debt (redacted) are not a measure of govt spending.’

    Peter, it is wonderful to have your clarity back and through some MMT with it as well…

  • Peter D

    John, first, if the problem is Medicare and Medicaid, as you seem to agree, then why not just say so, instead saying “entitlement” and painting all the entitlement programs with the same brush? SS is clearly not a problem, yet the moment you say “entitlement”, you had it in mind, didn’t you?
    Now, you failed to address the point that the outcomes and costs of our healthcare system are not only bad and high for the government-paid part, but are equally bad and even higher for the private sector-paid part. In that, you confused the problem with the symptom. In other words, the problem is not the fact that we need to increase the debt so much to pay for Medicare/Medicaid – this is the symptom of the real problem that the healthcare system is very very suboptimal. And this is crucial, because when you misidentify the real problem then your solution is not going to work either. Because for you the solution is to slash spending on these programs, but instead of being anything like a solution, this would only exacerbate the problem! Your solution is like putting a sick person with high temperature into a refrigerator because you think the problem is the temperature and not the sickness that caused it.

  • beowulf

    “that federal debt doesn’t have to be paid back, because a Treasury is simply another form of money”

    Individual bondholders are paid back, but the debt in aggregate is never paid back, its simply rolled over.

    “Logically, that’s what you’re saying, and it opens up all kinds of possibilities and risks; again, which you don’t seem to want to examine”
    Right, that’s why voting is important! The federal government has two great powers– the monopoly of violence (what Garry Wills calls the Bomb Power) and the monopoly on the creation of money (call it the Money Power).

    The US Government stockpiles nuclear weapons and is pretty open about it. However, and some may find this a bit hypocritical, If a household, business or state tried to do the same, the FBI would step in and shut the down first chance it got. The Bomb Power means the US Govt is different from any other entity in this country. Likewise, Secret Service arrests counterfeiters every chance it gets, so its the same thing with the Money Power.

    David Frum shared a great story recently; in the 1960s while the federal govt was sending the Army into the South (for the first time since the post-Civil War Reconstruction) to desegregate public schools, the Governor of Ark. told the Governor of GA, “Be careful Lester, the federals have the atom bomb this time”. Exactly.

  • Ramanan

    Okay found the answer:

    Me and my curiosities!

  • Cullen Roche

    That’s the one. :-)

  • Andrew P

    The trillion dollar coin is a workaround, a legal dodge. It is a way to pay for government spending with pure seigniorage instead of by borrowing money in the normal way, and without a vote in Congress to do so.

  • Andrew P

    And the EU has the “money power” but not the “bomb power”. France (which founded the EU by the way) is the only Eurozone entity with atomic bombs.

  • Cowpoke

    Andrew, Unless congress has changed the law I don’t think the treasury can order the minting of a Trillion dollar coin, see the law here:

    31 USC § 5112 – Denominations, specifications, and design of coins

    (a) The Secretary of the Treasury may mint and issue ONLY the following coins(Note the word ONLY):

    (1) a dollar coin that is 1.043 inches in diameter.
    (2) a half dollar coin that is 1.205 inches in diameter and weighs 11.34 grams.
    (3) a quarter dollar coin that is 0.955 inch in diameter and weighs 5.67 grams.
    (4) a dime coin that is 0.705 inch in diameter and weighs 2.268 grams.
    (5) a 5-cent coin that is 0.835 inch in diameter and weighs 5 grams.
    (6) except as provided under subsection (c) of this section, a one-cent coin that is 0.75 inch in diameter and weighs 3.11 grams.
    (7) A fifty dollar gold coin that is 32.7 millimeters in diameter, weighs 33.931 grams, and contains one troy ounce of fine gold.
    (8) A twenty-five dollar gold coin that is 27.0 millimeters in diameter, weighs 16.966 grams, and contains one-half troy ounce of fine gold.
    (9) A ten dollar gold coin that is 22.0 millimeters in diameter, weighs 8.483 grams, and contains one-fourth troy ounce of fine gold.
    (10) A five dollar gold coin that is 16.5 millimeters in diameter, weighs 3.393 grams, and contains one-tenth troy ounce of fine gold.
    (11) A $50 gold coin that is of an appropriate size and thickness, as determined by the Secretary, weighs 1 ounce, and contains 99.99 percent pure gold.
    (12) A $25 coin of an appropriate size and thickness, as determined by the Secretary, that weighs 1 troy ounce and contains .9995 fine palladium.

    I’m not sure, but unless the law has changed I don’t think it can be legally done.

  • Cowpoke

    Andrew, it looks like the legal athourity is based on this section (K):
    (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

    Kinda open ended I suppose

  • Johnny Evers

    Geez, Peter, do I really need to clarify that Medicare and Medicaid are entitlement programs.

    You want solutions? Here’s one — don’t pay for unnecessary procedures!
    Here’s another one: If you decide to give me ‘free’ coffee, I’m going to be ordering expensive blends and throwing half of it away. Solution? Make my buy my own damn coffee. Or if you insist that we buy coffee for poor people, ration the stuff.
    Look, I understand that a lot of people benefit from Medicare and Medicaid — primarily the medical industry. Lots of people would benefit from ‘free’ housing, too. We’d all be living in McMansions if we had ‘free’ housing.
    But if you want it — you pay for it. Your solution is to borrow money from future generations, or print money (not sure how you believe debt it issued) and then, this is the dishonest part, you want to make a hostage of that policy. So, if we want to limit entitlements, you say we’ll kill the patient.

  • Johnny Evers

    Beowulf: The government’s monopoly on violence comes from its monopoly on the money system.
    Historically, a government’s ability to wage war has come from its power to pay for war — either by borrowing from Italian bankers or importing silver from Peruvian mines or strong-arming the primary dealers.

    As to your point about debt being perpetually rolled over — is it possible that in your need to roll over more and more debt, you run out of actual savers? And what happens when the bond holders (savers) become spenders, as appears to be happening in Japan? And is it good for the velocity of money for so many trillions of money-like instruments to be sitting idle on a ledger sheet somewhere?