October 12, 2021 - 10:43am

Every time it seems like late-stage capitalism might face its impending doom, our beloved elites pull out another surprise.

This time there is (yet another) debt-ceiling feud in America, which, if left unresolved, would lead to the first sovereign default in America’s history. Notable economic figures, such as Joe Weisenthal and Paul Krugman, have therefore proposed a radical solution: to ignore the pesky debt limit and finance emergency government spending by minting a whopping $1 trillion platinum coin.

With every new presidency we go through this pathetic ‘will they, won’t they?’ charade. It’s nothing more than a political squabble, where the party out of power attacks their rivals for wanting to push the U.S. Government further into debt bondage, even though both Democrats and Republicans have helped amass national liabilities of over $28.8 trillion.

Sometimes it’s a close call, but the outcome is always the same. Eventually, the elites remember their financial and political futures are tied to fragile speculative assets supported by the Federal Reserve and ballooning deficits. If any default were to occur, the value of those investments would torpedo. As if by magic, they settle their differences, and Congress increases the debt ceiling.

As expected, last week, the Senate voted to raise the limit by $480 billion. But this is only a stop-gap solution for the next few months, and if hits another stalemate, #MintTheCoin is the proposed quick-fix for America to keep financing itself.

The platinum coin law, which Congress passed in 1997, would allow the Treasury Secretary to mint and issue a trillion-dollar denominated coin without Congress’s approval:

The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
- Title 31 of the United States Code

This law was introduced so that Government could avoid having to raise funds through issuing bonds (borrowing money from the private sector and foreign entities). But there’s a major problem with how this loophole will help fund any future U.S. government shortfall. As Marcelo Prates points out, once the coin is struck and deposited into the Treasury’s Federal Reserve account, the authorities can’t spend it. That’s because Section 14 of the Federal Reserve Act prohibits the central bank from buying any assets other than U.S. Treasuries.

As usual, a financial crisis — say, failing to raise or suspend the debt ceiling — is the sole scenario that will enable these rules to change. If trillion-dollar metal coinage becomes the only way to rescue America’s debt colossus, central planners will do whatever’s necessary to get the required legislation to pass.

And the people, without much deliberation, will likely support it. In this period of relative peace, the authorities can easily convince us to get behind any policy or emergency measure that preserves the status quo. As long as ultra-loose financial conditions prevail, most kinds of monetary alchemy — a quadrillion-dollar gold coin, Bitcoin-backed government bonds, or even a trillion-dollar coin (that’s not really worth a trillion dollars) — will receive the nation’s seal of approval.

Only when the cheap money era reaches its abrupt end will the fun stop, and we’re approaching that moment. The world’s number one superpower needing a trillion-dollar metal coin to bail itself out is more than an adequate late-stage cycle indicator.

Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at @concodanomics.

Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at@concodanomics.