Tag Archives: Barack Obama
Which Central Bank Wants to Be a Trillionaire? Twelve-Zero Coin Signals US Economy’s Stretch into Infinity
For many years, the subject of the national debt of the United States had more percipient commentators wonder – sometimes even aloud – whether they actually know anything about anything. How can what is nominally the world’s most powerful country run an exponentially-increasing deficit that is public knowledge – indeed, prominently displayed on a dedicated clock (which, ironically, has run out of digits) in New York City’s Times Square – and yet not experience a proportionate decrease in domains such as international prestige or perceived credit-worthiness?
Recent years, however, have seen the formerly invincible one-time ‘hyperpower’ begin to resemble an all-too-human entity: the summer of 2011 saw the United States flirt with outright default, with China’s Xinhua news agency giving the US government a very public dressing-down; towards the end of 2012, the term ‘fiscal cliff’ entered the global public’s consciousness in an unforgettable manner. Now, with the American administration once again engaged in the governmental equivalent of rummaging round the back of the sofa for a bit of spare change – a fiscal ‘Valentine’s Day Massacre’ looks to be on the cards – a proposal has been floated for the US Treasury to create a trillion dollar (US$1,000,000,000,000.00) platinum coin and deposit it with the Federal Reserve in exchange for the same value of loans.
Technically, the coin would be issued as a commemorative one, a process permitted by a hitherto obscure 1997 law – and therefore an ingenious stratagem to circumvent the need for the United States Congress to agree to an additional trillion dollars of debt. But while a wonderfully convenient method for the executive to get their paws on a pile of ‘free’ cash, we at Mediolana have some doubts as to whether this is a viable path:
1. Democracy? The idea that the US Treasury could bypass the elected Congress in such a brazen fashion does nothing to augment already-tarnished American claims to be a democratic exemplar.
2. A Bad Impression. Creating a trillion dollars out of thin air by coin seignorage is, to put it mildly, on the desperate side; that it is being seriously contemplated gives the watching world the perception of a country which is running out of viable ideas faster than most would wish to accept.
3. A Concerning Pattern. The United States seems to be lurching from one financing crisis to another with increasing frequency, with not even close to one quarter having passed since the sighting of the ‘fiscal cliff’. How its creditors react to this trend may well define the present epoch.
Under normal circumstances, one might have expected this blog – which is not totally unconcerned with current affairs, particularly viewed through the lenses of business and education – to have devoted a few acres of coverage to a presidential election in the world’s number one economy. Yet try as we might, we have been unable to shrug off the global apathy enshrouding the outcome of the 57th quadrennial election in the history of the United States of America. It has proven impossible for us – like so many others across pretty much the entire socio-political spectrum – to be even remotely inspired by this contest.
But why exactly is this? Why has this stand-off between a Harvard-educated lawyer and the most prominent member of The Church of Jesus Christ of Latter-day Saints almost entirely failed to prompt anything other from the global public – not to mention many Americans – than a half-hearted shrug? Beyond the more obvious reasons that are frequently cited – disappointment with the incumbent’s inability to implement his programme, the mediocrity of his challenger – we at Mediolana have been contemplating this conundrum and have come up with the following, tentative answer:
1. Social Distance. Democrat or Republican, blue or red, the American people as a whole are at best an annexe and at worst an irrelevance to the entire proceedings. The United States economy is now configured in such a way that not even all of the 1% seem to be benefitting from the limited ‘paper’ recovery; with lobbying increasingly defining US politics, the chances of any actual democracy breaking out are ostensibly receding by the day.
2. Astronomical Debt. The United States has passed the stage when its largest creditor – the People’s Republic of China – is publicly lecturing it on the merits of good housekeeping via its official news agency, Xinhua. No, we have reached a quiet different point, a point where the world’s most energy-inefficient major economy outside of a few tiny Middle Eastern petro-monarchies is now resigned to capitulation to monetarist fundamentalism, with the rest of the international community – not least the Asian states which are keeping the country afloat – working out how on Earth they are going to protect their positions in the event of a massive dollar devaluation.
3. Must There Be Another Way? With no small measure of irony, the 18th National Congress of the Communist Party of China kicks off in two days’ time. But there is not yet a consensus on the Beijing Consensus: while China has indubitably eclipsed its erstwhile ‘hyperpower’ rival across most macroeconomic indices, its own gargantuan levels of elite corruption and other structural deficiencies are hobbling its ability to be seen as a stable successor to the United States both in terms of planetary leadership and being an economic touchstone.