The Idiotic Plan to Mint a $1 Trillion Coin

Fair warning: Today’s dispatch is stupid. Like, borderline ignorant. 

But that’s the way it has to be because of how idiotic the topic is. 

At the root of this stupid ignorance is a coin. 

Not just any coin.  

A platinum coin. Worth, in theory, $1 trillion. 

Now, you might know exactly what I’m talking about here. Or maybe not. But just so that everyone is up to speed… Right now, some people are running around Washington, D.C., circus capital of the world, spouting off about this grand idea to save America from the debt-ceiling crisis that’s soon to erupt in Congress. 

The grand idea is this: President Biden can simply and legally dictate that the Treasury Department mint a special, platinum coin—just one coin—with the words “One Trillion Dollars” stamped on it. Treasury would deliver that “commemorative” coin to the Federal Reserve, which could then increase Uncle Sam’s debt limit by $1 trillion. 

With this approach, the government could forever put off future debt-ceiling debates. 

Anytime our debt-addicted, legislative clowns approached the debt ceiling, they’d just send the commemorative $1 trillion coin to the Fed…the Fed would open up the dollar spigot…and Uncle Sam could afford his overspending. 

Then when Uncle Sam repaid the $1 trillion temporary loan, the Fed would return the coin to the Treasury, to be used the next time the debt-ceiling circus came to town. 

The problem, of course, is that nothing in government is ever temporary.  

You’d need the IQ of a barely flickering lightbulb to believe this is a good solution. Congress would lean on this coin like a crutch, over and over, and ultimately, we’d come upon a day where the $1 trillion would not be repaid and the Fed would be stuck holding a commemorative platinum coin worth nothing more than the value of the underlying metal. 

The only event this coin would commemorate is the depths of desperation to which a financially flailing nation stooped in order to hit the crack pipe of magical finance one last time before the inglorious collapse brought an end to the decades of voodoo economics America has pursued since the 1980s. 

Behind this bone-headed plan (can you tell just how stupid I think is?) are the people who push Modern Monetary Theory, known as MMT.  

This bit of mental gymnastics insists that a government which prints its own currency can never run out of money because it has the power of the printing press and taxation, and, thus, has no need to follow any budgetary restraints like a family would.  

In short, government can spend forever and a day, it can accumulate otherworldly sums of debt, and none of that matters…because government is financially omnipotent. 

Here’s the logical short-circuit that MMT’s proponents suffer from in their debilitating struggles with economic illiteracy: Government might control money, but government does not control the trading in money. 

Currency traders and bond traders actually control the world of money. Government is just a dairy cow with teats spewing forth an unending stream of currency notes. If currency and bond traders say “Whoa, Nellie! You’ve got too much debt—enough with that lunacy!” then currency prices fall and bond yields soar. 

Those two factors in tandem are powerful enough to bring a government to its knees in pleading supplication. 

Just ask Britain of the early 1990s, when a defiant British government kept the pound inside what was known as the European Exchange Rate Mechanism, a procedural affair that pre-euro European governments used to manage exchange rates between each other’s currencies. Traders led by George Soros saw the idiocy of what Britain was doing…and promptly bet against the pound, which collapsed the currency and forced the Brits out of the mechanism. 

Or ask Britain of late 2022 and Liz Truss, whose tenure as prime minister famously didn’t even outlast a decaying head of lettuce. Currency and bond markets balked at her debt-laden mini-budget. The pound plunged, bond yields jumped, and it nearly brought ruin to Britain’s pension plans. 

Or ask Tricky Dick Nixon of the early ’70s, when global currency and gold markets forced him to take the U.S. dollar off the gold standard in order to save the greenback and the American economy from collapse. 

My point is that markets control the noose. They give government plenty of rope to hang itself…something at which government has routinely succeeded across a vastly long stretch of history. 

This $1 trillion coin idea is 100% ignorant from the get-go. 

It’s a gimmick—and a bad one at that. 

Assuming this were to happen (and even Treasury Secretary Janet Yellen says it’s dumb), the global markets would rightly see this as political and monetary desperation. 

The dollar would dive. Inflation would race higher because the costs of imported goods would surge and drain the American pocketbook.  

The U.S. stock market—still down 16% from its December 2021 all-time highs—would immediately lurch into bear territory.  

And the recession we’re facing would be an instant reality, and far worse than is already likely. 

As I said, this was a stupid dispatch. Borderline ignorant. 

The fact I had to write it speaks to just how sad the state of affairs is at the circus these days.