In the midst of the US debt ceiling crisis, the trillion dollar coin theory resurfaced: crazy idea or solution?

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“It should by no means be taken for granted that the Fed would do it,” warned Treasury Secretary Janet Yellen

In the middle After the US debt ceiling crisis, the trillion dollar coin theory resurfaced: crazy idea or solution? /></p>
<p>File photo of the US Federal Reserve building in Washington (REUTERS/Kevin Lamarque)</p>
<p class=Considered by most economists as a wild and improbable idea, the theory of currency of a trillion dollars (“One Trillion Dollar Coin”) to eliminate the deficit has re-emerged in the US as a radical way out of the impasse caused by the debt ceiling.

The head of the Treasury Department herself, Janet Yellen, has had to distance herself from the subject and reassure those daring who have dared to lie to her in recent days: that the US Constitution allows the creation of this magical currency that would alleviate the debt does not mean that the Federal Reserve (Fed) has to go along with it.

“It should by no means be taken for granted that the Fed would do it, especially with this, which in my opinion is a trick,” he said a few days ago in an interview with The Wall Street Journal.

As happens periodically (78 times since 1960), the United States reached its current debt ceiling of 31.4 trillion dollars on the 19th and Yellen announced a series of extraordinary measures so that the government does not find yourself immediately on the precipice of default.

In the midst of the crisis over the debt ceiling in the US, the theory resurfaced Trillion Dollar Coin: Crazy Idea or Solution? /></p>
<p>US Treasury Secretary Janet Yellen (REUTERS)</p>
<p class=Unlike other countries, the US government can only issue debt up to the limit set by Congress, which has the power to raise -or suspend- that roof as it sees fit.

Problems arise when, as is the case now, Congress is divided and control of the Lower House is Republican, while the Senate is Democratic.

It already happened to Barack Obama (2009-2017) in 2011. With In the Republican-controlled House, no deal was reached until Democrats agreed to pass sweeping spending restrictions, which have remained in place until recently, two days before the cap was reached.

A confrontation that caused the risk agency Standard and Poor's to lower the country's credit rating for the first time in history.

With the deadline set for next June, Yellen does not stop urging Congress to get to work on this and Republicans not to use the debt ceiling as a bargaining chip.

Given the frequency of this situation, there are numerous voices calling for permanent solutions or mentioning radical tools such as the “One trillion dollar coin”.

An idea that appears in “The Simpsons”

Created precisely in the debt ceiling crisis of 2011, the idea of ​​the trillion dollar coin it has even appeared in The Simpsons, but in ticket form and ahead of the times.

In a chapter titled “The Problem With Trillions” from season 9 broadcast in 1998, Homer Simpson is involved by the Government in a mission: to recover a trillion dollar bill that then-President Harry Truman printed in 1945 to help rebuild post-war Europe.

In the midst of the crisis over the debt ceiling in the US, the theory resurfaced Trillion Dollar Coin: Crazy Idea or Solution? /></p>
<p>Scene from The Simpsons episode about a “one trillion dollar” bill</p>
<p class=The theory of the “One Trillion Dollar Coin” says this: by a law created in 1996 , the Treasury Department has the ability to mint “platinum bullion coins”, trillion-dollar coins, deposit them with the Federal Reserve, and then withdraw the money to pay the country's bills.< /p>

“I think this solution is highly unlikely, but not impossible. The only way I see it happening is if Yellen has no other choice,” Eric Swanson, a professor of economics at the University of California, told the news agency EFE.

And it is that this idea does not seem so remote to figures like the Nobel Prize winner in Economics Paul Krugman. In an article published in The New York TimesIn 2013, with Obama back in trouble over the debt ceiling, he asked himself the question: “Should President Obama be willing to print a $1 trillion platinum coin if the Republicans try to force the United States United to default on it?” benign, the other equally foolish but at the same time vile and disastrous.”

The theory would not, however, be a permanent solution, since it is nothing more than “an accounting trick to avoid the debt ceiling”, Swanson points out again.

In the midst of the crisis over the debt ceiling in the US, the theory of the trillion-dollar currency resurfaced: was it a crazy idea or was it a solution? n?

American economist Paul Krugman, winner of the Nobel Prize in Economics (Getty Images)

Kenneth Kuttner, a professor at Williams College University in Massachusetts, agrees with this, who tells EFE that “it would only last a while” and “once the credit line was reached we would be in the same situation”.

Furthermore, doing something like this would be “very damaging for the independence of the Federal Reserve”,which Yellen herself directed from 2014 to 2018.

For Charles W. Calomiris, a professor at Columbia Business School, this currency “is a disguised debt instrument and not a real currency.”

“The goal of issuing it would be, rather than providing a currency, to circumvent the law and I think the Treasury will not do that. If the Republicans do nothing, they will lose this battle and end up losing political support along the way,” he adds.

In the opinion of Milton Marquis, professor emeritus at Florida State University, using it would set “a precedent” and “send an important aspect of fiscal policy to the executive branch, which would alter the current balance of power”.

“Future presidents, from whatever party, would be tempted to wield that power and it could lead to more wasteful, underfunded spending measures,” he adds.

(By Paula Escalada Medrano – EFE)

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