Imagine for a moment that Tim Geithner ordered the Bureau of Printing and Engraving to forge a $1 trillion coin.
How big would that coin have to be?
Before you answer that, let's acknowledge that the creation of an extra trillion dollars would be highly inflationary. It would probably be a terrible idea. Our creditors would object that we were blatantly monetizing our debt, committing the moral equivalent of defaulting on the debt. Basically, cheating them.
But now back to the question: How big would a $1 trillion coin be?
Now that I've asked it twice you probably suspect this is a trick question. A trillion-dollar coin could be smaller than a dime. There's no relation between the size of a coin and its value. Think about it.
A dime is worth more than a nickel even though it's much smaller.
But most people initially think of a really, really big coin when they think of a coin worth $1 trillion. Why is that?
It's because we don't really, intuitively grasp the idea of fiat money. The notion that money is created by the government is hard to get your head around.
This is one reason people don't understand that the government can never unwillingly go broke. It can only go broke if it choses not to print money to pay its bills.
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