Another debt ceiling battle is brewing, and pundits are debating what to do about it. Over at National Review’ Capital Matters, I take a look at one of the worst ideas: Minting a trillion-dollar coin to pay down debt:
The main reason this wouldn’t work is that money is supposed to match real output if it is to retain its value. If the amount of money goes up by a trillion dollars while the amount of goods and services stays the same, the result is inflation.
Treasury secretary and former Fed chairwoman Janet Yellen was right to call the trillion-dollar-coin idea a gimmick that erodes the Fed’s independence. The Fed already has the power to create new money and buy up federal debt. It was doing so as recently as March 2022 and could continue to do so without interference from the executive branch. The reason it stopped is that it contributed to today’s inflation.
Better to address the root problem by spending less and reforming entitlements.
Read the whole thing here.