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The difference between the U.S. government and your friend Sam is that the US has a track record with fiat currency with value from trade between different persons. Is the difference between a Trillion Dollar coin and regular U.S. coins that, were the Trillion Dollar coin to be traded, the coin would crash the value of all other U.S. currencies? Therefore, it doesn't make sense to use it on the fed balance sheet?
I'm not sure that this has much to do with experience managing a fiat currency. In almost every rational expectations model of money (which is relevant because this coin thing is based on a ratex argument), a positive valued fiat money is an unstable equilibrium. There is also a sequence of multiple equilibria that lead to a fiat money with zero value (i.e. hyperinflation). If the Fed were to accept the trillion dollar coin, then the moment the Treasury spent the trillion dollars, the Federal Reserve would be insolvent. An insolvent central bank is precisely the sort of big shock that might move us toward hyperinflation. In fact, this is arguably what happened with John Law's bank. He was supporting the price of the stock by issuing money to purchase shares, which led to fear of insolvency.
The difference between the U.S. government and your friend Sam is that the US has a track record with fiat currency with value from trade between different persons. Is the difference between a Trillion Dollar coin and regular U.S. coins that, were the Trillion Dollar coin to be traded, the coin would crash the value of all other U.S. currencies? Therefore, it doesn't make sense to use it on the fed balance sheet?
I'm not sure that this has much to do with experience managing a fiat currency. In almost every rational expectations model of money (which is relevant because this coin thing is based on a ratex argument), a positive valued fiat money is an unstable equilibrium. There is also a sequence of multiple equilibria that lead to a fiat money with zero value (i.e. hyperinflation). If the Fed were to accept the trillion dollar coin, then the moment the Treasury spent the trillion dollars, the Federal Reserve would be insolvent. An insolvent central bank is precisely the sort of big shock that might move us toward hyperinflation. In fact, this is arguably what happened with John Law's bank. He was supporting the price of the stock by issuing money to purchase shares, which led to fear of insolvency.