A Trillion-dollar Loophole
It reads like a fractured fairy tale: A blogger, inspired by an online article about people using credit cards to buy commemorative coins from the U.S. Treasury so they could rack up frequent flier miles, devises a plan to solve the debt-ceiling crisis. He suggests the U.S. government mint a trillion-dollar platinum coin to avoid borrowing additional funds and thereby avoid the debt limit. Fellow bloggers run with the idea, which gains the attention of the mainstream media and is eventually considered during White House debates [source: Tate].
Turns out, Beowulf (as the idea's originator is known online) was right about a couple of things. One: There's a little-known law that permits the U.S. Department of Treasury to mint platinum coins of any denomination -- even with a face value of $1 trillion. The law originated as a way to mint commemorative coins celebrating or honoring American institutions, places, people or events. For example, in 2013, the Girl Scouts of the USA Centennial Silver Dollar was released [source: U.S. Mint]. And, two: The idea could actually have worked.
As with many well-intended laws, there was a loophole to exploit. While there are limits on the amount of paper money the U.S. government can print, and limits on the number of gold, silver and copper coins it can mint, there is no limit on the value of platinum coins it can create. That's why we can talk about a $1 trillion coin but not a $1 trillion paper note [source: Legal Information Institute].
Although not a long-term fix, creating a trillion-dollar coin would have helped the U.S. government to avoid a political kerfuffle over national debt limits while also skirting the need to curtail borrowing. The coin, sporting a 1 with 12 zeros behind it, could have been deposited in the U.S. Federal Reserve where it would have removed a trillion dollars in debt liabilities. This would have allowed the U.S. Treasury to continue to pay its bills and spend funds on programs like Social Security and Medicare. It was rumored that programs like these would grind to a halt if a debt-limit breach caused immediate spending cuts to go into effect.
Essentially, issuing a trillion-dollar coin would have been like receiving a new credit card in the mail -- one with a very high limit -- that would allow you to continue to spend money you didn't actually have in the bank.