Yeah, I know. I know. "Not another BS trillion dollar coin article".
So I'll make it brief.
It has been proposed, and bloggers have turned it into a campaign, that the US mint prints a 1 trillion dollar coin to sort out the debt ceiling.
It's all very loopholly.
This idea is not new, and its gimmicky nature makes it a stayer on finance blogs and as light hearted finance TV infotainment. However, as a practical issue it's the worst idea in economic history.
The reason is simple. Credibility.
We can talk about interest rates, CDS prices, stock fluctuations or any other indicator of the US economy. But when push comes to shove, the real asset the US economy posses is economic credibility.
We, the people of the world, believe that the US will prevail, even though it has a large debt. They've done it before and will do it again. That's what's at stake. Everything.
But to prevent that this credibility evaporates (forever), it is imperrative that the US government does not seek out a ultra short term solution, that also undermine the division of power, as the trillion dollar coin would do.
It's as simple as that.
If a politician is caught with another woman, he tends to resign. Not because of legal matters, but on moral ground.
The same can be said about the coin. It's not about what you legally can do. It's about what you morally should do.
So can we now stop with this red herring and actually talk about the real issue: The imbalance of the US's balance sheet.