posted on Oct, 20 2013 @ 06:12 AM
No one has heard of the $1 Trillion coin or as I like to call it The ObamaCoin
Why it doesn't work is that the banking system in the US works off of debt. Congress tells the treasury to create a US Bond (an IOU with interest).
Large banks buy US Bonds from the Treasury and sell them to the Fed for cash, That cash is handed to the Federal Government to pay for things. That
cash goes to the workers who in turn deposit into a bank. Banks loan 90% of that deposit as part of Fractional Reserve Banking policies. Those loans
go to people you buy cars, houses, iPhones, etc. That money is deposited into the banks to continue on until a $100 original deposit has become $1900.
When the Fed needs more bank notes, it trades some of the US Bonds to the US Mint to print the notes at a near 2 to 1 ratio (the Fed can also use old
notes on a 1 to 1 ratio to replace worn notes). The Mint hands the Bonds to the Treasury to be destroyed. Congress can now issue more bonds because
the debt has been lowered.
So how can the debt be $17 Trillion when there are only $2 Trillion in circulation? Interest is the easy answer, but recall the Fractional Reserve
Banking? There is over $10 Trillion in checking, savings, Certificates of Deposit accounts. None of that $10 T is physical cash so a run on the banks
is still a scary thought. And could have happened had the Shutdown lead to a default by not raising the debt ceiling.
So why not just mint those ObamaCoins? Because when the Fed has no debt owed to it, it has nothing to trade in for notes other than worn notes. The
owners of the Fed make 6% off of selling bond transactions as well. Without the bonds, there is no profit and no reason for the Fed to stay in
So other than the coins, how do we lower the debt? Easy answer is to make Congress stop issuing new bonds and let the Fed cash them in over time for
notes to cover that $10 Trillion of electronic currency. But in order for Congress to stop issuing bonds, it has to stop or severely control spending
and reign in the debt ceiling (which is Presidential discretionary spending through the various cabinet departments). And to complicate matters, the
Chairman of the Fed is approved by the POTUS. So the POTUS controls both the head of the Fed and the head of the Treasury. Congressional Budgets (last
one passed was 2008 for Fiscal year 2009) and the debt ceiling (which was a hard number of $17 T until the deal that ended the Shutdown--it is now
spend whatever you want until Feb 15, 2014 because there is no hard dollar cap).
As a side note, some call the above deal capitulation rather than a compromise about the debt ceiling. Republicans will now blame Obama for every
penny above $17T as reckless spending. I understand the political ploy, but it is weak sauce. The only thing about $1T that people understand is that
it is a stack of $100 bills over 1 mile high. Great for trivia, but to people that have never held $10,000 in cash at once, it is just a made up
number with no real meaning.