Thursday's Market Minute: Minting a Trillion-Dollar Coin Would Erode Trust in America

Trust is not a hard concept to understand. It builds by way of repetition and dies by virtue of erosion. Erosion begins when trust is abused to the benefit of the trusted. In theory, one can accumulate infinite trust. Deeper trust, more prolific trust, and generations of trust – if it’s never abused. Abuse generally begins with a miscalculation by the trusted of what they can do, versus what they should do.

Can we mint a trillion-dollar coin? Of course. Should we? If you want to absolve our moronic politicians of their inability to agree not to light the house on fire, yes. If you get a kick out of ruling from inside the tiniest nooks of the law, sure. If you want to see bitcoin rocket to a new all-time high overnight, hell yeah! If you want to preserve the trust of the people – no. Minting the coin would be the most extreme policy extrapolation of Modern Monetary economic theory to date. This is not printing stimulus checks to keep Americans out of homeless shelters; it’s throwing together a $3-trillion escape hatch to allow inept politicians to evade their duty to maintain a functioning government.

MMT is anchored in the belief that a monetarily sovereign country can print as much of its own currency as it pleases, regardless of revenue or debt-load. The central idea is that government is not a household with a balance sheet and therefore must not view its operational finances as zero-sum. Trust, however, is a zero-sum concept. Trust is a tally that’s kept over time and allows the trusted to take risks or make mistakes in exchange for a reduction of that trust. Minting the coin would be a vulgar abuse of that trust at a moment when confidence in the system is already lackluster. The risk of embracing MMT as a policy framework has always been that it will be habit-forming; that the money-printer would replace actual, productive problem-solving policy. Printing stimulus checks and minting the coin embrace the same underlying economic assumption, but differ greatly in their connection to productivity.

The checks bailed out the American economy from a viral invasion that threatened to send us into ruin. The coin is a solution to bypass a process that so far, we’ve always found a way through. Stimulus checks were a means to productivity with little another alternative; a good-faith, creative solution that embraced the MMT framework and the results of which are still being gauged. We printed the checks to keep the heartbeat of the global economy pumping. We did it from a place of power and trust. If we mint the coin, it’ll be from a place of weakness.

A recognition and acceptance of ineptitude that will exact a toll on the trust of our borrowers that make it all happen. Is the debt ceiling an archaic self-own? Maybe. Or maybe we’re supposed to have a periodic roadblock that forces us to at least pretend we’re keeping track of it all.

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