Trillion Dollar Coins, Sovereign Debt, And Paul Krugman Is Dumb

The debt ceiling suspension is (currently) set to expire January 1, 2025. Inevitably, sometime in late November/early December, a bunch of people who don't understand how the economy works will begin to, once again, propose we "mint the coin" to pay off our national debt.

It never ceases to amaze how many people who are considered to be very smart (by the standards of the masses) propose this idiotic idea, and how many people take it seriously. But rest assured, there's absolutely nothing serious about this idea whatsoever.

"Nobel laureate economist" Paul Krugman, who somehow still has credibility in economic circles despite being wrong about literally everything he's ever predicted, is one of the biggest advocates of minting (what would now be 35) trillion dollar coins to pay off our national debt.

Now, ignoring all the obvious problems this would instantaneously create in the economy, there's actually, despite popular "opinion" (actually, despite popular ignorance would be the better descriptor), not even a legal avenue to even attempt to execute such an idea (thank god).

Allow me to explain: this entire crackpot theory of the government's ability to mint its own set of trillion dollar coins to pay off its own debt (which would in all actuality inherently constitute a de facto default, but that's an article for another day), comes from an obscure law, 31 U.S.C. 5112(k), passed back in 1996 that basically states that the U.S. treasury has the authority to mint commemorative coins in platinum in any denomination it wants to. Perfect! So we can just go ahead and exploit this law to mint trillion dollar platinum coins and use it to pay off our sovereign debt without having any adverse effects on the broader economy whatsoever! Magic!

Uh. No. Despite the fact that this law was passed, it doesn't supersede or render other laws meaningless. What Paul Krugman apparently doesn't know is that the Bureau of Engraving and Printing has to receive a print order from the Fed before it can create any new currency at all, regardless of how the Treasury asks the B.E.P. to print it. So if the Fed were to send a print order over to the B.E.P. for $100, then theoretically, the Treasury could then ask the B.E.P. to print the $100 in 5 $20 newly-minted commemorative coins, or 1 $20 commemorative coin and 4 $20 federal reserve notes, etc.. But what the Treasury cannot do, under any legal circumstance, is just force the B.E.P. to start printing new currency or minting new coins without the involvement of the Fed. Period. The Glass-Owen Federal Reserve Act of 1913 simply prohibits it. End of story.

But that's not even the only problem. Even if the Federal Reserve Act didn't completely prohibit this from happening (which it does, but we'll pretend for the sake of argument that it doesn't), the Treasury certainly does not have the legal authority to control the money supply in this country. Minting a coin in the denomination of one trillion dollars (this sounds so silly, it even feels weird to type in this article), would certainly legally qualify as a "larger liquid asset" and would therefore be included in the M3 money supply (had it not been arbitrarily discontinued), regardless of whether or not it's just deposited in a big vault in the dark, creepy basement at the D.C. Fed building. And again, the U.S. Treasury has absolutely no legal authority to control the money supply. Period. End of story. So, Paul Krugman is wrong, legally, for a second reason (and again, we're obviously ignoring all the major problems this would create in the broader economy, which Paul Krugman himself probably doesn't even believe would happen).

So anyone who proposes this idea, including "Nobel laureate economist" Paul Krugman, has a fundamental misunderstanding of how the economy actually works in this country, and has absolutely no idea what they're talking about. So the next time you hear Paul Krugman, Kyle Kulinski, or Sam Seder claiming the U.S. government can essentially waive a magic wand and make the government debt disappear before your very eyes with a "trillion dollar coin," you'll know that what they're saying is complete bullshit, and you'll know why. And to be clear, anytime Paul Krugman ever says anything at all,  you should immediately be skeptical, and the meme we've posted below sums up why.