Sunday, 10 February 2013

Trillion Dollar Coin Trick "explained"


So the massive US deficit is no problemo, don't we worry our little heads. Fallback plans include minting a trillion-dollar coin out of platinum. Whazza?

"Today, former US Mint director Philip Diehl explained in a comment on the Pragamatic Capitalism blog how the proposed trillion-dollar coin of platinum would come about."
1. The US Congress authorized the Treasury Secretary more than 220 years ago to handle money. In particular, the Secretary has complete discretion to produce all platinum coins, including the denominations.

2. The accounting treatment for this coin is the same as all others:
•the US Mint makes the coin
•the coin is shipped to the Federal Reserve
•the Fed books $1 trillion and transfers that amount to the Treasury’s general fund
•the general fund can then be applied to finance government operations
•25-cent coins are handled in the same way

3. Once the US federal debt limit is raised:
• the Treasury sells more bonds to bring in more money for the government
•the Federal Reserve ships back the trillion-dollar coin to the US Mint
•the accounting treatment for the trillion-dollar coin is reversed
•the trillion-dollar coin would be melted and it never would be circulated



Diehl said this works like additional tax revenue or borrowing under a higher debt limit so there are no negative macroeconomic effects. Moreover, the trillion-dollar coin doesn’t circumvent congressional power nor raise the debt limit, it delays when the debt limit is reached."

http://www.mining.com/how-the-us-trillion-dollar-coin-would-work-15292/

So there's absolutely NOTHING to worry about here, right?