Various writers, tongue-in-cheek, have urged that the Treasury Secretary mint a one trillion dollar coin and use it to buy back debt. This would resolve the debt ceiling crisis.
Whoa!, you say. If they just print more money, won’t that cause inflation? Maybe not. Money is created and destroyed all the time. Your bank routinely makes loans it doesn’t have the funds to cover. It is not required to have deposits equal to its loans. When the market price of housing, soybeans, or General Motors stock fluctuates, money is created or destroyed.
In its essence, money is only a promise to pay. We rely on the Federal Reserve to impose monetary policies that keep us as close to 2% annual inflation as they can. It’s an art, not a science.
The unknown is whether minting the coin would alter the world’s faith in our promise to repay.
There is little question that failure to raise the debt ceiling would cause the US to default on its existing debt. This would certainly shake faith in our monetary promises because we would be breaking them. So maybe the risk of minting the coin is small relative to the alternative of certain default.
Here’s my suggestion. Let’s mint eight of those $1T coins. Put Mitch McConnell’s likeness on one side and the GOP elephant on the obverse. Use them one at a time during Biden’s presidency to pay down the deficit and keep the economy rolling. Why eight coins? That’s about equal to the record-setting deficit that accrued under #45’s four-year term. So, it would be bold political theater to remind us all that the GOP is not fiscally more responsible than the Dems. Quite the opposite – they are willing to scuttle the economy and throw us into recession to game the political system.