There has been a lot in the news about the US’ ‘fiscal cliff’, which was only narrowly averted by a cross-Congress deal last week. But apparently the US Treasury is ‘seriously’ considering producing a coin that can be deposited in its own account, which would wipe $1 trillion off the national debt at a stroke.
Theoretically, the Treasury is capable of producing physical money and assigning whatever value it chooses to the new coin.
The rumour has come from financial analyst Cullen Roche, founder of Orcam Financial Group and a blogger for Pragmatic Capitalism. He told the BBC’s Today programme: ‘I know it’s been spoken about at the White House and a number of prominent people, including congressmen, are talking about it.’
The Treasury has allegedly already been moving cash around in order to pay the government's bills after the country hit its debt limit (which stands at $16 trillion) on New Year’s Eve.
The deal reached to avert a fiscal cliff – where tax rises and budget cuts are introduced automatically to protect the country from complete financial meltdown – gives US politicians just eight weeks to agree to raise the debt limit. If they do not manage this, the country will default on its debts. And we could really do without the world’s largest economy taking another dive.
Roche added: ‘The idea of the US willingly defaulting on debt is beyond crazy. We started kicking the idea around a year ago and it was really a joke, and the fact it has become something sort of serious, well, it’s a sad state of affairs that it has become so dysfunctional in Congress that this is something we having to resort to.’
It sounds to us a little like Roche is doing his best to say something that will grab headlines and promote his firm, but if the people at the top are genuinely considering it, then all those baked-bean hoarding end-of-the-worlders might have been onto something after all...