That’s not to say that the United States won’t make repayment arrangement s that are a virtual default.
In the age of virtual reality, a virtual default makes sense.
What would a virtual default look like? Pretty much like it does on the individual level, when you owe someone money, and you can’t pay it back so you convince them to accept something else. If you have something your creditor values as much or even more than the money you owe, then that can be a perfectly fine payment and no default at all. But if what you have to offer really isn’t worth as much as you owe, that’s a virtual default.
For the United States, the wild idea of having the Treasury mint a trillion dollar coin, that would be a virtual default.
That’s not the wildest idea out there however. We have some economic geniuses who say to themselves ‘Hey, if we can make a one trillion dollar coin, why not a 20 trillion dollar coin, or a sixty trillion dollar coin?’
This is the idea being proposed by our strange fellow-citizens over at MoveOn.
The last time I checked, they had 213 signatures for their petition demanding that “The President should immediately mint a $60 trillion coin, and use the proceeds to pay off the national debt completely, cover all likely deficit spending by Congress over the next 15 years, and take the issue of spending cuts in programs that benefit the 99% off the table!”
According to the site, they now have a “new goal” which is 300 signatures. So if you act fast, you might be able to join the MoveOn dream-team and get you signature affixed to this important petition.
You can’t argue with their logic. You might be able to if they actually used logic.
According to petition signer #206, Pamela Rees, it “isn't crazy, it's a tool and an opportunity to entirely reframe and alter the national conversation. The danger of Federal debt of a myth from which banks benefit and because of which people are, literally, dying. “
Signer #181 Jeffrey Kurland, spies a partisan opportunity in the scheme; ” Take down the Republicans and save the people from paying again for the vile financiers. Save our social democratic support programs.”
Frances Walker, proud petition signer #174, sees the coin as perhaps a kind of silver- bullet that can tame the Tea Party, “Please mint the coin to end the anti-government insanity “he writes in his comment field.
There is more, but let me conclude these examples by passing along the wisdom of John McDonald, petition signer #160, who solemnly states “This will end the foolish discussion on debt that has been going on endlessly for what seems like years now.”
In McDonald’s defense, I have to admit that this idea makes me also a little concerned about foolish discussions and debates that go on endlessly for what seems like years.
Unfortunately, our well-intentioned but misguided MoveOn-ers don’t really understand the concept behind the idea for a trillion dollar coin. It was a real idea, but it was never intended as real money paid to real people for real debt.
It was proposed as accounting trick between the Treasury and The Federal Reserve.The Treasury would mint the coin and with a wink give it to the Fed, who with a nod would hold it and give another trillion in credit, thus bypassing congress and avoiding the debt ceiling debate.
But they already have plenty of accounting tricks, and they don’t need or want a physical symbol of their wink and nod covert relationship. Plus, the Democrats always emerge from the debt ceiling-crisis-muck basking in the public’s adoration and shaking their head at the Republicans who seem bent on taking a Cruz to nowhere, impotently making threats they know that the Democrats know they can never follow up on.
And there you have the real answer. The coin trick could actually work as a technicality, a way for the government to keep borrowing and spending endlessly without having to worry about the bad publicity that comes with breaching the debt ceiling.
But they don’t need it. A gifted propagandist never fears bad publicity. For them, bad publicity is a weapon to spin back on your opponents. Which is why Republican can expect to take another beating early next year when they try to slow things down after the debt quickly climbs above 20 trillion.