This suggestion from Cullen Roche’s crowd over at Pragmatic Capitalism has gone viral across the internet and even mainstream media (see CNBC, The Economist, and NYMag). It’s a way the Treasury Secretary Tim Geithner can sidestep the debt ceiling crisis if the deal doesn’t get done. From the original source, Pragmatic Capitalism:
Tsy isn’t authorized to just “print” money, the Federal Reserve Act gives that power to the Fed, However, the Coinage Act grants the Secretary of the Treasury rather broad coin seigniorage authority. Geithner could sidestep the debt ceiling this afternoon by ordering the West Point Mint to coin a 1 oz. $ 1 trillion coin. Tsy can then present the jumbo coins at the NY Fed to buy back $1 trillion in Fed-held debt (the Fed has to accept it, a creditor can’t refuse legal tender paid in to settle a debt):
(h) The coins issued under this title shall be legal tender.
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
Since talks aren’t moving in the House, I’m thinking their 11th-hour solution would be to put all non-current liabilities on the table to reach the goal of $4T in cuts within 10 years. They can take certain cuts off the table later. Throw all of Social Security and all of Obama’s Healthcare reform on the table as cuts, then spend the next 6 months ratifying everything.
Here’s the 2010 US Federal Budget. Find somewhere else we can cut: