Could a $1 trillion platinum coin be the answer to our problems? Or is this just another bad idea on the never-ending list of bad economic takes?
If history is any indication of the past, then everyone knows how the debt ceiling debate ends. As the deadline approaches, government officials will come together, extend the ceiling, more money will be printed, and, as we’ve been told, calamity will be averted.
A trillion-dollar coin sounds absurd from the outset. But consider its implications first. Pass judgement after. ABC News explains:
Legislation enacted in 2001 allows the treasury to mint platinum coins of any value without congressional approval. Under that law, the coin’s value could be anything, but it would have to be platinum, not gold or silver, nickel, bronze or copper, which are under Congress’ control.
Per the Constitution, only Congress has the power to “coin money.” But should this money be backed by a platinum coin, it allows the president to bypass Congress. As for the Federal Reserve, they are not mentioned in the Constitution …
Giving money creation powers to a president can be dangerous; however, the law can be amended to include congressional approval. And there’s a more important aspect here:
President Joe Biden could order Treasury Secretary Janet Yellen to have a coin with the value of $1 trillion be minted and deposited into the Treasury.
Money creation with an ironic twist may bode well for the free market. But think about the central bankers: Where does this leave the Federal Reserve? Have they not been cut out as the intermediary?
Understand, the Federal Reserve does not physically print money. That is the job of the US Treasury. Unintentionally, the very essence of the trillion-dollar coin calls into question the role of the Federal Reserve and should make people wonder why their bills are marked Federal Reserve Notes. Through bypassing the Fed and existing without debt creation, the trillion-dollar coin has the propensity to make the Fed obsolete.
Choose one of the two (simplified) scenarios, where $1 trillion is being physically printed:
The Treasury mints a platinum coin granting them the authority to print $1 trillion and deposit it in the USA’s bank account; this is money creation without a debt burden and without the Fed.
Or we maintain the status quo. The Treasury prints $1 trillion and gives it to the Federal Reserve. The Fed literally does nothing except send the money back to the Treasury, which then deposits it in the USA’s bank account; same money creation as the previous scenario, except now the money is owned by the Fed.
The difference is clear, as the Fed provides no value-added activity in the money creation process. Under free enterprise, there is no market for the Federal Reserve. It only exists due to a government-granted monopoly on the US dollar.
It leads us to consider whether money should even carry an unpayable debt. Gold, or bitcoin for example, carry no debt. But when the Fed is involved, our money is debt based and the benefit to society can scarcely be defended.
Watch carefully to see what inflationists and the debt-doesn’t-matter crowd have to say. Janet Yellen exposes many errors:
The platinum coin is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt, it compromises the independence of the Fed conflating monetary and fiscal policy, and instead of showing that Congress and the administration can be trusted to pay, to pay the country’s bills, it really does the opposite.
Someone should inform Yellen that the government’s deficits are already covered by money printing. While Fed independence is a red herring, monetary/fiscal policy was compromised long ago.
More analysis is required. But with absolute certainty, $1 trillion will be printed by the Treasury in the not-too-distant future. This process does not require the Federal Reserve. The question for now is whether or not we want the Fed to get their cut. Or should we strive to live in a country not shackled down by central banking?
