The $1 Trillion Dollar Coin: Exploring the Debt Ceiling

For the first time in its history, the United States government may mint a $1 Trillion Dollar coin.

This could happen in the next 60 days.

Here's why: 👇👇👇 pic.twitter.com/AqUVPyrzFP

— Moiz Ali (@moizali) April 10, 2023

First, lets talk about the debt ceiling. The debt ceiling is a limit on the amount of debt the United States can incur.

We’re always running a deficit here, which means that the government spends more money each year than it collects through taxes. Naughty stuff!

— Moiz Ali (@moizali) April 10, 2023

In order to pay for stuff when you don't have money, you have to borrow money.

In 2021, Congress passed a law that said the US could incur debt of *up to* $31.4 trillion. That is, by law, we can't borrow more money than that.

In June 2023, we'll hit the limit of $31.4 trillion

— Moiz Ali (@moizali) April 10, 2023

In the past, Congress has bickered a bunch and then lifted the limit. This time, some believe that we'll be at a political impasse and won't be able to lift the limit.

As a result, we'll have to pay for a bunch of stuff we've purchased, but won't have any $$$ to do it. Trouble!

— Moiz Ali (@moizali) April 10, 2023

If Congress fails to lift the debt ceiling, the government has an option that your parents don't have, which is to print money.

That is, we can just print money (rather than borrow money) and use that money to pay for the stuff. Pretty easy, no?

— Moiz Ali (@moizali) April 10, 2023

Well, the trouble is we actually have to PRINT the money, and then deposit it into our account. We can't just go into a software program and add a zero (or rather, a lot of zeros).

So lets print a trillion dollars, no?

— Moiz Ali (@moizali) April 10, 2023

Well, it's more complicated than that.

There is only about $2 trillion dollars of US currency in circulation today, and our goal is to have another trillion dollars so we don't have to go through this again for a bit.

— Moiz Ali (@moizali) April 10, 2023

Did you know $1 million dollars in $100 bills weighs 22 pounds? We would need to print 22 million *pounds* of bills in order to print $1 trillion dollars.

So printing a bunch of $100 notes isn't feasible.

— Moiz Ali (@moizali) April 10, 2023

Moiz, you idiot, lets print a trillion dollar note! That way, we can solve the problem in a second.

Well, the issuance of paper currency is subject to various accounting and quantity restrictions that are governed by federal law, and we can't do this without Congress.

— Moiz Ali (@moizali) April 10, 2023

But there exists a loophole that could work: coins!

Coins are generally restricted to amounts of $50, $25, $10, $5 and $1, and have specific provisions regarding weight, size, and even layers of metal.

But there is a loophole to this!

— Moiz Ali (@moizali) April 10, 2023

The Treasury Secretary has discretion to print platinum bullion coins (AND ONLY platinum bullion coins) in the amount she desires.

Platinum bullion coins can be minted in any denomination, whereas coins in any other metal are restricted to amounts of $50, $25, $10, $5 and $1!

— Moiz Ali (@moizali) April 10, 2023

So the Secretary can print a trillion dollar coin, and then walk it over to the Federal Reserve and deposit it in the United States Government Bank Account.

That gives us another trillion to spend without having to go through Congress!

— Moiz Ali (@moizali) April 10, 2023

Now Janet Yellen (Sec of Treasury) thinks this is a gimmick, but Nobel prize winning economists and Harvard Law School Professors have both said this is legal and the right thing to do if Congress doesn't act!

— Moiz Ali (@moizali) April 10, 2023

So why do we ever lift the debt ceiling instead of just printing more money?

Printing money without economic output can lead to inflation, so generally, this isn't a good idea. But it is a better idea than letting the US Government default on its debt!

— Moiz Ali (@moizali) April 10, 2023