This video was made possible by Dashlane. Protect your digital identity for free for
30 days by going to dashlane.com/HAI. Hello and welcome to another episode of, “Kinda
Clickbaity Titles to Get You To Watch Something Vaguely Educational.” Today, we are going to talk about trillion-dollar
coins—but first, in order to understand why the US government would ever even consider
making a coin that’s worth more than a gold-plated Jeff Bezos, we have to talk a little bit about
the debt ceiling crisis of 2013. Now that half the audience is gone, the year
was 2013, the month was January. The number one YouTube channel was Smosh,
Macklemore’s, “Thrift Shop,” was rising up the charts, and President Barack Obama
had a problem: the US was about to hit the debt ceiling. Of course, “what’s the debt ceiling,”
says someone, so here’s how the debt ceiling works. Each year, Congress passes, and the President
signs, a budget that says how much it’s going to spend on different things. So maybe it says the government will spend
$10 billion on Big Macs, $20 billion on Doritos Locos Tacos, and $30 billion on Pepto Bismol. It's then up to the US Treasury to buy all
those things. The Treasury gets the money to do that from
two main sources. The first is taxes, which are collected from
the American people and American businesses, unless you’re Amazon, of course. The US, you see, goes for the rare graduated
bell curve tax bracket system. Typically, though, that tax money isn’t
enough, so the Treasury will make up the difference by borrowing money, which is done by issuing
something called a treasury bond. Basically what happens is the Federal Reserve,
which is the central bank of the United States, says to everybody, “hey kids, if you give
me $100 right now, I’ll give you this super cool piece of paper, which is called a treasury
bond,” and what this piece of paper says is, “In exchange for your $100, a year from
now, I’ll give you back your $100 plus a little bit extra. Or, if you want to wait longer, like 3 or
5 or 30 years, I’ll toss in a bit extra for your trouble.” So, people buy these bonds, the Fed takes
their $100, puts it into the bank account of the Treasury, and now, just like magic,
the government has a brand new $100 that they didn’t have before. As time has gone on, the US government has
issued more and more treasury bonds, and thus taken on more and more and more and more and
more debt—seriously, like a lot of debt. The debt ceiling is an arbitrary number that
Congress sets as the maximum amount of debt the US is allowed to take on. In 2013, the number was $16.394 trillion. So if the debt were to pass $16.394 trillion,
then the Fed wouldn’t be allowed to borrow any more money, which means the Treasury wouldn’t
be able to buy all those crucial things in the budget. Normally, when the debt approaches that number,
Congress just raises the debt ceiling, which means they just set a new, higher number as
the limit, and historically, this was a pretty uncontroversial, bipartisan process. But in 2013, the Republican-led Congress refused
to raise the debt ceiling unless Obama agreed to get rid of Obamacare. Unsurprisingly, Obama said no to this deal
because, you know, it turns out that Obama kinda liked Obamacare—that would be like
asking me to stop mispronouncing obscure words like buffet; it was kinda Obama’s thing. And so, Obama began looking for ways around
the debt ceiling. That’s where the trillion-dollar coin came
into play. The idea was, if the government can’t borrow
more money, what if they just made more money? While that may sound like the type of idea
only a drunken second grader would suggest, bizarrely, in this case, it actually made
sense. See normally, only the Federal Reserve can
create new money, and it has to be backed by bonds. In other words, if the Fed wants to create
100 new dollars, they have to sell a $100 treasury bond. This helps keep the US economy from imploding
in case some maniac ever gets at the controls. They can’t just print as much money as they
want, except, thanks to a loophole in a 1996 bill about commemorative coins, the Treasury
actually can. The law, 31 U.S.C 5112(k), reads, "the Secretary
may mint and issue platinum bullion coins and proof platinum coins in accordance with
such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary,
in the Secretary's discretion, may prescribe from time to time.” The intent of this law was to let the federal
government create commemorative platinum coins for special occasions, but technically, because
of the bill’s unclear language, it meant that the Treasury Secretary could make a coin,
so long as it was made of platinum, and then declare that it was worth any amount of money
they wanted. So the plan was for the Treasury to mint a
coin, declare that the coin was worth 1 trillion dollars, then deposit that coin into their
bank account at the Fed, which would make the debt, instead of being $16.394 trillion,
only $15.394 trillion—below the ceiling. Eventually, once Congress raised the debt
ceiling, the Treasury would just buy the coin back or melt it down, and in theory, it would
be like it never existed, and thus it wouldn’t cause inflation. Now I’m going to tell you something that
might disappoint you: although the trillion-dollar coin was genuinely considered by the White
House, they never went through with the plan, so no trillion-dollar coin was ever actually
minted. I know, I know—the title of the video kinda
made it seem like they actually made the coins, but you know what, the Greeks made it seem
like they were just gifting Troy a cool wooden horse. Not everything is as it seems. On the bright side, now you know a bunch about
treasury bonds and debt ceilings, which will come in handy the next time you’re on a
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