If you can simply make money based on nothing but you saying it is money and worth something then who among us would have any financial problems? We’d just design our own version of dollar bills and have them printed up or copied on a copy machine. We wouldn’t even have to risk getting arrested for counterfeiting if we used our own style of money (well I don’t know the actual law on that, really).
That such an idea of minting a trillion-dollar platinum coin that the federal government would then deposit in the Federal Reserve Bank, thus making $1 trillion of debt disappear could even be floated, at least semi-seriously, clearly demonstrates how dysfunctional our political system has become (and then why not mint $16 trillion or so to pay off the whole national debt?).
I have been so busy in the past several days I had not even heard of the trillion-dollar coin idea and when I saw a headline on it while surfing the web I did not even bother to read the story at first — but then my curiosity picked up when I kept seeing references to it.
As I understand it there is no trillion dollars worth of platinum available to the government, but some quirk in the law makes it possible for the U.S. Treasury to mint a platinum coin of lesser value and assign whatever value it wants to it. Well, that is pretty much how all of our money, paper or coins, goes.
I along with probably 90 percent of people don’t fully understand the concept of money and how its value is decided. Once upon a time when I was a kid I was led to believe that paper money at least represented gold and/or silver kept at Fort Knox. I was later stationed at Fort Knox in the U.S. Army but I did not go anywhere near or at least did not see the gold or silver. But anyway even though we once did base our currency on the value of precious metal we really had on hand, that went by the wayside some time ago.
Nonetheless, the dollar has been the world’s standard currency for a long time. People and governments want our treasury bonds even when they are worth nearly nothing because they are safe. Or at least they have been safe. But the threat of default, first by the crazy fiscal cliff crisis and now by a coming re-enactment of the debt ceiling limit battle, threatens the stability and trust of our financial system.
Even though it would seem that the Republican Party is the predominant obstruction in all of this, I would put blame on both the Democrats and the Republicans. The Democrats are to blame because of their unwillingness to face up to the fact that you cannot or should not indefinitely spend more than you take in (does not work for individuals and does not work for governments) and the Republicans are to blame for playing politics with the crisis, threatening to let the whole nation and even the world fall into a financial abyss in order to exact spending cuts on social programs and the lower taxes.
The GOP appears sharply divided on this issue. Old guard Republicans, who tend to be more moderate, are willing to compromise, while the newer Tea Party type know nothings want to dismantle the whole system. I imagine most business types, particularly big business types, see the need for compromise. And by the way, that reference to know nothings was not a mere accusation of ignorance but more of a historical reference to a political faction back in the 1850s.
Needless to say, the minting of a trillion-dollar coin does not seem wise nor practical and maybe it was just a joke anyway.
But our government does essentially print up dollar bills based on nothing but money borrowed via treasury bonds issued. When everything goes great guns it’s all kind of like a Ponzi scheme. We keep ahead of the game. Somehow back in 2008 we fell behind (the burst of the housing bubble was blamed).
Simply printing money based on no real underlying value has not historically worked. It results in hyper-inflation and loss of trust in the currency. The oft-cited example is Germany after World War I with the image of people pushing wheelbarrows full of German marks down the street to buy a loaf of bread and the famous photo of a hausfrau burning them to keep warm. A more recent example is in the African nation of Zimbabwe where money was simply printed up based on no real value at all. The annual inflation rate was as much as 11.2 million percent at one time. People quit using the local currency and used dollars instead.
The United States borrows so much money from China, we might be in danger of having to carry around billfolds full of Chinese yuan.
In light of the recent election I think the moderates are going to prevail here in the United States.
But the know nothings are posing a serious threat.