A $ 1,000 Billion Coin: The Unusual Secret Weapon That Has Been Scanned In The United States To Avoid Default

As the debt issued by the U.S. Treasury approached the limit imposed by the debt ceiling fixed by law, the world’s largest economy faced the real possibility of defaulting do not have the funds to pay their obligations and, according to specialists, fear. Today, Congress agreed to raise the debt ceiling. But, according to experts, the US Treasury had a secret weapon to Avoid Last Minute Collapse: Strike The Most Valuable Coin Ever.

The problem was not economic but political. So far, the administration of Joe biden the U.S. Congress has approved record spending in an attempt to mitigate the effects of the coronavirus pandemic. These huge expenses have already been approved by parliamentarians from the two main political parties. But since the account requires debt to be issued to cover disbursements already approved, the figure approaches the debt ceiling. A rule that requires a second approval: that of the resources for these expenses.

The Democrat majority on Capitol Hill could well have made the problem go away by raising the debt ceiling, as it has done several times in the past. But lawmakers in Biden’s party seemed unwilling to vote on their own and wanted their Republican peers to approve spending resources they had already approved. It was a chicken game –chicken game-, like the one in which two cars accelerate towards each other and the one that turns first loses. Only then would the collision involve hitting the US economy. And when there is a clash, everyone loses in the pool game.

A crazy idea

As economists, citizens, and those interested in the day-to-day life of North American politics gazed at the possibility of a US default with bewilderment, a possibility of emerging from the quagmire is being discussed on social media and in specialized publications. That while this does not solve the political problem, it would allow the Secretary of the Treasury Janet Yellen avoid last minute faults.

In other words, it would be like equipping chicken play cars with an ejection seat.

The proposal was even broadcast on networks under the hashtag #MintTheCoin. What is?

The proposed solution was to strike a $ 1 trillion coin. $ 1 trillion). Something that according to an interview with former United States Mint director Philip Diehl published in Axios can be technically fixed in just a few hours.s.

It is because the American currency, the US Mint, already regularly minting a $ 100 platinum coin known as the Platinum American Eagle an ounce of weight. Although the currency is considered to be legal tender, it would be of little use to make a payment: its face value is symbolic. Its market value is well over $ 1,000 in the collector and investor market.

As Diehl explains, change the currency denomination from 100 USD to 1 USD trillion it’s something very simple. Question of minutes. And that’s because, for some reason, the law gives the Treasury enormous latitude to mint these particular platinum coins..

How the proposal works

Now why could a single penny solve the problem?

It would have been, if it had been applied, a purely accounting solution. To resort to this last-minute bailout, the Treasury would have to reach the Federal Reserve with that currency and make a deposit. Then, with that trillion dollars, write off the Treasury debt to the Fed itself, and thus open a gap between the amount of existing debt and the cap that members of Congress cannot raise.

Ready. Yellen has its margin to continue issuing debt that finances current spending and avoids default.

Background: The Simpsons Predicted It

The idea, like crazy, has aroused enthusiasm among those who analyze it. It would be the most valuable dollar coin ever minted and, its existence, a challenge to any attempt to measure values ​​and wealth.

And an idea that was practically stolen from an episode of the animated series The Simpsons. In “The Billion Problem”, published in April 1998, billionaire Montgomery Burns fled from the United States to Cuba with a $ 1 bill trillion tax money he did not pay to lose it to Fidel Castro.

It would outperform the highest dollar bill ever distributed, $ 10,000. Issued in 1918 and retired in 1969, it was the highest face value ever printed. But not the one with the highest face value to dry.

The highest dollar bill ever issued is the $ 100,000 bill. Of course he did not circulate nor was it created for public use.

“The largest face value ever printed by the Bureau of Engraving and Printing (BEP) was the $ 100,000 gold certificate of the 1934 series bearing the portrait of President Wilson. These notes were printed from December 18, 1934 to January 9, 1935 and were issued by the United States Treasurer to Federal Reserve banks only against an equal amount of gold bullion held by the Treasury Department. », Explains the official website of the US Treasury Department.

“The notes were only used for official transactions between Federal Reserve banks and did not circulate to the general public,” he said.

What about inflation?

The big question, in this case, is whether such an accounting maneuver would generate inflation. The debate is open, and it is passionate. There are arguments in favor of both visions since if the strategy became customary, what would be the meaning of financing the US Treasury by debt or, even more, by taxes?

In an age of relative resonance in modern monetary theory, which in its most extreme versions assures that the capacity for money issuance is infinite, the idea seems risky. Pero, a modo de ejemplo, para el caso de la moneda que podría trabar la crisis por el techo a la deuda se puede tomar como ejemplo un argumento: el de que, en este caso, es apenas un movimiento contable sin efecto sobre la oferta silver.

Wielded by one of the $ 1 trillion coin enthusiasts, Bloomberg publisher and presenter, Joe weisenthal, who argued that the effect on inflation – already caused by the cash injection that took place in 2020 and 2021 – would be virtually zero.

The debate is far from settled, but at least to know the arguments of the promoters, we quote their look below-

“Of course, making money from minting high-value coins seems odd and inflationary. But it only seems inflationary for the same reason people thought quantitative easing would be inflationary in 2009.” , he wrote.

“You can think of the currency as a kind of quantitative easing of the Treasury. It would simply be an exchange of assets. The Fed receives a currency to keep it on its balance sheet. The Treasury collects the repaid debt. The effect on the real economy is marginal at best. There is no new expense. There is no new money for goods. Only the different branches of government make accounting changes, ”he concluded.

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