how the $1 trillion coin minted by the United States and deposited into the treasury doesn’t help resolve the outstanding debt without ramifications.
In: 141
Because currency is an abstraction of wealth. Wealth is generated through productive labor. There is nothing inherently valuable in a few square inches of green paper, but there’s a lot of inherent value in a basket of groceries – you can eat them and not starve. You have a motivation to perform the labor of growing vegetables. But maybe you suck at growing vegetables. So you go hunt a mammoth instead and then trade mammoth meat to the basket-maker and the vegetable farmer so everyone can eat. Hooray!
At some point, though, society starts becoming more complex until we end up declaring that this small stack of green paper is worth this basket of vegetables. It’s not the paper that’s valuable, it’s the vegetables that are valuable. And what makes them valuable is the labor that went into growing and harvesting them, and the utility they provide (not starving).
A lot of very smart people are put to work figuring out how much wealth (i.e., labor) is being generated year by year. That tells them how much money to print. If more money is printed than labor is generating wealth, then that devalues labor and it no longer becomes worth what it should be. I.e., inflation gets even worse than it already is.
A complicating factor is to whom the government owes this debt. A huge majority of ‘debt’ is held by US Treasury bonds. US Treasury bonds are considered one of the stablest investments on the planet. It won’t get you a lambo, but you’ll never lose your shirt putting your money in Treasury bonds. And it’s basically money the government owes its citizens. The coin trick runs the very real risk of blowing up that market; which would be bad for everyone.
Latest Answers