I think it is considerably more bizarre. People have always done strange things with their money; NFTs have made it maybe more visible, and have certainly dressed it up in new tech-y buzzwords, but they've hardly introduced the idea of spending money in strange and stupid ways.
But I am considerably more upset about whole countries' economies being founded on strange and stupid decisions than I am on individuals making such decisions. (Which is not to say that I could, or know how to, do any better; we're just comparing bizarre-ness, not solutions.)
It's only bizarre when you believe that money is a concrete, tangible thing with unchanging intrinsic value.
When you believe that then of course it seems wrong and unnatural to create new money out of thin air.
Isn't the following approximately right: suppose that some country has a net worth of 10B (calculated somehow). The government decides that it needs some cash, so it prints another 10B of that currency and injects it into the system. Well, all it has done is devalue the currency by half, thereby looting half the economy of half its value, transferring that to the government. It's just a ploy to steal 5B by declaring it to be government property, which is possible since every instance of money is a tiny abstract contract which is controlled by the government's treasury/mint.
It's like issuing new stock to raise cash, without any increase in the total market valuation, which nothing but a cash grab from the current share holders made possible by controlling the issuance of stock.
The money supply is increased by government spending.
The US economy grows by approximately $700B per year. (23T * 3%). Therefore as a first approximation the money supply needs to grow at approximately $700B per year. If the government deficit is less than that, it acts as a brake on the economy.
When the government spends money, it buys stuff with that money. Whether that is inflationary depends on how rivalrous the spending is -- IOW if it's competing with private money for that stuff or it's buying stuff that nobody else would ever want to buy.
Suppose you actually approached the author of the gif, and bought the exclusive copyright to it, conventionally. The gif itself is still not affected any more by that transaction than of the non-fungible token purchase. Exact copies of it exist all over the place, shared by people who don't care about your copyright.
The Mona Lisa isn't valuable because it's a nice painting: it's valuable because of its history and meaning to the arts.
In principle it doesn't need to be transported by helicopter or transported at all, that's a formality that predates the Internet. It's not a particularly big detail that is worth changing, much like it's not a particularly big detail that a President must be sworn in by having a judge physically stand next to him and have him exhale CO2 in such a manner so as to produce vibrations within a narrow audible range.
Both things are just formalities to express intention.
"In case of emergency, a trillion-dollar coin could be deployed to bridge any gap between the money running out and the debt ceiling being raised".
Do they invalidate it? Because 5 minutes before it was stolen, it was considered a valid currency.
The most you could do is destroy it, the end result would be as if nothing happened and that's about it.
But Congress at the same time wants to have a silly law that tries to prohibit the executive from doing what it’s required to do in our system of government.
So in that case minting a coin actually seems to be what is required of the executive. It’s the only legal route out. This is all a farce.
It's silly, but mostly as a representation of how the underlying situation is ridiculous.
Waiting for Fast and the Furious 14 where the crew have to steal this coin.....
I got family."
This seems like quite the assertion. Anyone want to explain how minting $1 trillion will definitely not have any impact on inflation?
Treasury trades the coin to the Fed for existing bonds the Fed already owns.
Treasury extinguishes the bonds.
Fed's balance sheet is unchanged, minus a trillion of bonds, plus a trillion of coin.
Treasury's balance sheet is unchanged.
Zero new money in circulation.
The coin doesn't go into circulation, it just lets the member banks of the Federal Reserve have an asset (dollars) to borrow against and fund their current operations. This does have an impact on inflation, but it's not the same as dumping USD one trillion in bills into general circulation.
It's not going to enter the monetary supply, it's more of a loophole to avoid debt ceilings.
Now whether avoiding debt ceilings has an impact on inflation is up for debate (my vote is that it will, but I also don't like the debt ceiling in the first place)
And the harm is already done on that front.
This is relatively low impact compared to other shenanigans.
To summarize -- Congress has authorized a certain amount of spending, but they have also passed a law limiting the amount of money that the Treasury department can borrow. So ... how is the executive supposed to pay the bills?
tl;dr: Creating the trillion dollar coin does not commit to any spending not already authorized by Congress.
If there is in engineered way to create no spending limits for congress that congress will not spend 100% of that is moronically naive
If they make a 10 Trillion coin, congress will pass a spending measure to spend all 10 Trillion
to believe other wise is to be ignorant of history to a level that I don't believe is fathomable
This gimmick WILL CAUSE INFLATION. you can bank on that.
I think someone called it a trilemma -- Congress has passed a rock-paper-scissors law, and left no legal action that can be taken by the executive. Except that there's a loophole that they can mint the coin. Congress can close that loophole if they want! But right now it exists.
If Congress wants to control spending they should control spending, not force the executive branch to choose which law to break because they are in contradiction.
This seems to be the premise of a lot of later conclusions you're making, but it's basically wrong: Congress can print money at will. The debt ceiling is not the reason we don't do that. Reputation and inflation mostly are.
No Congress can not, the Federal Reserve can, which is not under the authority of congress at all really.
