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The Trillion Dollar Coin: Joke or Game-Changer?
Posted on Jan 18, 2013
By Ellen Brown, Web of Debt
This article first appeared at Web of Debt.
Last week on “The Daily Show,” Jon Stewart characterized the proposal that the White House circumvent the debt ceiling by minting a trillion dollar coin as an attempt to “just make shit up.”
Economist and NY Times columnist Paul Krugman responded with a critical blog post accusing Stuart of a “lack of professionalism” for not taking the trillion dollar coin seriously. However, Krugman himself had called the idea “silly.” He thought it was just less silly — and less dangerous — than playing with the debt ceiling, which was itself an unconstitutional shackle on the Treasury’s ability to pay debts already incurred by Congress.
Stewart responded on January 15 that he stood by his “ignorant conclusion that a trillion dollar coin minted to allow the president to circumvent the debt ceiling, however arbitrary that may be, is a stupid f*cking idea.”
It’s all good fun – or is it? Most commentators have missed the real significance of the trillion-dollar coin. It is not just about political gamesmanship. For centuries, a secret battle has raged over who should create the nation’s money supply – governments or banks. Today, all that is left of the US Treasury’s money-creating power is the ability to mint coins. If we the people want to reclaim that power so that we can pay our obligations when due, the Treasury will need to mint more than nickels and dimes. It will need to create some coins with very large numbers on them.
To bail out the banks, the Federal Reserve, as head of the private banking system, issued over $2 trillion as “quantitative easing,” simply by creating the money on a computer screen. Congress, the White House, and the Treasury all rolled over and acquiesced. When it was proposed that the government bail itself out of its budget woes by minting a $1 trillion coin, the Federal Reserve said it would not accept the Treasury’s legal tender. And the White House again acquiesced, evidently embarrassed to have entertained this “ludicrous” alternative.
Somehow we have come to accept that it is less silly for the central bank to create money out of thin air and lend it at near zero interest to private commercial banks, to be re-lent to the public and the government at market interest rates, than for the government to simply create the money itself, debt- and interest-free.
The banks obviously have the upper hand in this game; and they’ve had it for the last 2-1/2 centuries, making us forget that any other option exists. We have forgotten our historical roots. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.
In fact, the trillion-dollar coin represents one of the most important principles of popular prosperity ever conceived: national debt-free money creation. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted the essential strategy behind it: that debt-free money offers a way to break the shackles of debt and free the nation to realize its full potential.
We have lost not only the power to create our own money but the memory that we once had that power. With the help of such campaigns as Occupy Wall Street, Strike Debt, and the Free University, however, we are starting to re-learn the great secret of money: that how it gets created determines who has the power in society — we the people, or they the bankers.
It is no secret who has that power today. In the great bailout of 2008, banks were rewarded for making irresponsible and fraudulent gambles in the subprime mortgage scandal, with no one serving time in jail. Then there was the robosigning scandal, in which banks committed criminal fraud and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold. While a commoner might get 10-20 years for robbing a bank, bank executives get huge bonuses for robbing us.
We may rail against the banks and demand change, but nothing will change until we grasp their fundamental secret, the foundation of their power: that those who create the nation’s money control the nation. By mechanisms explained elsewhere, nearly the entire money supply today is created by banks.
Remembering Our Roots: A Refresher Course
Benjamin Franklin was called called “the Father of Paper Money.” He argued before the British Parliament that government-issued money had allowed the colonies to escape the yoke of debt, to thrive and grow. The king, urged by the Bank of England, responded by forbidding all new issues of paper scrip. The colonial economy then sank into a depression, and the colonists rebelled. They won the revolution, but the power to create money was lost to a private banking oligarchy modeled on the one dominated by the Bank of England.
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