The Trillion Dollar Coin Idea Is Back As A Wacky Way To Prevent Financial Armageddon
A US government default on its debt would be a blow to the economy, leading to widespread job losses, higher interest rates and economic hardship that would last for years. Treasury Secretary Janet Yellen predicted “widespread economic catastrophe” if the debt ceiling was not raised, with millions of Americans suddenly strapped for cash.
What the White House says
âWe were having these conversations with Jack Lew and others about the options available, as this had never happened before,â he said. “There were all kinds of wacky ideas about how you could potentially have this huge room … This theory [was] that I had the power to issue this huge trillion dollar coin, a trillion dollar commemorative coin, and on that basis we could repay the US treasury bills. “
What the experts say
But as serious as a flaw may be, most experts oppose the use of the trillion dollar coin. They say such a bold way to avoid default would shake confidence in the dollar and the US Treasury as much if not more than an actual default.
“Global investors will know that this is not a sustainable way to pay government bills, and given the constitutional crisis it would trigger, it will increase the chances that they will not be paid in a timely manner at some point. in the future. The trillion dollar coin will not prevent a financial crisis and a downturn in the economic crisis. The only winner in all of this would be cryptocurrency. “
Using the coin to pay off US debts would shake confidence in the dollar going forward and only draw the attention of investors around the world to the country’s governance issues, said Philip Wallach, senior researcher at the American Enterprise Institute, a conservative think tank.
âIt’s so glitzy and fancy, it’s the worst thing you can do,â he said. âIt’s really designed to capture the imagination of the whole world. Ultimately, the stability of a fiat currency hinges on nothing more than people’s belief that money is worth what they think it is. ‘It’s worth. Doing something like the trillion dollar coin is a great way to get people to think the dollar isn’t such a great currency. “
Right now, the Treasury Department is taking what it calls “extraordinary measures” to keep paying its bills, but Yellen has said it will run out of those options by mid-October. Wallach said there are likely other actions that can be taken if the debt ceiling is not raised by then, aside from the flashy trillion dollar coin.
âI think it would be irresponsible of the Treasury not to have a whole menu of options to generate cash,â he said. “They would come up with much more obscure and boring innovations. I trust them.”