
Trillion-dollar coin - tosh
https://en.wikipedia.org/wiki/Trillion-dollar_coin
======
m-i-l
There are £1,000,000 [0] and £100,000,000 [1] bank notes issued by the Bank of
England, used to back the value of Scottish and Northern Irish pound.

[0]
[https://en.wikipedia.org/wiki/Bank_of_England_%C2%A31,000,00...](https://en.wikipedia.org/wiki/Bank_of_England_%C2%A31,000,000_note)

[1]
[https://en.wikipedia.org/wiki/Bank_of_England_%C2%A3100,000,...](https://en.wikipedia.org/wiki/Bank_of_England_%C2%A3100,000,000_note)

~~~
noneeeed
Can someone explain how it is that the Bank of England can summon huge amounts
of money into existence through QE by just updating entries in some ledgers,
but for something like this we need to mint/print some physical object?

Every time I think I understand how modern money works, I learn about
something like this.

~~~
JumpCrisscross
> _for something like this we need to mint /print some physical object?_

Ultra-large denomination bills are a relic. They preceded computerized records
as an immutable record of interbank transfers.

For example, say someone in New York sends someone in San Francisco $100
million. Settlement-wise, the New York bank reduces the sender's deposit
balance and moves reserves from its New York Fed reserve account to the New
York Fed itself. The New York Fed moves these reserves into the San Francisco
Fed’s account at the New York Fed. (These could, at the San Francisco Fed's
option, then be couriered across the country.) The San Francisco bank, in
turn, gets $100 million deposited into _its_ reserve account at the San
Francisco Fed and creates a deposit in the recipient's account.

Keeping track of all of the above is complicated. Physical settlement, in a
country without the telegraph, reduced the risk of errors. Moving around
tonnes of cash is inconvenient. Hence, super-large bills, used solely for the
settlement layers above.

~~~
sandworm101
Until nixon axed the large bills as part of the drug war. With 1000$ being the
new largest bill, gold bars/coins became a potentialy practical option once
again. Krugerrands (sp?) tried to capture this market but never caught on.

~~~
rsmckinney
$100 is the largest federal reserve note today. And even that is under
pressure, mostly from the anti physical currency crowd.

Considering inflation a $100 note today is comparable to a $10 note from just
a few decades ago. Thus currency denomination should shift in the opposite
direction eliminating the cent and nickel, and adding larger notes.

------
_Nat_
The trillion-dollar coin is so amusing because it's so blatantly disingenuous.
I mean, no one's seriously going to treat the coin as actual money, but rather
as a symbolic trinket.

For example, say someone steals a trillion-dollar coin; would Forbes rocket
them to the top of the richest-people list? And could they ever actually spend
the coin in any way?

I mean, sure, the coin'd have value as a piece of artwork, but no one'd
seriously regard it as actual money.

~~~
josu
The balance sheet of the Fed will. The coin is just a loophole, but the impact
on the economy would be the same as actual cash.

------
ajhurliman
I can't remember where I heard it, but an interviewer asked Obama what his
hardest decision was in office and he responded "the trillion dollars coin".
In retrospect it seems absolutely massive in terms of setting precedence, but
at the time it just seemed like part of the news cycle.

~~~
jrs235
Well don't let Trump know this unless you want a trillion dollar coin minted.
He'd probably do it just to spite Obama.

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cyberferret
Somewhere in a drawer here I have a Billion dollar note from some African
nation from years ago. I think it roughly converts to about $100 here in
Australia.

~~~
KozmoNau7
That sounds like Zimbabwe dollars. I have a 100 trillion dollar note
somewhere, and a stack of 200 million dollar notes.

They're worth a lot more now as collector's items, than they ever were as
actual currency.

~~~
kilroy123
Not really. I was just in Zimbabwe and on many street corners they try to sell
you one for like $1-2 USD.

~~~
xyzzyz
Yeah, but going to Zimbabwe to get them for cheap is expensive for anyone not
already in Zimbabwe.

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jellicle
The trillion dollar coin idea is a good one, and completely legal, and the
idea will come up again if there's ever a Democratic president. And no, it's
not inflationary in the slightest (the inflation, if any, would originate with
the government spending in the first place, not in how that spending is
accounted for behind the scenes).

It's just a way to say the debt ceiling is dumb, that when Congress
appropriates $X then that also comes with inherent authority to spend $X.

~~~
50656E6973
According to that logic, does money have any material basis in reality? Or is
it purely authoritarian in nature?

~~~
ls612
Money is just a useful abstraction to get economic exchange to happen more
easily. So long as the money supply is vaguely in line with the demand for
real goods and services the details don’t matter too much.

