Beyond Debt Ceiling, Trillion Dollar Coin Offers New Economic Paradigm

Last week the "trillion dollar platinum coin" entered the public lexicon as part of Washington's debt ceiling debate. It sounds jaunty and paradoxical, but it is a surprisingly serious proposal.

The coin presents a rare opportunity to have a public discussion about the nature of money, something very few people understand. If advocates play their cards (and coins) right, it could even result in the creation of a new and more sustainable monetary system.

OK, so here's a summary of the trillion dollar coin proposal: The Federal government has a self-imposed debt ceiling that must be raised by Congress periodically in order to continue to pay its bills. If House Republicans refuse to raise the debt ceiling, a legal loophole allows the U.S. Treasury to mint a high value (trillion dollar) coin, and deposit it at the Federal Reserve, where the Treasury's account would be credited, this allowing government borrowing to continue. In the narrowest strategic reading, the coin could buy the president time to reach an agreement with Congress on the debt ceiling. Similarly, the president could threaten to use the coin unless Congress gives the president the authority to unilaterally raise the debt ceiling. In return, Congress could revoke the ability to mint future trillion dollar coins. In these scenarios, the status quo is preserved, and no major changes are implied to the existing monetary system.