A "trillion dollar" coin sounds like a joke. All people that hear about it are laughing. Even the tricky-minded proponents of the idea explain it with a smile on face. Yes, formally this is an option if the debt ceiling is not lifted. But even so it remains a joke. Therefore a joke is all the government policy in the last few years. Because this policy was exactly the same. Without even a coin :)

Obama, and Bush before him, had enormous budget deficits. FED was printing money to cover them. So the decision of the deficit was the money-print.

$1 trillion coin is just a different juridical scheme to do the same.

Up to now the procedure was government bonds to be issued, investors to buy them and the government to spend. As more and more of the bonds has been bought by FED, so this was exactly a money-print - issuing uncovered money.

Let's change the word "bonds" with the word "coin". What happens then?

The government issues a coin, gives it to FED and receives in exchange newly printed dollars.

I.e. coin=bonds...

So if it is funny when we talk about a "coin", shouldn't it be also funny when we talk about "bonds"...?
The US government is very active when searching for new ways to print and use easy money. And it is very passive when thinking about real reforms and spending cuts.

"Money" means something that has a value. To have value, this means someone has created any product that stays along with this money. Real money is this money that has any product next to it. When we are printing money, there is no product. I.e. this is not real money. This is counterfeit money. If the counterfeiter was not the government, he would go to jail.

Printing money is a hidden way of taxing people. Issuing new banknotes is not harmless and painless operation. It means lowering the value of the rest banknotes - the ones that have real labor and production along. I.e. printing money means confiscating part of this production. I.e. it means "taxing". "Inflation tax" is the right term...

The problem is not with the "trillion dollar coin". The problem is with the thinking that led us to a "trillion dollar coin". The coin is only a tool, a consequence of the thinking. The thinking of an easy money that can be created from nothing. There are many ways of printing money. The government can always find a juridical form of doing this. Historically it can draw on the experience of so much previous turbo-inflation policies that were implemented around the world. And the best achievement is the 100 trillion dollar bill of Zimbabwe. Much and much more than even the "trillion dollar coin". So there is enough "knowledge" to use. The problem is why to use is, and is it clever to do so. The answer is again in history. And this answer does not say Obama is very clever... :)))

Dobri
Jan 10th 2013