Last night on the Daily Show with Jon Stewart I again heard about the government’s idea to mint a trillion dollar coin out of platinum to circumvent the debt ceiling. An economist, Paul Krugman, behind the idea of minting the coin was poking fun at Mr. Stewart’s initial report that scornfully mocking the very idea. He said that The Daily Show was ruining it’s brand by running stories like this. To which Mr. Stewart said, “UH, I’m pretty sure that IS my brand!”
Every time I hear this idea flashing red lights, caution flags and sirens go off in my head. Why? When you don’t have the money to pay off a debt you can’t just make up a kind of currency and expect the lender to accept it. Even if the government has found a loophole and has the power to mint an insanely expensive piece of currency this imaginary money has to come from somewhere. Translation: MASSIVE INFLATION.
Granted I understand that a government with the power over it’s own fiscal policy has the right and need to prevent going into default. The idea of just minting that much more money at one fell swoop seems dangerous. Maybe not dangerous for the government because for it’s lenders they will look good for paying off some of their $16T debt. Where does the value of that currency ultimately come from? How much further will the U.S. Dollar be devalued if this does come to pass? To quote Chris Hayes, the host of MSNBC‘s weekend morning show “Up,” “Money is nothing more than a shared illusion.”
To learn more about how money works and why the government has the power to mint as it sees fit please read this article from Bloomberg: “Economics Is Platinum: What the Trillion-Dollar Coin Teaches Us,” by Evan Soltas.
Here is the previous report: