Econintersect: Political economist Bruce Bartlett (pictured) has presented a most straight-forward essay on the accounting features of the trillion dollar coin in today’s (15 January 2013) New York Times. The Op Ed succeeds more directly than a prior GEI Opinion article in explaining that the process of creating a trillion dollar coin with a small amount, say $1,000, of platinum would change nothing in the accounting processes and the monetary policy activities that have been used up to this time. Bartlett points out that the creation of the coin does nothing to increase spending by the government and therefore has no inflationary expectations.
Before we report further, Bruce Bartlett has a long career advising political figures, most notably President Ronald Reagan (Republican), Representatives Ron Paul (R, TX) and Jack Kemp (R, NY) and Senator Roger Jepson (R, IA). This is no left-wing ideolog.
But whether or not creating a $1 trillion coin to avoid defaulting on the debt was reasonable, in accounting terms it would have been no big deal — simply a larger scale of what the Treasury and the Fed do every day.
He also wrote:
While some people worried aloud that the creation of $1 trillion of cash would be dangerously inflationary, this is nonsense. The coin would not affect monetary policy. The Treasury and Fed constantly coordinate their actions so that tax receipts don’t reduce the money supply and Treasury payments don’t lead to an increase.
Bartlett provides the following graphic which shows the net earnings (after expenses) of the Federal reserve which are paid to the U.S. Treasury by law.
The following graph shows how the interest payments by and to the government have varied over the past 15 years.
John Lounsbury has pointed out the similarities between QE (quantitative easing) and the trillion dollar coin idea. Both are means of reducing the effective amount of interest paying government debt outstanding.
- Coins, Bills and the National Debt (Bruce Bartlett, The New York Times, 15 January 2013)
- The Terrifying Danger of the Trillion Dollar Coin (John Lounsbury, GEI Opinion, 09 January 2013)
- Economist Ridicules Congressman’s Platinum Coin Bill (GEI News, 08 January 2013)