We're About To Run Out Of Money

The government wants to create a trillion dollar coin. Here’s what that means.

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IS THIS TRUE OR IS IT A RUMOR?

Yep, it’s true, the government is considering minting a trillion dollar platinum coin.

WOULD IT BE A PHYSICAL COIN OR DIGITAL?

It’s a physical coin mixed with platinum.

WHERE DO WE FIND A TRILLION DOLLAR’S WORTH OF PLATINUM?

We wouldn’t, we would mix platinum with other metals and stamp “1 trillion” on the coin - same as the one hundred dollar bill which does not contain one hundred dollars worth of cotton.

WHY DO WE NEED A TRILLION DOLLAR COIN?

The coin is a solution to a problem called the “debt ceiling”. The reason we may want to create a trillion dollar coin is because our government is trying to raise money to pay for running the government, but it can’t do that without politicians coming together and agreeing to do it (which they don’t want to do). This is why we found a loophole that allows the treasury to create a trillion dollar coin. This is because of Section 31 US Code 5112 which states “The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with…”

HOW DOES IT WORK?

The treasury would create this trillion dollar coin, deposit it that into the Federal Reserve, and from that account it would be able to use the money to pay the government’s bills with to avoid hitting the debt ceiling.

WHAT IS THE DEBT CEILING?

The debt ceiling is just a limit on how much money the government can borrow through the creation of bonds. When our government needs to raise money, it creates bonds, and with that money it uses it to pay bills, things like social security, medicare, tax refunds, payroll etc. This limit does not reset every year or every month like a credit card - it’s a hard limit. At the time of its creation in 1917 the limit was set at 1 billion dollars and it was something we created to help us fund World War I.

HOW MANY TIMES HAVE WE INCREASED IT BEFORE?

Since 1917, we have increased it roughly 80 times.

WHY DON’T WE INCREASE IT AGAIN?

Politically speaking, raising the debt ceiling doesn’t look good - it seems like you’re just giving the government a blank check to spend on anything it wants. To people across America, for both Democrats and Republicans, no one wants to be the guy that approves “reckless spending.”

IS THIS A BIG DEAL?

Yes. The debt ceiling is a very real problem which affects all of us because if we don’t fix, has the potential to put a stop to the entire US economy which would eventually impact the global economy. If we don’t raise the debt ceiling and we reach the limit, national parks would shut down, seniors would stop receiving social security for a period of time, our military and anyone who works for the government wouldn’t get paid, including families that depend on government support would be in trouble. The US would default on its “obligations”. To this day in history, the US has never defaulted which is a big part of how the US is able to borrow money at very low interest rates - because we always pay our bills in full.

WILL THIS CAUSE INFLATION?

The trillion dollar coin is not created to pay for new expenses. Raising the debt limit doesn’t create inflation, instead it allows us to pay for the commitments we’ve already made. Because we’re not creating more money to pay for the national debt or to fund anything new - inflation shouldn’t go up. If anything, it’s accounting trick that allows to achieve the same result of raising the debt ceiling. But, if we used this to pay for new expenses then yes - eventually inflation would go up.

SO WHY DON’T WE GET RID OF THE DEBT CEILING?

No one knows but it’s most likely because none of the political parties want to be the party that approves “reckless spending”. Instead increasing the debt ceiling is a political game that has turned into leverage over the opposing party.

WHEN DO WE HIT THE DEBT CEILING?

We will run out of money in the middle of October 2021.