THE BLOG

What Would a Trillion-dollar Coin Mean?

01/23/2013 05:09 pm ET | Updated Mar 25, 2013

The idea that the government should issue a trillion-dollar platinum coin arose during debates to avoid raising the debt limit in 2011. The "debt" limit has been a congressional charade for decades. Congress set a debt ceiling and has raised it again and again. However, the United States economy relies on government deficit spending to operate and to prevent recessions and depressions. This was established as policy during the Great Depression.

The emergence of the trillion=dollar coin idea is encouraging in that it recognizes that the federal government has the sovereign power to create its own money. This is a major constitutional power, giving We, the People the authority to issue our own money. U.S. Constitution Art. I, Sec. 8, Clause 5, "The Congress shall have Power... To coin Money and regulate the Value thereof,..."(i). As leading constitutional scholar Robert G. Natelson demonstrated in his lengthy article in the Harvard Journal of Law and Public Policy on the meaning of "to coin" in the Article 1, Section 8, Clause 5, the word "coin" here is a verb, meaning to create or originate: "... the money thus "coined" did not need to be metallic. Paper or any other material that Congress selected would suffice. Because the power to coin paper was express, it requires no justification by the incidental powers doctrine of the Necessary and Proper Clause."

Most of the money we use today is digital, and nearly all of this money is presently created by the private banking system when they make loans. The U.S. Treasury, under the direction of Congress and the president, could create money in any amount the same way. The Federal Reserve Banks would be required under current law to accept that money on account.

The advantages of this sovereign power are several. The federal government could go far beyond merely avoiding a debt limit and could operate without deficit. It could pay off all existing debt, thus eliminating hundreds of billions of dollars of interest payments each year. This would free up revenue to provide desired and necessary services, creating millions of useful economy stimulating jobs -- all debt free. This would include repair of degraded infrastructure, universal medical care, and universal education. The federal government could bail out states, many of which are deeply in trouble; and help resolve their pension problems. Again, all of this could be accomplished debt free.

A publicly issued trillion-dollar coin would help us break our political and economic chains of banking corporations supplying our nation's money supply as interest bearing debt. Considering the destruction the banks have wrought, shouldn't our nation revisit the foolish policy of giving banks the license to create our nation's money, then having our government borrowing that money and paying interest on it?

What the trillion dollar coin has to offer is illuminating our constitutional money power, and Congress's malfeasance in allowing banks to create the national money supply as interest bearing debt. This can be important in helping people understand that the monetary power belongs with the United States government to promote the general welfare, not with the caprice of private bankers acting to promote their own corrupt interests.

A trillion-dollar coin could avoid raising the debt limit, but it does not solve most of the problems facing our monetary and banking system. It leaves the same corrupt financial power structure in place. Bank issued debt used for money in our system remains in place -- that is the source of current economic stress. It does nothing to reduce the interest burden of the existing federal and state debt. It does nothing about private debt such as housing, consumer, and student debt. It does nothing to get 47 million people off food stamps. It would not repair infrastructure or provide employment.

A trillion-dollar coin would not prevent the continuing inflation and deflation of bank credit called business cycles. It would not retard the growth of private debt and mis-distribution of wealth from lower and middle income people to the rich. Wealth would continue to be concentrated more and more into the upper one tenth of one per cent of the population.

In short, a trillion-dollar coin does not remedy the anti-American effects of the monetary power being concentrated in the financial sector. It merely undercuts one political party's ability to close down our government over a nonsense issue.

The real solution to those problems was introduced into the 112th Congress by Congressman Dennis Kucinich, HR 2990. This bill puts the private Federal Reserve System under the U.S. Treasury, so that money creation in the U.S. becomes a function of government. The accounting privilege banks presently have to create money in the form of debt is ended by ending what is known as the fractional reserve system. New money is introduced into the economy by approved congressional government spending for infrastructure, health care and education.

The experience of history strongly supports all these measures, as is made clear in the "frequently asked questions" assembled by the American Monetary Institute and viewable here at our website.

Notes:

i. United States Code, Title 31

By Stephen Zarlenga, and AMI researchers: Robert Poteat of Onalaska, Washington; Jamie Walton of Washington, DC; and Greg Coleridge of Cleveland, Ohio. Originally edited by Patrick Notaro.

Stephen Zarlenga is director of the American Monetary Institute and author of The Lost Science of Money. Meet him in Chicago at the 9th Annual AMI Monetary Reform Conference!