The public debate is starting to become permanently peculiar. Recently Paul Krugman decided to support the idea of minting a trillion dollar platinum coin, by saying that Barack Obama:
will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious…
It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years. Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.’
While I don’t think Krugman is wrong in this particular argument if you look at the current situation only, I do believe it may be more useful to look at the discussion from the point of view of long-term economic policies and the economic theories themselves. In other words I see Krugman’s point that while the right wing refuses to acknowledge economic reality the left wing should not bother with principles, and only with salvaging this reality, but I also see the point made by Jon Stewart (which, funnily enough, irritated Krugman) that the whole idea is appallingly stupid.
Felix Salmon, in his analysis of the situation, says that from an economic point of view there is no reason against minting the coin. He is indeed right that, despite this technically being ‘printing money,’ if the printed money is not injected into circulation, it would not lead to inflation (incidentally the relationship between mindless money creation, work productivity and inflation is a topic thoroughly confusing for most economists and policymakers). Additionally, this being the dollar it would probably not shake the faith of the people all over the world either, at least not in any serious manner, therefore not causing any foreign exchange problems. So in summary there is indeed no economic reason not to do it, given the current economic system. But Salmon is, similarly to Krugman, looking at the issue from the short-term, naive perspective.
If you take a step back and look at the whole situation again then it becomes clear that a political as well as an economic system where one even has to consider gimmicks such as minting a trillion dollars in order to hide it in a pocket is not a healthy system, as pointed out by The Economist, one of the few pieces to get close to the real issue. First of all it shows once again how the political scene is poisoned by the insistence of the right wing on lunacy, especially when it comes to the economic issues, but also on the lack of any insistence on anything sane on the left side, including the President (there may be some good signs lately). The discussion is seriously flawed, mostly based on big ideas behind the right and the left, and not based on the issues at hand (No-Tax Pledge vs. the current fiscal needs). Mary Parker Follett, a pioneer in management consulting and organizational theory, presented what she called constructive conflict resolution, by which she meant a conflict whereby the opposing sides dismantle the main problem into smaller problems, which don’t have as much ideological charge as the big problems, and can therefore be fixed with less mindless fighting. Yet that’s precisely what the politicians can’t do today – they are not able to look at single, current issues and see what is the best decision for all of them, one by one (keeping an eye on the big picture too, of course). In such case the ideology on both side could have been pushed aside.
But equally if not more interesting is what the situation says about the economic system, and not just the politics. If taking a small token and saying that it now has a value of a trillion dollars solves serious economic problems then the basic assumptions of the current economic system must be absurd. This all comes down to monetarism, and more generally the neoclassical economics, where money is created by Ben Bernanke clicking a few buttons on his computer, and not by any fundamental processes in the economy. The fundamental process which should create money is, arguably, work, as it is what creates value. But even if one does not agree with the fundamental role of work, creating money for no apparent reason is equally absurd regardless of whatever economic process should be the real basis. So in reality the economic system is hanging by a thread of common faith, waiting for a collapse, signs of which can be viewed in the number of crises in the last thirty years.
Pundits and journalists are seriously and not-so-seriously discussing whether a trillion dollars coin should be produced (incidentally it won’t), but none of the sides are looking at a more fundamental problem with the economy and the political system. The myopic insistence on discussing the symptoms rather than the disease cannot lead to solutions guaranteeing healthy growth in the long term. What is needed in order to stop the perpetual mix of comedy and tragedy is a sober look at the big picture of the political scene, the legal system and the tenets of the economic order. The current state of the economic system is not only exploitative but also self-destructive, which on one hand means that it will eventually change (a good thing) but on the other hand it means that the system will eventually collapse (a bad thing). Minting anything wouldn’t help, but so won’t not minting it.
This essay first appeared in The Firebrand Magazine.