This post originally appeared on Business Insider:
This is really thrilling.
An arcane idea that started on finance blogs in the summer of 2011– that Tim Geithner should mint a trillion dollar platinum coin to avert the debt ceiling–is now seriously taking off.
The premise of the idea is this: Although the Treasury can’t just create money out of thin air to pay its bills, there is a technicality in the law that says the Treasury has special discretion to create platinum coins of any denomination, and the thinking is that Tim Geithner could make the coin and walk it over to the Federal Reserve and deposit it in the Treasury’s bank account.
But there’s a new debt ceiling looming, and this time, LOTS more people are talking about it.
We noted our surprise back in early December that an actual 3rd party research firm brought up the idea.
Now it’s going even more viral.
In an interview with Capitol New York, Representative Jerry Nadler came out in favor of the solution (Nadler has an above-average understanding of economics in our experience).
Josh Barro at Bloomberg is now endorsing it, and that’s spread a huge conversation about it among DC journalists and policy folks on twitter.
Barro explains why it’s the perfect “solution” to the debt ceiling fiasco:
“Hitting the debt ceiling isn’t an option. It’s no way to run the country, and Republicans know that. So, a debt-ceiling increase shouldn’t count as a ‘concession,’ and it’s nutty for Obama to have to give substantive policy ground to get one.
“Monetizing deficits through direct presidential control of the currency, in lieu of borrowing, is also no way to run a country. It’s silly, and it’s perfectly legal. Agreeing not to do so is therefore the ideal ‘concession’ for Obama to offer in return for Republicans agreeing to end the threat of a debt-default crisis.”
This is basically the right way to think about it. Yes it’s silly to think of funding yourself with a coin, but it’s even sillier to think that defaulting might be a good idea, so you might as well do it.
Now quick detour into economics that must be addressed: Lots of people, when they hear the idea, say one of two things:
- This would cause massive inflation!
- Well if we did this, why not a $100 trillion dollar coin?
Neither of these are legitimate rejoinders.