~~~
carlivar
As long as the government can keep spending more every year, everyone is
happy. This will apparently work forever. Best not to ask questions about how
this affects the poor that don't have inflation hedges such as real estate or
stocks.

~~~
newguy1234
The poor can easily get those things as well, especially with apps like
robinhood that make buying stocks easier than ever. Also you have
cryptocurrencies now that can basically be purchased in seconds.

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codesushi42
The Simpsons did it first:

[https://en.wikipedia.org/wiki/The_Trouble_with_Trillions](https://en.wikipedia.org/wiki/The_Trouble_with_Trillions)

~~~
omegaworks
>Originally, Homer was to learn that he was a Native American, and would try
to exploit it to not have to pay taxes. The idea had been going well for a few
days, but the staff did not actually know whether Native Americans had to pay
taxes.

wow

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nickpinkston
The US also had $100,000 notes for internal government accounting and
transfers.

[https://currencies.fandom.com/wiki/United_States_100,000_dol...](https://currencies.fandom.com/wiki/United_States_100,000_dollar_banknote)

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ikeboy
An even more interesting idea is treasury bonds with high coupons that would
sell for above par, allowing more spending without increasing the debt by the
full amount.

See
[https://www.bloomberg.com/opinion/articles/2013-10-02/mint-t...](https://www.bloomberg.com/opinion/articles/2013-10-02/mint-
the-premium-bonds-)

~~~
api
All these hacks just illustrate the fact that money is a social construct.

It's funny to watch the block chainers come to this realization too. "Bitcoin
is hard money! Finally we have an 'objective' currency!" ... then someone
forks the chain and makes a new coin. Now there is twice the "money" in
circulation, with holders on the old chain now also holding some other coin in
the forked chain.

But what about gold? Why is it that we find a certain non-reactive yellow
metal so valuable? Answer: because we have implicitly agreed to do so. If we
all decided gold was worthless as money its value would collapse to something
more on par with its value in terms of its industrial uses. Right now it
trades far above that because we like to stockpile it in warehouses and use it
as a large-scale "store of value" to back currencies and stuff.

~~~
0x8BADF00D
> If we all decided gold was worthless as money its value would collapse to
> something more on par with its value in terms of its industrial uses.

If that were the case, then the price of gold would drop. Demand would
decrease and the price would fall. In fact, this happened during the last
financial crisis, because of a strong dollar and deflationary pressure. In
terms of dollars, gold will always do very well, though. Here’s why.

The thing central bankers (they’re really central planners) don’t understand
is that markets are forces of nature. You cannot tame this force of nature
anymore than you can stop a hurricane.

The fiat currency scheme will eventually collapse, because it produces
distortions in the market. The key piece of evidence is when the Fed had to
print 85 billion dollars last week because the overnight repo rate skyrocketed
to something like 10%. The interest rate is a proxy for credit risk. What that
tells you is the house of cards is about to collapse, because the market will
not allow distortions like negative interest rates or negative yielding debt.
It is simply illogical. As a creditor I will not lend someone money and agree
to receive less than I originally lent out. Additionally, the real interest
rate is probably around 10-15%, and the Fed will continue to need to print
money, which will depreciate the dollar (money itself follows supply and
demand. Increase supply and what happens to price?). All of this is very good
news for gold.

~~~
brewmarche
An interest rate is not only a proxy for credit risk but also is driven by
demand and supply.

If like here many banks request overnight money then the interest rate goes up
(interest rates are just prices for money in the future quoted differently --
high price to the lender = low interest rate). The same market forces apply to
the good "money redeemable in n days".

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ralfd
> "Beowulf" would later tell Wired magazine that the coin idea came from a
> December 2009 Wall Street Journal article that talked about how several
> people were able to generate frequent-flyer miles at no cost by ordering
> coins from the U.S. Mint with a credit card offering mileage rewards and
> then depositing the coins at a bank to pay off the credit card debt.

Sadly the WSJ story is behind a paywall:

[https://www.wsj.com/articles/SB126014168569179245](https://www.wsj.com/articles/SB126014168569179245)

~~~
Scoundreller
I miss fatwallet and its shenanigans.

I’ll never forgive Rakuten for buying a community and shutting it down.

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lando2319
Here's my question. As far as the national debit, somewhere on planet earth
there are people who are owned this money. They are out there presumably
collecting interest.

How does this whole platinum coin exchange change their situation?

Aren't they still owned money?

~~~
guipsp
Imagine I owe you one trillion dollars. I pay you a trillion dollar coin. Our
debt is settled.

The way this works out is that every single dollar is worth slightly less
after minting this coin.

~~~
AtlasBarfed
Depending on the perception of the value of the valueless currency, velocity
of information, and "supply" of money.

Not that I'm a gold standard zealot, bitcoin self-deluder, or the like, but
fiat currency is ridiculous, yet it's the basis of the global economy.

~~~
antonvs
> fiat currency is ridiculous

If you think this, it's almost certainly because you don't understand it.

The basic concept is incredibly simple: it's an abstraction of value which
allows us to avoid having to barter directly with actual goods.

Gold and Bitcoin allow you to implement exactly the same thing, but with
specific built in supply constraints that aren't connected to the underlying
economy. This is a problem for both commodities being used as currency.
Ideally, the money supply should be able to expand to reflect the wealth in
the underlying economy - otherwise, you get severe inflation or deflation,
both of which have negative effects.

Of course you didn't say what aspect(s) of fiat currency you consider
ridiculous. If you're just saying that governments are too free with their
manipulation of the abstraction, there's some merit to that. But that's not a
problem with the concept of fiat currency.

