Joe Weisenthal — Why The Fight Over The $1 Trillion Coin Is The Most Important Fiscal Policy Debate You'll Ever See In Your Life

But contrary to all these people who say that this is a childish, non-adult proposal put forth by impish trolls, it's actually quite the opposite. It may be the most important fiscal policy debate you'll ever seen in your lifetime, because it gets right to the nature of what is money.

This question is central to any discussion about a country's monetary and fiscal policy, and yet it's almost never discussed, and virtually nobody understands it.

Almost everyone talking about fiscal policy imagines money to be a commodity of sorts that we can "run out" of if we don't spend it carefully. In this sense, although we've long gotten rid of the gold standard, we're still shackled with a gold standard mentality, where we think of money as a scarce natural resource that we need to husband carefully, lest one day the bond vigilantes show up at our door, causing us to go broke.

The critics of #MintTheCoin are very forthright in attacking the proposal from this view....

But these complaints actually get at the crux of the matter. Creating money is exactly what government does. What's absurd for a private business is not absurd for the government.
As John Maynard Keynes simply put it a long time ago: "Money is the creation of the state."

hat the state creates the money we use is actually known to just about everyone, but people have a hard time making the key leap, which is that once the state is in the business of creating money, then the old gold standard notions of monetary scarcity don't apply in the same way.

 You can see this flawed thinking all the time.

It's because people think that money is scarce that they think that gigantic government debts and deficits will lead to surging interest rates, because our lenders worry that we might not be good for it.

And yet, as this chart shows, as the national debt has surged (red line) the interest that the government pays on the debt (blue line) has gone down....

In fact, as the chart shows, the explosion of the money supply (red line) has coincided with muted inflation (blue line)....

This is why the coin debate is so crucial. Whereas most fiscal policy debates talk about what we're going to do with our money, or why we need to be careful not to run out, the coin gets right to the heart of the matter.... 

Remember, money is a fiction. Real wealth is capital assets, our infrastructure, our cars, our houses, and most importantly the potential human ingenuity and cooperation. Money is just something that the government creates to facilitate the trade in all of those things.

The #MintTheCoin debate, more than any other fiscal debate we can remember, gets right to this matter.

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Why The Fight Over The $1 Trillion Coin Is The Most Important Fiscal Policy Debate You'll Ever See In Your Life
Joe Weisenthal
(h/t Kevin Fathi via email)