Congress can spend money, and Congress can Mint Coins (i.e this story) but it can not create federal reserve notes
If it spends more money than it take in from taxes it must issue Treasury bills that is has to sell to someone, Today almost no one wants to buy US Debt because congress is irresponsible like a child with a AMEX Black card.
So the only entity willing to buy US debt is the Federal Reserve who does so by money printing aka inflation of US Currency aka a tax on responsible people in society
They damn well can. There's nothing stopping congress from dissolving the federal reserve tomorrow if they'd like, other than the general dysfunction of congress that's spurred this whole discussion.
if that were the case why not just make a 1000 Trillion Coin, and pay off all the debt for all of time
Because we both know that yes that money will enter the money supply, just not directly.
The reason this distinction matters is that the President has the authority to create the trillion dollar coin, but does not have the authority to spend it. All he can do is grant permission to another authority to borrow against that coin, it's that other authority (the Federal Reserve) that would in turn affect inflation.
The argument is that since the Federal Reserve is going to end up doing that anyways, one way or another, that this trillion dollar coin itself really isn't the cause of any inflation to begin with; it's basically nothing more than a formality.
Sure, but it's going to do it through the borrowing/lending we presume will be allowed by congress (raising the debt ceiling) eventually anyways.
This just allows that to happen regardless.
This (to me) is not so much a financial tool as a political bludgeon to work around that fact that the US congress is essentially useless at the moment.
I still don't think it's a good idea, but bad ideas start seeming like good ideas if the people making the rules are utterly useless (see: congress).
For those of you not paying attention or who are from less-silly countries, the USA has a two-part spending process. First, congress passes a budget that directs how the government is going to spend money. Second, congress authorizes the government to borrow money if needed in order to fund said spending.
This, yes, means that congress first votes on whether to spend enough that we'll need to borrow money, and then votes on whether we're allowed to borrow the money that's needed for the spending they legislated.
Once congress has passed the budget, it's (essentially) a law that requires that the money be spent, so those responsible for using the money literally aren't allowed to e.g. trim programs to make sure we come in under the debt limit.
Notes are a liability of the Federal Reserve. Meaning they can be traded for balance on a Federal Reserve account. The treasury can't just create liabilities for the Fed out of thin air, I mean that would be wrong ;-)
(edit: just joking. The $1T coin would also be deposited at the Federal Reserve. I don't know why it can't be a note, other than that's how the law was written.)
But when it comes to authority, the constitution requires issuing IOUs that come with the full faith and credit of the US goverment originate in an act of congress. This is because "full and faith and credit" is not something that the executive can do on its own.
The constitution also gives the executive the right to mint coinage, but only up to spending limits, except for a loophole for various collectible coins made out of platinum. These were not intended to circulate, or be deposited at the Federal Reserve in exchange for reserves, which is why I am skeptical about the legality of using this coin. It would also be a huge political embarrassment. But if they cannot deposit it for reserves, then no one is going to get their bill paid with the trillion dollar coin.
In the past, congress had to pass a bill for each debt issuance, which was too much work as debt issuance ramped up. Then congress went to a debt ceiling authorizing the issuing of debt up to a certain amount. This was intended to give the administration flexibility. For the same reason, many spending programs authorize payments "up to" some amount in order to support flexibility. Should the executive do this, you can be sure this flexibility would disappear and things would get much more painful for the executive.
Now if you don't see anything wrong with bypassing congressional authorization because conceptually writing an IOU on metal and paper is the same, then we fundamentally disagree. It's not about the act, but the authorization behind it.
Congress can fix all this with a stroke of a pen, but eliminating the debt ceiling or lowering appropriated spending below what the debt ceiling would require. This is just a cheap trick to allow the executive to bypass the debt ceiling/government shutdown shenanigans.
> without any impact on inflation
This strikes me as absurd. Putting it on the other side of the balance sheet doesn't change its impact on the overall economy.
Let's make it a $10 trillion coin!
It’s insane to think that’s how inflated their economy became.
I read it as "fiat currency is more resilient in certain scenarios".
I know that even for small coinage the value we assign to them is arbitrary, but for the public it doesn't matter because it's just change.
If they want to use this solution they need to print a 1 trillion note, that would be in line with the arbitrarily assigned value to the smaller denomination notes.
I won't be shocked if this coin has been stamped there would be a court challenge, especially in terms of the said law's constitutionality.
(Edited because despite having "Depression" in my mind I still typed "Recession". The law was from the last century, not this century.)
Specifically to this case though, they might argue it's violating the so-called "power of the purse", which constitutionally is solely given to the Houses. I'm not sure if it will be enough (given common-law precedent), but I won't be shocked if someone will use this argument.
Unlikely to work. The Appropriations Clause gives Congress control over spending; the debt ceiling only affects money that's already spent per Congressional appropriation.
Congress needs to legislate not just demand the executive / Administrative state do all the things.
People don't question the face value of 1$ given the fact that it's cheap change.
Political opinions aside, it seems obvious to me that the value of the metal content of US coinage is unrelated to the face value.
That sounded so ludicrous that I thought you must be mistaken or exaggerating, but, as with all things currency-related, I think it's impossible to out-absurd the reality.