Pointy-bearded professors around the nation are stroking their chins in deep contemplation of the proposition that the U.S. government can write off its national debt — by minting trillion dollar platinum coins. Let me offer another metal: fool’s gold.
Minting trillion dollar coins to pay off debt was discussed on the American Enterprise Institute’s blog by the scary smart Jim Pethokoukis, who incredulously dismissed it (even as the infantile notion is being debated with bated breath all along the beltway cocktail circuit).
Printing a few shiny coins with the president’s smiling faces on them and calling our debts settled would not only be wrong, it would be a prelude to inflation, since those who hold our debt are not likely to take such promises to pay as seriously. The dollar would suffer, even if you took these ‘Obama coins’ out of circulation and framed them up in the Lincoln bedroom for the president to admire.
Treasury holders would offload their bonds, which are only as good as governments’ word. And given that there have been 250 sovereign defaults since 1800, that word has not been very good when it comes to paying back debt. Ultimately, refusing to pay off debt in good faith is a form of deception and an abdication of responsibility.
Money, after all, is debt — but debt is not always money. Whether or not we printed such coins, someone would have to pay for the debt by the sweat of their labor, the only question is who. The issue of debt is thus a moral one; and the matter of who pays for whom in reality — in life and labor, not in coinage — is what the debt debate is about. Should our children pay our debts, because we shirked our responsibilities?
Throughout human history, debt has been used as a means of enslaving and controlling people. And from time to time, democratic movements have arisen seeking to erase all the debts and start over. Whether the Jews with their Jubilee, the ancient Greeks under Solon the lawgiver, or the Mesopotamians with their priest-kings’ power to recreate society, people have always sought a way to escape from under the onerous burden of debt.
This includes governments, which have a tendency to debauch their currencies; specifically through the manipulation of metals in coinage, but also by using paper money. As Adam Smith mentions in The Wealth of Nations:
By means of those operations the princes and sovereign states which performed them were enabled, in appearance, to pay their debts and to fulfil their engagements with a smaller quantity of silver than would otherwise have been requisite. It was indeed in appearance only; for their creditors were really defrauded of a part of what was due to them. All other debtors in the state were allowed the same privilege, and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old.
Such operations, therefore, have always proved favourable to the debtor, and ruinous to the creditor, and have sometimes produced a greater and more universal revolution in the fortunes of private persons, than could have been occasioned by a very great public calamity.
The way individualists see it, people themselves should be responsible for their debts, and that viewpoint is extended to governance. The way so-called “progressives” see it, we should all “serve” one another, even if at implied and actual gunpoint through the government’s decree of debt, taxation and redistribution.
If democracy is so grand, why doesn’t the government send us all printing presses, so we can monetize our own debts? You know, in the name of equality? We can call it “democratizing the debt.” I can print off my credit card debt, my mortgage, my doctor bills, student loans — sky’s the limit! It’s not like money actually represents anything much, just other people’s property or labor.
Those who prize liberty each believe we should be responsible in order not to burden society; and by implication, that government should be responsible in order not to burden us and our children. That is why the national debt needs to be paid down in real money — for moral reasons, not for reasons cooked up by the green eyeshade set or by superstitious goldbugs.
Follow Kyle Becker on Twitter @rogue1776