So, I wasn’t always financially aware. In fact, I was, up until a few years ago, very financially unsavvy and ignorant. And so, it was only over the weekend that I learned about the $1 Trillion Dollar Coin proposal by some politicians in the US.
In fact, it isn’t even new.
The proposal to mint $1 Trillion Dollar Coins (Why not make it a Bazillion?) was first proposed in the aftermath of the housing crisis of 2008, when the US hit the debt-ceiling limit in 2011.
The basic idea (I may still get this wrong despite rigorous wiki-ing, so please correct me if I’m wrong) was that the President could technically bypass Congress, and get the Treasury to mint a coin worth $1T, and force the Federal Reserve to buy it at face value and use it to lower their debt obligations, or use it as a stimulus package.
The Obama Administration eventually rejected the idea, but this was again recently (March 2020) raised as a possible solution by Congresswoman Rashida Tlaib. Her proposed solution (Automatic BOOST Act) was to mint 2 $1 Trillion Dollar Coins, and use it as an aid to hand a one-time $2,000 to every person in America, followed by $1,000 per month for a year in the aftermath of the Coronavirus. The disbursements will be via a pre-loaded debit card.
But will minting $2 Trillion be enough for a plan of her magnitude? Not based on Bitcoiner Jimmy Song’s calculations.
Let’s do the math:
— Jimmy Song (송재준) (@jimmysong) March 21, 2020
300M people x $2000/person = $600B initial cost.
300M x $1000/person/month for at least 12 months = $3.6T
You’re going to need to print more Trillion dollar coins.
This sort of thinking is exactly what leads to hyperinflation.
Hedge with #Bitcoin pic.twitter.com/NZojBSN1Ss
Based on his very basic calculation for what Rashida intends to cover, they minimally require $4.2T.
I’m no monetary policy expert, so I don’t exactly know how magically minting (and adding) 2 Trillion US dollars into the system will work (let alone 4T), but I know it’s definitely not good for confidence in the currency.
We’re also operating in a vastly different world, one where Trump is in charge, and the thought of minting (or ordering) a trillion dollar coin, might just be the thing that floats his boat. Because that will be a great, great coin. Possibly the greatest coin ever. Definitely bigger than any coin Obama ever minted.
Perhaps this will be the moment bitcoin was waiting for.
Also, where would the Treasury keep such an expensive coin? I feel like assembling a team…