i found this on an australian website on how the debt ceiling crisis will affect australia. i found this to be really interesting. it feels like im playing monopoly with fake money again...when we used to run out of money we would add zeros to the monopoly money or get some choc bars are put a value to them.
Quote:
10) The US should mint a $1 trillion coin
This is an idea that is bouncing around some of the blogs. The basic idea is right: The US Treasury does not actually need to borrow any money at all to pay its bills.
Why not? Because Treasury can unilaterally create money out of thin air.
So, the idea to get around the debt ceiling is for the Treasury to mint a one-ounce, $US1 trillion palladium coin and deposit it in the Treasury's bank, the Fed.
(Under the law, the monetary value of any coin has no relation to its metallic value.)
The Fed would credit $US1 trillion to the Treasury, which could use it to pay the USA's creditors.
It is a brilliant and creative idea in theory, but in practice it would be almost as devastating to the full faith and credit of the United States as a default would be.
If this gimmick were used only once in an emergency, that would be one thing. But once the Government got the idea that this sort of alchemy is an option, it would use it all the time.
Inflation - perhaps hyperinflation - would result from overuse of the alchemy/seigniorage option. Do not go there.
Read more: Crazy or scary? Ten things you need to know about why the US debt ceiling matters | News.com.au
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