Can we can solve the fiscal crisis with a trillion-dollar platinum coin?
The trillion-dollar coin idea certainly sounds absurd, but in this age of trillion-dollar annual budget deficits (with no end in sight), and a national debt in excess of $16 trillion (and growing at over $3 billion per day) is it really any more absurd than what we’re already doing?
No doubt it would be a game changer, on par with President Nixon announcing the end of dollar convertibility to gold in 1971.
“In the past seven years there’s been an average of one international monetary crisis every year. Who gains from these crises? Not the working man, not the investor, not the real producers of wealth.
The gainers are the international money speculators. Because they thrive on crises they help to create them.”
– Richard M. Nixon, August 15, 1971
(International money speculators? Crises? Sounds like current events!)
As shocking as the closure of the gold window was, the world didn’t come to an end and the United States dollar retained its reserve currency status. However the action was not without consequences. The oil shocks of 1973 and 1978 (who wants to sell us their oil for non-convertible paper?), and the prime rate topping 20% in the early 1980’s, were all direct results of the dollar becoming a pure fiat currency in 1971. So as tempting as the trillion-dollar coin may be, history tells us there are risks.
However, history is also very clear concerning the risk of doing nothing about exponentially growing debt (aka credit expansion).
“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”
– Ludwig von Mises
There are better solutions than a trillion-dollar coin that only enables the government to continue squandering money. Real solutions must benefit the masses. But at least Washington is starting to consider monetary alternatives to the debt-based Federal Reserve note system.