Joe Biden and the Crazy Idea of a $1 Trillion Coin To End the US Debt Ceiling Problem

America is consistently confronted with the very same financial debt ceiling psychodrama. America is indeed under a legislative limitation on the amount of public debt that can be incurred by the U.S. Treasury. This limits how much money the federal government can pay on the financial debt currently obtained.

The UNITED States federal government consistently hits the ceiling on this financial obligation.
To continue to operate appropriately, an arrangement should be reached with Congress to increase the debt ceiling. This typically brings about a huge face-off in Congress between Democrats and also Republicans, which sometimes can cause a partial closure of the United States administration.

Ultimately, a contract is constantly reached, since it can not be or else because the present system is built on the infinite financial debt.

The trillion-dollar coin is seen as the ultimate weapon against the recurring psychodrama of the US debt ceiling

However, this reoccurring psychodrama has actually gone on as well long for some. In 2011, a confidential legal representative from the state of Georgia generated an amazing suggestion that could fix this issue that regularly threatens to incapacitate America at last.

The concept is to mint a $1 trillion coin to be paid to the Fed by the US federal government. The amazing thing here is that this is feasible under the law.

Supporters of this suggestion suggest that the law come in 1997 could be utilized to do this. This regulation in theory permits the United States Treasury Secretary to have a coin of any type of denomination, made of platinum, minted.

The Treasury Assistant, probably on the guidelines of President Joe Biden, can produce a $1 trillion coin, which would then be transferred in the Fed’s account to pay off an equal portion of the US financial obligation.

This would place the US federal government well listed below the financial obligation ceiling as well as give it the adaptability it needs, without having to ask for Legislative approval, which is what it normally needs to do.

For many, minting such a trillion-dollar coin would not be commensurate with the world’s leading economic power

However, this idea is considered by most to be fanciful and even legally impossible to implement in practice. Nevertheless, the concept has gained ground, to the point that in 2013, the US Treasury took the trouble to say that it would not mint the coin.

In January 2017, just days before the end of his term, President Barack Obama took the time to discuss the idea with Jack Lew, the then Secretary of the Treasury. The idea was eventually dismissed.

Few economists have given credence to this theoretical construction, among them the American Nobel Prize winner Paul Krugman, in March 2020, who presented it as an “accounting trick” that would “simply allow the Treasury to get past the blackmail of the Republicans”.

For Boston University economics professor Laurence Kotlikoff, it is an absurd and dishonorable idea for America:
“This is the kind of thinking you see in a developing country.”

Minting such a coin would have potentially disastrous consequences for inflation

Minting such a trillion-dollar coin would also have an impact on inflation, as Laurence Kotlikoff points out:
The heart of the matter is to issue money to pay the government’s bills. And when you print enough money, you generate inflation.”

Nevertheless, after greater than twenty years of low-cost rises, inflation has actually already gone back to the American economic situation, thanks to the emergence of the COVID-19 pandemic.

Republicans, who are currently again opposing an increase in the debt ceiling, believe that this would be tantamount to validating the massive investment plans of the Biden administration, which they consider “irresponsible”. The threat of default, the first in US history, is becoming a real fear in the minds of some.

Rather than a $1 trillion coin, the solution would be to look to the legislative side by removing the debt ceiling in America

In this context, the trillion-dollar coin, which is the subject of so many fantasies, is back in the spotlight. More and more people are talking about it, especially on social networks.

Nancy Pelosi, the Democratic leader of the House of Representatives, recently revealed that New York Congressman Jerry Nadler had suggested the “trillion-dollar coin” as one of the possible solutions to avoid new debt battles in Congress in the future.

From the point of view of the co-creator of the Modern Monetary Concept, L. Randall Wray, this famous coin is no more improbable a suggestion than the substantial assistance to the economic climate that the Fed has put in place considering that the beginning of the pandemic, by purchasing hundreds of billions of bucks of public as well as exclusive debt on the economic markets given that March 2020.

For L. Randall Wray, the trillion-dollar coin is “a workaround” that “highlights that the debt ceiling is itself a stupid idea”.

Rather than regularly pushing the trillion-dollar coin idea, a growing number of economists, including L. Randall Wray, are pointing out that it is time to blow up the debt ceiling.

To those who fret about the possible impacts on inflation, these economists retort that the substantial shots of liquidity by the Fed into the monetary system since 2018 have actually had no result and that this specter is consequently not a specter.

Final Thoughts
The temptation of Joe Biden minting the trillion-dollar coin to unblock the current situation should therefore once again remain a dead-end idea.

Nonetheless, it does give the leading edge the value of ending this political program that we are regularly treated to and that is proving to be worthless. Indeed, most of us know very well that an arrangement will eventually be discovered and that the country will not fail.

What is the point of maintaining this illusion and leaving millions of Americans in fear? Rather than constantly giving in to the political strategy, American politicians would do well to return to the original meaning of their mission: to serve the interests of Americans and America.