Monetary Realism

Understanding The Modern Monetary System…


View all posts by

23 Responses

  1. Ramanan says

    You Can’t Stop The Fire. #trilliondollarcoinsongs

  2. Dave Holden says

    I think young John Hodgman is correct – there is zero chance of a TDC being minted.

    • Michael Sankowski says

      It’s not quite zero, but it is low.

      The impact of the Coin comes more from the idea than from the execution. JKH has pointed out there is little difference between minting a coin and borrowing money, at least from the point of view of the government.

      The coin does at least two things:

      1. It provides a “nuclear” solution to the debt ceiling crisis for Obama. He can play hardball knowing he’s got pocket aces.

      2. It points out the government can make money out of thin air. We are having a massive national debate about affording something when we are sitting on a pile of cash. We don’t have a viable system setup to use the power today, but it’s entirely possible to “afford” to bring the U.S. economy at least back to the old NGDP trend.

      It seems knowing the coin can exist is even more powerful than the coin actually existing. I wouldn’t recommend using the coin – I do think we would have some people absolutely freak out if it was used. But as a tool in pushing the debate, it’s perfect. Understanding the coin is the “riding the bike” of the money creation process. Once you get it, you can’t forget.

      • beowulf says

        Exactly, Russia Roulette suddenly becomes less interesting once everyone realizes the gun isn’t loaded.

        • Michael Sankowski says

          It’s entirely possible Obama would be forced to use the Trillion Dollar coin. He’s got to spend the money, and the debt ceiling precludes him from issuing more debt.

          He’s got to do something at that point.

  3. beowulf says

    The Secretary would have to issue a Notice in the Federal Register for the price of the new coin (he’s also supposed to consult with the citizens coin advisory committee on the design– recycle an old design they’ve approved already).

    The phrase that pays is… “Pursuant to the authority that 31 U.S.C. 5111(a) and 5112(k) grant the Secretary of the Treasury to mint and issue platinum coins, and to prepare and distribute numismatic items, the United States Mint mints and issues….”
    The lag between new rule issued and new rule published (in FR) seems to run about a week (I imagine they can crash that schedule if necessary). In theory, a Notice is effective on the date of publication, but I’ve seen a Mint pricing Notice that was written December 29, published January 4 but effective January 1.

    That’s my first take on that. Were I were in govt, I’d call the Mint to confirm there’s no rulemaking issues and find out if anything else (Secretary’s design approval?) should be put in the Notice.

  4. Brian says

    “In the Secretary’s discretion, may prescribe from time to time” sounds like standard rulemaking authority. Even price changes go in the federal register: What am I missing?

    • Clonal Antibody says

      Also, the Secretary of Treasury would not need Congressional authorization to use the coin to “retire” the “National Debt” – at the very least, retire the “deb” held by the Fed.

    • Clonal Antibody says

      The notification has to take place – but only after the action has happened. In other words, notification prior to the action would not be necessary, and there would be no necessity for public input via comments.

      • Clonal Antibody says

        And the notification could be something as simple as “Today xx/xx/xx the US Treasury sold coins worth $2 Trillion to the US Federal Reserve Bank”

  5. Brian says

    Isn’t the Secretary of the Treasury’s ability to define the denomination of a platinum coin still constrained by the Administrative Procedures Act? That is, notice and comment, publication in the Federal Register, etc.

    • Clonal Antibody says

      I believe that the APA does not apply – from the Wiki

      The Administrative Procedure Act (APA), Pub.L. 79-404, 60 Stat. 237, enacted June 11, 1946, is the United States federal law that governs the way in which administrative agencies of the federal government of the United States may propose and establish regulations.

      Coining a platinum coin, and determining its denomination is not a rule or regulation. Further, the platinum coin act states

      denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time

  6. beowulf says

    Ha ha, thanks guys. I was telling JKH last night, the reason we’ve never seen the TDC before is because Congress has never been so stupid before. But beyond that, using the TDC couldn’t really work before the Fed was authorized to pay interest on excess reserves (with costs deducted from Tsy earnings rebate) by 2008 TARP bill.

    Tsy (via the Fed) has to pay “interest” on the excess reserves created or maintained by the Coin in the form of IOR payments or the Fed will be unable to keep policy rate north of 0%. IOR rate is 0.25%, which is what 2 year Treasuries yield currently. This is how absurd our situation is, seeing as 3 month T-bills are at 0.10%, it is actually cheaper for our government to borrow money than to just create it out of thin air.

    • Clonal Antibody says


      I still believe that the law was passed intentionally – at least on the part of a Congressional staffer. At least the language on the statute and Bill would indicate to me that it was indeed that case.

      • Michael Sankowski says

        Very much agree. This was intentionally put into the law by someone very smart.

  7. wh10 says


  8. JKH says

    Obama: “I will not play that game”

    Meaning: Geithner out; Carlos in

    P.S. Boehner on the face of the coin was also my original recommendation

    • JKH says

      superb report by Hayes, btw

      • Michael Sankowski says

        Yes, it really got to the point of the Trillion Dollar Coin. It’s a tool to get around the debt ceiling. It’s also a demonstration of the power to create money by the government.

        Right now, we give the power to create money (almost) exclusively to the banks. The government then borrows that money in order to spend it. It does not have to be that way, and probably should not exclusively be that way. It’s just the way our current system is setup.

        • Clonal Antibody says

          Mike a comment is awaiting a moderator!!!!!

        • Michael Sankowski says

          How did you know? Does it show up somehow?

          I’ve been on the road all day and just now got back.

          Nice comment too, btw

        • Clonal Antibody says

          When I wrote it, it said, “Your comment is awaiting moderation” — The second link triggered the moderation!

  9. Cullen Roche says

    Congrats Carlos. Very cool.