The Trillion Dollar Coin

About a year after Obama was in office, I walked into a small business in our town. And posted on their wall was a trillion dollar bill and Obama’s face was on it. It looked real and I laughed. Well, I am not laughing anymore. Due to a loophole in the Treasury coin printing process, the treasury can print any monetary value of coin so long as the coin is made of platinum. There are rules and restrictions on printing paper money, and copper, silver, gold, and coins. And for good reason, printing money to get out debt usually leads to massive inflation. Many countries have done a similar process with bad results. Some economists argue if the FED keeps spending at current levels they can avoid inflation. If inflation does become an issue the FED can counteract the effect of the trillion dollar coin by selling off treasuries. Maybe this is true, but this is a dangerous experiment and sets a bad precedent by giving the executive branch too much power.

The purpose of the trillion dollar coin is a gimmick so Obama can avoid the “debt ceiling limit” debate in the next month. This way, Obama can continue spending money without facing a debate over spending cuts. I admit, defaulting on our debt would have catastrophic economic global consequences. At the same time, Democratic calls for moving control of the “debt ceiling limit” under the president or starting a litigation process that would attempt to abolish the “debt ceiling limit” as unconstitutional is just as insane as the trillion dollar coin.

I really do not think a President who has failed to pass a budget and has created more debt than any other President should be given a blank check to keep spending – especially since most of the spending is wasteful due to government bureaucracy. There are real consequences of running up too much debt and we see this situation unraveling in Europe – Ireland, Spain, Italy, Portugal, and Greece have massive debt to GDP levels and this is threatening the existence of the Euro. These countries created massive debts because of increases in welfare and entitlement spending. This is the same situation in the U.S. The scary thing is that our true debt is approaching 100 trillion dollars in unfunded liabilities for retirement funds (Social Security, Pensions, and Medicare).

Defaulting on our debt will have more catastrophic consequences than going over the fiscal cliff. What’s worse, there are no good options here – Obama who insists we do not have a spending problem – can increase the power of the executive branch by coining more money to avoid default. In this instance, our spending will continue with no cuts and or reform to entitlement programs. Obama can try to abolish the debt ceiling limit through litigation calling it unconstitutional (I do not think he can win this one) giving the President the power to continue spending policies with no checks and balances. Republicans can hold out for spending cuts, but defaulting on our debt would be bad and trigger a massively adverse economic effect around the globe.

So there have it, more doom and gloom, loopholes, tricks, gimmicks, and expansion of government being thought about by Democrats. Republicans will introduce a bill to try to block Obama from creating a trillion dollar coin, but there is not much they can do. Democrats carry on about companies and individuals using loopholes to avoid paying taxes, but they seem to like loopholes when it comes to them spending more.