Trillionaire
If you were to receive a trillion dollars tomorrow, but all in a single coin, what would you do with it? Fascinatingly, the U.S. government was quite close to getting one.
Back in January, the U.S. was facing trouble after it exhausted its US$31.4t debt ceiling – defined as the maximum amount of money that a government can raise through bonds. News permeated the markets, as hitting the ceiling meant that the Treasury had to resort to accounting manoeuvres to pay its bills, raising concerns the department could be close to defaulting on its debts. Fortunately, with just two days left until a default, the U.S. president signed the papers removing the ceiling for two years.
But before that happened, another potential solution to the U.S.’ debt crisis was in discussion: the trillion-dollar coin. Yes, a USD coin packing 12 zeros.
Can they just do that? Well, the U.S. Mint is legally permitted to produce platinum coins of any denomination. While this was initially to allow the minting of collectible coins, it technically also means that the Mint can actually make a coin worth US$1,000,000,000,000.
The plan was to mint it for the sole purpose of paying off debts; it was to be given to the Federal Reserve, which – suddenly flush with a trillion bucks in its coffers – could pay its bills off with no issues. It’s a break-the-glass solution that supporters believe is more economically-sound than defaulting on loans or raising the debt ceiling just to go into more debt. The idea has garnered the endorsement of both economists and members of congress.
But contrarians would say, “if only it was that easy”. Firstly, there’s the issue of the extra cash adding to inflationary pressures. Secondly, even if the trillion got minted, it wouldn’t necessarily be accepted by the Fed and its separate decision-making powers. And lastly, if the U.S. were to strike the gavel on it, its credibility would most likely be questioned by domestic and international entities alike. After all, that’s a huge amount of money to print out of nowhere.
Will the trillion dollar coin ever happen? Who knows. For now, it’s a fun fact to note that the legislation allowing for it still persists – which means that the probability is not zero. Check out a few designs imagining what this silver bullet could look like.
Stella is a markets analyst and writer with almost a decade of investing experience. With a Masters in Accounting from the University of Sydney, she specialises in financial statement analysis and financial modelling. Previously, she worked as an equity analyst at Australian finance start-up, Simply Wall St, where she took charge of the market insights newsletter sent out to over a million subscribers. At Stake, Stella has been key to producing the weekly Wrap articles and social media content.
