What many people miss, is the fact that this coin won't cause any inflation. It wouldn't be released to the public marketplace, thus creating no inflation. What the US does, is it mints a coin, probably from platinum. If they say it's worth a trillion dollars, it's worth a trillion dollars. It doesn't have to be from a trillion dollars worth of platinum. Many people are just joining the bandwagon and not thinking about this scenario at all.
The reason this idea is so out of left field is because the Federal Reserve is the entity responsible for printing money, and every dollar the Fed prints must be backed by Treasury bonds and counted toward the U.S. debt. But the Treasury's printing of a trillion dollar coin would not have any connection to the debt. Because it would sit in a vault and not be part of the money supply and not backed by bonds, it would not skew the economic system and, therefore, can't cause inflation. But because this coin is sitting in a vault and the Treasury Department determines that it's worth $1 trillion, it is.
While I do not think that the Trillion Dollar Coin would solve any problems, the notion of the debt ceiling is just as ridiculous.
Congress, particularly the House of Representatives, has already authorized spending on programs. The debt ceiling vote is merely a vote to decide on paying the bills they've already incurred.
Congress will never get serious about responsible taxing/spending as long as they can use the debt ceiling as a political cop-out.
If the Tea Party wanted to get rid of Social Security & Medicare, then they should have said so when they were running in the 2010 midterms. If they want to cut programs, then they need to finally identify the programs to cut. But this idea of saying that they want less spending, only to find out that they refuse to cut any spending that affects their own district, is now becoming a waste of time.
Allowing the executive to coin money by fiat and exchange it for credit with federal reserve would fatally sever the control congress has over the nations spending. A grave breach of the separation of powers. Infusing $1 trillion into the US economy via government spending will inflate the volume of currency in circulation depreciating its value. Finally, it would destroy presumption of Fed Reserve independence and credibility here and abroad causing Treasury bonds to crash.
Obama thinks he is a dictator, and he can just do what he pleases. So what happens when congress decides to say you can't put us into debt any further, his people come up with the trillion dollar coin as a way to get around the law. He is telling people, I am going to do what I want whether you like it or not.
Definitely not. Money is only worth as much as there is in other resources to back the value. The more money is printed (or minted), the less each piece is worth. This trillion-dollar coin wouldn't be solving anything. In effect, it seems like it could plunge us even deeper into debt. The value of money would plummet and it seems we would need to request help even more from other countries at that point.
It's funny that some people are actually suggesting this. Let's say I have 56 cents in my piggy bank and that's not enough to cover my bills, so one night I get out my woodworking tools and carve out an entirely new coin that says 1 million dollars on it. I put it in my piggy bank and my problems are solved. I no longer have bills I can't pay because I have that new coin. The suggestion that we can do that to solve the fiscal crisis seems to point to the fact that all this economic concern is trivial to begin with. I guess the main point is that we have reached the debt ceiling and cannot spend more until we have more money. I read that there is a law that we cannot mint such coins out of gold or other materials, except the law doesn't mention platinum. It kind of reminds me of credit cards, when your silver is maxed out they send you a gold and when your gold is maxed out they send you a platinum. But that is if you pay your bills.
Though it may sound like an easy answer to simply have a trillion-dollar coin made to take care of our debt, it would only lead to financial ruin. At the end of WWI, the German government started to print significantly more money to pay back what it owed. It caused their currency to loose so much value that a barrel of money was needed to buy a loaf of bread. Imagine what that would do to our economy now.