How does Joe Biden want to prevent the state bankruptcy?

The US is on the brink of bankruptcy. again. But a bizarre solution could save the world power from bankruptcy. The central bank plays the most important role.

The salvation of the United States shimmers silver. It appears circular and consists of one of the most expensive metals in the world. Depending on the version, the head of the Statue of Liberty can be seen, the American sea eagle or the likeness of the current US President Joe Biden. The listed value on the flat piece of metal is “$1T”. 1T does not stand for “One Thousand” but “One Trillion”.

A small platinum coin, which is said to be worth around 919 billion euros.

Even that sounds strange. But this coin does not exist yet. Mystical powers are attributed to her: because she is supposed to save the world power from bankruptcy. What sounds grotesque is apparently a real option in the land of unlimited opportunity – and one born out of necessity.

Because a spectacle is taking place in Washington that is actually almost always performed at the beginning of the year: the hopelessly divided Congress cannot agree on raising the debt ceiling. Strictly speaking, the “government shutdown” means that the state comes to a standstill as soon as the threshold is exceeded. It is currently around $31.4 trillion.

But it could get even worse: If the budget crisis persists, the USA will no longer be able to service the interest on its existing debt. In the worst case, this default could trigger a global financial crisis. US Treasury Secretary Janet Yellen is already warning of the drastic consequences. A few extraordinary measures can still be taken to continue paying the bills. The money will definitely run out by June.

The most absurd solution is the coin

That’s not entirely unrealistic. What makes the situation particularly explosive this year: Joe Biden, a Democrat, is in the White House. But the House of Representatives has the budgetary power. And the Republicans have been in power there again for a short time. Because this party is deeply divided, there is only one goal that unites almost all MPs: the main thing is to harm the President and the Democrats.

Because nothing will change in the foreseeable future, a way out must be found. The options are curious: some lawyers argue that the debt ceiling is unconstitutional anyway. Others recommend that the Treasury simply ignore the limit and take on more debt.

But the most absurd solution discussed is the minting of one or more “One Trillion Dollars” coins out of platinum.

The idea for this is said to have first emerged in the 1990s. It has been further developed in the forums of numerous business blogs and is closely linked to the so-called “Modern Money Theory” (MMT). Put simply, this modern monetary theory states that government debt is not really a big problem and could actually be pushed to infinity.

The coin idea comes specifically from a section of the so-called US codes, a collection of federal laws. Accordingly, the Ministry of Finance is allowed to mint new platinum coins, the face value of which is at the discretion of the Minister of Finance.

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In theory, the “One Trillion Dollars” coins could be minted and deposited with the US Federal Reserve. The value would then go to the accounts of the Treasury. The national debt could continue to be serviced, civil servants’ salaries paid and the “government shutdown” prevented. This would remove the Republicans’ potential for blackmail in Congress.

The consequences would be unpredictable

Sounds plausible. But is it? Critics are already warning of a financial catastrophe that could result. Basically, the ascription of such a high imaginary value for the platinum coins is nothing more than mass money printing. The consequences of such a measure could push already high inflation into hyperinflation.