http://www.nytimes.com/2013/01/13/us/politics/treasury-will-not-mint-1-trillion-coin-to-raise-debt-ceiling.html

The trillion dollar coin would not be inflationary and could in fact have a positive effect on the US. From what I’ve been reading, the trillion dollar coin would be minted and then deposited at the Federal Reserve. One of the things they could do would actually be to use the coin to pay off some of the U.S. Treasury Bonds that the Fed is holding. It has over $1.6 Trillion, so this part could work.

Now, if the Federal reserve then puts that money into the economy via the banking system, we would have a tremendous amount of inflation. BUT they don’t have to. They can just sit on it and do nothing with it. In reality, it’s just an electronic method to balance the books. If they do this then the US government reduces its debt by $1 Trillion without causing inflation, because the debt is held by itself.

I would say that this is analogous to borrowing from yourself and then just canceling the debt to yourself. Yes, you’re still out of the money you lent but you no longer have interest or loan payments.

@John S @ Frugal Rules – Haha… it just may happen!
@Chris – Really?? I haven’t seen that episode.
@SavvyFinancialLatina – Ew, nasty…. so sad :(
@becca – Haha… well I guess it does make sense to make the coin still out of 1 oz, but you’re right – not nearly as fun as it needing to be a billion ounces or something ;) That could be one large ass coin!

Near as I can tell, Congress (including Republicans, as a rule) is perfectly happy to spend money we don’t have, they just don’t like to vote for raising more revenues. And after all, once you’ve conditioned a 3 year old to unlimited pixie sticks and Dora on demand, making them eat broccoli and read books is HARD (yes, I did just compare US taxpayers accustomed to current tax rates to horribly spoiled brats).

@Brian – Haha, right? Maybe that’s just *too* crazy for people ;)

@Greg@ClubThrifty – I’m just as confused as you are… hoping someone hear can shed more light!

@AverageJoe – HAH! Yeah dad, why aren’t you doing that more?? :)

@David Hunter – I think your poop is only worth $1,000,010 actually, sorry. Way overvalued ;)

@J. Delancy – I will say they’re getting pretty creative these days though, for whatever that’ worth.

@Grayson @ Debt Roundup – Haha… I was almost one of those people who put those $1 coins on my credit card! By the time I mustered up the courage to do so though it was all changed. But every personal finance blogger and their mom was doing this before I even had my own blog… which excited me to start one, and here we are today blogging about coins again :) The world is funny sometimes.

@Janine – Oh yeah! Interesting thought indeed, I wonder too?

@Monica Clark – They’re a whole other breed. But at least someone wants to take it politics stuff or else we’d be in even more trouble! :)

@Terah@The Credit Report Chick – I’m all about summaries of things and not reading more unless I’m super interested in it – so thanks my friends for passing it along!

@Edward Antrobus – Hah!

@Stephanie – Ahhhhh yeah that would make a lot more sense, wouldn’t it? :)

@ravinder – I’d drive over to check it out :)