Money Rehab with Nicole Lapin - Can a Magic Coin Worth One Trillion Dollars Fix the Economy?

Episode Date: January 25, 2023

Nicole demystifies this week's financial headlines and reveals the impact on your wallet. Today, it's all about Elon Musk's 420 lawsuit debacle, and whether the United States' debt problem can be solved with a trillion dollar coin.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Today, I am bringing Wall Street to you, my friend, and breaking down the biggest headlines in finance right now. Once again, the debt ceiling is making waves in financial news. And here's a reminder if you missed last week's update. The debt ceiling is essentially the authorized amount of money the United States government can spend. It's a limit that Congress authorizes,

and right now there's talk of needing to raise that limit. The current limit, last raised in 2021, is $31.4 trillion. We hit that limit last week, so something has to be done. Like yesterday. so something has to be done. Like yesterday. This week, and this is 100% a true story, Janet Yellen, the Treasury Secretary of the United States, is spending some of her precious time answering questions on whether minting a new trillion dollar coin is a viable solution to the country's debt problem. So let's double click on where the heck this idea comes from and what it says about the state of our economy. In 1996, the Commemorative Coin Act gave the Secretary of the Treasury the authorization to mint platinum coins in any denomination. That means that in present day 2023, Yellen has the power to mint whatever kind of coins she wants.

$1,000 coins, $1 million coins, and yes, $1 trillion coins, I suppose. There is a real suggestion being thrown out that Yellen mints a trillion dollar coin and deposits it in the Federal Reserve in order to delay the debt ceiling drama. If this sounds like a flawed solution to you, you are right. There are a lot of reasons why a trillion dollar coin would not solve any of our problems. But believe it or not, this bizarre thought experiment isn't new. This idea was first floated in 2011 as a way to solve the debt crisis. And the fact that it's haunting us yet again shows us how much we would all like a magical solution to this very real problem. Right now, a bipartisan group of lawmakers is creating a bill that would limit the debt ceiling to a preset percentage of the national economy. Today, American debt is 125 percent of what the American

economy is producing. But again, the debt ceiling is only approving the funding for laws Congress already passed and the government's longstanding financial commitments like Social Security. passed and the government's longstanding financial commitments like social security. Failing to pass the debt ceiling does not save any money. It just forces us to default on things we've already agreed to pay for. Perhaps a well-designed law that sets a national budget of spending based on production would create a more sensible environment where we aren't reduced to asking one of the most trailblazing female economists of our time if she will print a magical coin to save us from our inability to cooperate. Because she's probably just going to pop her collar at us and tell us it's a gimmick, which, by the way, is exactly what she said verbatim.

The other big headline you should know about is also numbers centric, namely the number 420. Yes. And Elon Musk's very weird fascination with it. We all know that 420 refers to all things cannabis. This is not breaking news. It's also not breaking news that Musk is obsessed with 420, the number. with 420 the number. Starlink, his project that aims to take high-speed internet global, will eventually have 42,000 satellites in its mega-constellation. And when Musk bought Twitter, he paid $54.20 a share. But now his love of 420 has him in court because he's being sued by a group of investors over his tweet that he had secured funding to take Tesla private at, you guessed it, $420 a share.

Musk is claiming that, at the time, he believed he had secured funding from a group of Saudi investors. And when he tweeted about the buyout, he believed that it was the best way to get ahead of a leaked story coming out. And he claims he didn't want investors to feel left out. In the SEC complaint against Musk for the tweet, he's quoted as saying that he rounded up the price slightly because his girlfriend at the time would find it funny. Although he admits that is a bad reason for doing it. That doesn't make me feel any better. It is a very scary thought that Musk has the sense of humor of a 14-year-old boy and he can move markets with a tweet. The case comes at the same time as Tesla is facing a lot of uncertainty over its future. It recently slashed prices in an attempt to stay competitive. But Tesla is hardly the only company going through a tough time right now.

Spotify announced Monday that it will be cutting 6% of its workforce. It joins the ranks of big names like Alphabet, Amazon, and Microsoft, who all laid off a large number of their employees this month. And it's not just tech companies laying people off. number of their employees this month. And it's not just tech companies laying people off. Financial companies like Goldman Sachs, BlackRock, and Capital One have all joined in with their own round of layoffs. This week, we'll be getting some important jobless claims numbers that should give us the chance to see just how widespread these firings really are and help us understand if there are industry-specific trends in layoffs or if this is just a ubiquitous problem. If it's the latter, it's not great news because widespread industry-agnostic firings can be a sign of a

recession. The previous count of jobless claims was 190,000 and the expected number for this week is 205,000. So I'll be watching to see if we over or undershot that number. As painful as it is, we need some loosening of the job market if we want to get that soft landing the Fed is after on inflation. But high unemployment, of course, comes with its own set of problems that we definitely don't want either. So once we get those numbers, I will be sure to decode them for you right here on Money Rehab. For today's tip, you can take straight to the bank. If you're worried about layoffs potentially coming to your company, check and see if your HR department has made any recent announcements that you might have missed. If there's a hiring freeze or a pause on employee benefits, your company is making some big moves to try and cut costs.

Now, cutting costs doesn't mean your company is about to announce layoffs. We are in tough economic times, and a lot of companies are trying to trim as much budget fat as they can. But at companies that do initiate layoffs, typically they do a round of hiring freezes and benefit cuts first. So I want to prepare you for the worst. We can always hope for the best. I know it is never fun, but preparing for the worst is the best protection that prevents you from ever getting there. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab?

And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself,

which is the most important investment you can make.