US could soon create a $1 trillion coin

The US could end up creating a $1 trillion coin as a way of sorting out an impending financial crisis which could hit next month.

Hey kids, would you like to learn about the US debt ceiling? I promise it's (slightly) more interesting than it sounds.

Basically, there's a total limit on the amount of money the US government is allowed to borrow, although since 1960 Congress has on no fewer than 78 occasions voted to permanently raise, temporarily extend or revise the definition.

While the debt ceiling might theoretically be a limit, it's not much of one since they just keep putting it up whenever the debt gets close to the limit.

Raising the debt ceiling has also historically not been unique to one party, with it being put up 49 times with a Republican in the White House and 29 times with a Democrat president.

Around the world only the US and Denmark have debt ceilings pinned to an actual amount of money, whereas most of the others that have ceilings make sure it's more flexible and a percentage of GDP.

DonkeyHotey

However, in recent years the issue of the debt ceiling has been used as a way for parties to extract political concessions by threatening not to vote for raising it, when that would cause economic catastrophe.

If the US doesn't raise the ceiling, which is currently at $31 trillion, and hits this limit then it legally can't borrow any more.

The government hit this limit back in January and since then has been financially buying time for a solution to be found, whether that be raising the ceiling or suspending it somehow.

Republicans want to use this moment to force the US government to enact a range of spending cuts in exchange for their support, but President Biden has said he'd veto their plans to slash government spending.

If a solution isn't found as early as 1 June the US could begin to default on its debts, which would be a financial catastrophe, Insider reports that even a short period of default would trigger a recession and cost up to a million jobs, so you can understand why this needs sorting out.

There have been a bunch of plans suggested, but one pretty outlandish idea is to mint a trillion-dollar coin made of platinum and use that to pay off debts.

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The US treasury can mint a platinum coin of any value it desires and suddenly have the money the government needs.

Rohan Grey, an assistant professor at Willamette University College of Law, told Insider it was a 'silly' solution but pointed out that the supposedly sensible options to sort out the looming crisis hadn't yet been reached.

It's unlikely to be the sort of thing the US government would actually do but it might help illustrate that the whole situation is rather silly - the largest economy on the planet potentially crashing itself over a self-imposed limit when there were solutions.

Not to be all 'The Simpsons called this' but there is an episode where the US government created a trillion-dollar bill which was supposed to be delivered to Europe to fund reconstruction after the Second World War.

Unfortunately, they tasked Mr Burns with delivering it and it turns out he still has it, so the key thing to take from this would be for the government not to give lots more money to rich people because they'll likely just keep it for themselves.