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  • Michael N.

US Debt Ceiling

Is printing more money the solution?

The US government is in 31.46 trillion Dollars of debt. To put that in perspective, that is ten times the debt the UK has or the net worth of 175 Elon Musks. The US president signs a budget every year on how much money will be spent. This amount includes social care, the military budget, and everything else the government spends money on.

The US government is in 31.46 trillion Dollars of debt which it has from bonds. A bond is a government document you can buy for -let's say- 100$. On the document, it says that the US Government owes you 100$ + interest, depending on how long ago you lent them your money. Only 30% of all bond owners are foreign investors such as China, Japan, Brazil or Singapore; 33% is owned by banks, regular people and institutions and the federal reserve owns 12%. The federal reserve is like the Bank of England in the UK: it is responsible for printing money, evaluating economic risks and keeping the economy stable.

Most surprisingly, the US government owes itself 27% of all bonds. Now for those of you scratching your heads, thinking I wrote something wrong on accident, this is true. In fact, it is common amongst countries in debt. But national agencies like social security or Medicare own the government bonds and use the interest from these bonds to fund themselves.

The U.S. hits these ‘‘Debt Ceilings'' often. This is just a metaphor meaning that there is a certain amount of debt the US government can have. The debt ceiling is often put higher and higher so that the US Dollar isn’t damaged and the U.S. Economy doesn’t fall. Especially after the war in the Ukraine, inflation and covid-19, the last thing Joe Biden wants if the US Dollar and Economy to fall.

Currently, the republicans hold a majority in the House of Congress which has more power over the debt ceiling. McCarthy -the Chairman in the House of Congress- is now in power and he is looking for a work-around, a term for a way to avoid getting more debt. For this there are two solutions. The first one is cutting costs or raising taxes and not having more debt. This would halt investment in America and damage the US Dollar, bringing down cost of living. This could take a while to recover from and would make middle- to lower-class families cut costs. Now this may sound bad but on the other hand, it would lower the probability of an economic crisis and more debt. The second work-around option is “making a trillion-dollar coin”. This is an idea that has been gaining popularity with every debt ceiling since 2011.

In 1997 a law was found by a group of scholars, which allows the treasury secretary to mint platinum coins. An idea to escape the debt ceiling crisis is to mint multiple, very high value platinum coins and give it to the US government to escape debt. Currently, all US Dollars in notes and coins in circulation add up to roughly 8.28 trillion Dollars. Minting another trillion would increase the number of US Dollars by 8.28%. This would cause inflation. Generally, the idea of printing more money is done by desperate governments during economic crisis's instance. Venezuela printed more money to give to lower class people but this only caused a loop of more and more inflation. One dollar is equal to 2.5 million Venezuelan BolÍvares. In general, the idea of a trillion-dollar coin is very risky and is unlikely to happen. No solution is obviously better than the other option.


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