~~~
AtlasBarfed
Everyone bases all their valuations on something that can be devalued or
manipulated at will, and only isn't because "smart" people are in charge.

If anything we know that we can't rely on good governance, not just from the
appalling current administration but the forty years of pro-rich economics
that have exacerbated our descent into indolent oligarchy.

Therefore our currency is based in an assumption of confidence and ability of
the adults in charge. Which we in w to be utterly bankrupt.

Your definition of abstract value applies to the concept of currency.

Fiat currency is an abstraction of the abstract... That relies on people's
visceral sensation of the utility of money in the current moment to serve as
the only tangible aspect, and substitute for any real value.

Which we know is an illusion, based on a declaration. A "Fiat".

My issues with currency are very very deep. Money exists in the modern world
where billion year evosystem destruction is converted to short lived
production and temporary utility .. with the imbalance of wealth it is even
more vapid and shallow.. And money is the laundering mechanism along with
"limited liability" to enable this mass sociopathy.

That it doesn't even represent anything in reality is the icing on the turd
cake.

At least the remnants of previous empires have their idols of gold. Ours will
just be bits on a flash drive.

~~~
anticensor
> Ours will just be bits on a flash drive.

Computer archæologists disagree.

------
FactolSarin
This article takes me back. I remember being pro-trillion dollar coin, if it
came to issuing that or defaulting. Too bad Obama didn't know what Trump does:
obeying the law is optional for the president.

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tibbon
I have yet to understand why people are upset about the concept of China
devaluing their currency and manipulation of it, and don’t have an issue with
the US doing it.

~~~
gok
You don’t understand the difference between:

A. Actively controlling an exchange rate through foreign debt purchasing and
capital controls to sidestep rules on tariffs, and

B: Having someone float an idea to work around a bizarre loophole in the
federal budget law?

Ignoring the fact that this didn’t even happen, it also has really nothing to
do with adjusting currency values.

~~~
hn_throwaway_99
But I believe it's more bizarre that Congress has the power to appropriate
funds, but then also has the power to deliberately deny payment. The fact that
the debt ceiling exists at all is the bizarre part.

There were many parts of this Wikipedia page, the parts talking about how it
would be technically legal but counter to our traditions of checks and
balances, that honestly seem quaint in a post-Trump era. I don't say this to
be explicitly political, but Trump has made it 100% clear he won't be
constrained by any "traditions". I mean with defense money being rerouted to
pay for the wall despite not being allocated for this, the president directing
members of the executive branch to just break the law and build the wall and
then say he'll pardon them if they are prosecuted.

~~~
maxlybbert
The term “checks and balances” is almost always used wrongly, as in this
article. Checks and balances are the ways the different branches of government
check each other. The trillion dollar coin was a goofy proposal for the
president to save Congress from itself.

As you said, Congress passed the debt ceiling, then approved spending above
that limit without approving ways to pay for it. And it refused to raise the
debt ceiling. That’s not really part of the system of checks and balances;
that’s Congress getting itself into a bind by passing legislation that can’t
actually be satisfied.

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MagnumPIG
> Professor Jonathan H. Adler of the Case Western Reserve University School of
> Law has said that he believes the legality of the trillion-dollar coin to be
> dubious.

One of the most harebrained schemes hatched to date, "dubious".

~~~
akhilcacharya
To be fair, almost causing a default was also pretty harebrained.

Modern problems require modern solutions

~~~
blackflame7000
True but the cost of getting it wrong is the American economy so let’s not get
too clever for our own good like the mortgage crisis.

~~~
Wowfunhappy
And the cost of the US defaulting on its debt would be...?

~~~
blackflame7000
Probably something along the lines of the end of the soviet union followed by
China taking over as the world reserve currency.

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joshspankit
Interesting that the US govt is actually trying to find ways to circumvent the
world bank. I was under the impression that they were in a solid partnership.

~~~
gok
Where did you get that? This was an idea that someone posted on on a blog as a
hypothetical way to bypass congress’s ridiculous debt ceiling rules which are
used to hold the economy hostage during budget negotiations. And it was
rejected the agencies that could have implemented it. What does this have to
do with the World Bank?

~~~
joshspankit
Took me a little extra digging to see that you’re right. Apologies: I
sometimes have difficulties where facts get jumbled in my brain as they are
being considered. It was telling me that the world bank is the organization
that lends money to the US and controls the currency and the US is therefore
beholden to them. The correction is that it’s the federal reserve that lends
money to the US and the fed is owned by US banks with no clear, evidence-
based, ties to the world bank at all.

