The super-coin debate

010813krugman1-blog480Those who watched the high-stakes drama over the holidays in which the U.S. got as close to the fiscal cliff as it could may have been reminded of an unruly 4-year old boy who insists on peering over the side of a precipice. Possibly just for the fun of annoying his parents, and proving that he can. The fact that lawmakers in Washington actually came to an agreement was greeted with immediate relief and rising markets, but there was never any doubt that more drama was on the way.

And it’s coming quick. In order to pay its bills, the U.S. Congress will have to raise its debt ceiling, once again, and angry Republicans are certain to make life difficult for President Obama to come to grips with spending. Not an unreasonable goal, in fact.

But if you were in any illusion over just how tough that fight could end up being, the trillion dollar coin should be enough to bring you back down to Earth. Apparently, because of a bunch of weird, arcane rules, while the Congress holds the country’s budgetary purse strings the President actually has the power to mint a coin whose value could literally be $1 trillion. So, theoretically, if Congress refuses to agree to a deal on raising the country’s debt limit, Obama could simply create $1 trillion out of thin air, deposit it in the Treasury, and pay the country’s bills.

For normal people, or possibly for about 99.9% of the planet, this seems crazy. It’s like a Black American Express card on steroids for superpowers, and something about it just feels absolutely wrong. How bizarre, then,  to read Nobel prize winners taking the idea seriously, and the Financial Times writers discussing how the possibility of such a coin alters the negotiations dynamic between Congress and the President. So get used to hearing about this (hopefully) fictional coin. And/or follow the “debate” on Twitter at #MintTheCoin .

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