The thing is, money is all about shared assumptions, conventions that are accepted generally. Even with gold, no one seriously believes that it is intrinsically "worth" such-and-such an amount per ounce. It's just a way of keeping score: if we had to exchange so many bushels of wheat or x-rays or dozens of eggs for a brake job or some such product or service, we'd all have to have huge lists, or databases, with us at all times in order to keep track of relative values. We'd never get anything done.
So, to a certain extent, all we are talking about when we talk about money is our shared willingness to agree on rates of exchange of products, and a quick and easy tool to enable us actually to make the exchanges we need to make.
So, as far as the trillion-dollar coin is concerned, we could just as easily pretend to have it; we could not make it, and say we had. The effect would be the same: okay, you've got this stuff, this "money" that we've all agreed to accept as a store of value and a medium of exchange. So, we'll take it, at convenient times and in convenient pieces, and in return we will mow your lawn or change the oil on your car --or provide you with a new car--; and then you will have what you want. Whatever we want, this stuff will be accepted by the next guy in return for it.
It seems to me that when you look at it this way, all the hand-wringing in Washington about the budget, the debt, and so forth is so much window-dressing. We have too much debt, it is said*. What that apparently is supposed to signify is this: other people have a lot of our debt. We owe other people way, way too much. We can't pay it all off. So, the people who have our debt might decide they are uncomfortable, and want to get paid. The thing they would want to get paid with is this "money;" which exists only because we create it. So can't we just make some more?
Ah, say the skeptics: you might think we can, but it isn't so. If we make too much of it, people will get upset and will demand a lot more in payment, or stop accepting it altogether and demand something else.
That's where the notion of "full faith and credit" of the U.S. comes in: we are a rich, productive country, and everyone knows this, and so pretty much everyone is willing to believe that we can back up our promises (that is, our money) with our resources. We can create value in the form of things people want. Never mind that a lot of this value is intangible; it's real as long as people think it is real.
A trillion-dollar coin is, fundamentally, no different than a dollar bill. It would represent our contract, in a universally-accepted form, to perform in the future.
Put it this way: if you have a brokerage account, and a 401(k), and so forth, what do you really have? Numbers on a piece of paper, and not much more --in fact, if, like me, you've stopped receiving monthly statements on paper, all you have are images on a computer screen. But you can change these images into bank deposits (another intangible) and eventually into cans of pork 'n' beans; and, ultimately, that's all you care about. The pixels floating out there, or the numbers on sheets of paper, are just a method of score-keeping: they verify your entitlement to that can of beans, whenever you might want to claim it.
There's nothing magic about a trillion-dollar coin; the Mint could strike one trillion dollar coins, or dollar bills for that matter (however, there are laws restricting the amount of paper currency --but not of coinage-- that can be in circulation at one time). It is well-established in traditional economic theory that, in our current circumstances, such printing would not be inflationary; indeed, in spite of a constant chorus of warning, over the past 5 years, from right-wing politicians about hyper-inflation, the dramatic expansion of government "stimulus" and significant annual federal deficits, there has been no inflation. We've even flirted with deflation from time to time. But physically printing all that volume of money would be time- and resource-consuming (even if it were legal); let's just take the large-denomination coin shortcut.
In its function, the trillion-dollar coin would be indistinguishable from debt; but then, all money is, debt, isn't it?
*The federal debt is, very roughly, equal to the current annual output of the national economy. Is that "too much" debt? Reasonable people may differ. But for all the "government ought to be run like a household" people, I have a question: How many of you bought your first house for an amount equal to your annual salary? Did that purchase mean you had "too much debt?" And did you cut back to two meals a day in response? That is, essentially, what we are being asked to do now, by the Right.
