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A trillion coin to settle US debt

Chris Paine, News.Com.Au
Friday, January 11, 2013

BARACK Obama can alleviate some of America's egregious debt by requesting a $US1trillion ($F1.77tn) coin — a real-life, money-in-the-hand coin, worth $US1tn.

All the President needs to do is call the US Treasury and have them mint a piece of platinum with a whole bunch of zeroes on it.

In what shapes as a solution to America's debt crisis that's both shocking and simple, the President has been urged by some financial experts to consider minting a $US1tn coin. But how is that legal? Wouldn't that affect inflation?

Technically, the coin would satisfy both of those concerns. The Treasury can't just print money as it chooses, but there's a loophole allowing it special concessions on platinum coins.

The coin wouldn't impact inflation any more than the alternative — which is to raise the debt ceiling.

Says Philip N Diehl, the former Mint boss and Treasury chief, who co-wrote the law that allows all this to happen: "There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $US1tn would be taken off the books, and the coin would be melted." The reason a coin is being considered as an option, is to help Congress from being held hostage by the Republicans — who are happy to support a move to raise the debt ceiling, but only if the Democrats promise to cut spending. The only remaining option would be to do nothing, which would cause the US to default on its debt repayments and cast the American — and global — economy into turmoil.

It's because of these grim alternatives that experts like Nobel Prize winning economist Paul Krugman have made a strong push for the coin.

Mr Krugman's also got support on the Hill. But it might not just be as simple as the President calling up his Mint Guy; Republican Greg Walden has put forward a bill to nix the coin-minting-option. Bring on the coin, we say from afar. It's like Charles Montgomery Burns' trillion-dollar bill from The Simpsons — except this is real (potentially), and probably wouldn't be stolen by Fidel Castro.