Donald Trump's re-election has really shaken me. And my fears for the future have been further increased by his recent picks for his team. For example, he has just selected Chris Wright, the head of fracking company Liberty Energy and a skeptic of mainstream climate science, to lead the Department of Energy and to serve on a new National Energy Council. What better way to demonstrate during the Cop29 meeting in Azerbaijan that he couldn't care less about destroying our planet.
However, I am still trying to find reasons for optimism.
One of the possible advantages of having someone like Trump at the Whitehouse is that he could really shake things up. His support for cryptocurrencies is a good example. I'm not a fan of crypocurrencies, which I see primarily as a way for gamblers to get rich and for criminals to avoid investigation. But cryptocurrencies like bitcoin and dogecoin are interesting because they are a direct threat to conventional banks. If everyone switched to cryptocurrency trading, we wouldn't even need dollars and euros at all. And no need for conventional banks.
Trump has also made it clear that he wants to break the power of the Federal Reserve. He wants to fire the head of the Fed, Jerome Pöwell who is refusing to go. In case you didn't know, the Fed is not a wing of government, but is actually a consortium of private commercial banks. And since Trump wants absolute power, the existence of the Fed is a problem for him.
Trump's desire to pick a fight with the Fed opens up a fascinating possibility that I want to explore here.
The first point is that the level of US government debt has gone through the roof, as can be seen in this graph taken from the treasury's own site.
The latest figure can be found on the US Treasury's "Debt to the penny" website, updated daily, where is says that on the14th November 2024 it stood at $35,965,533,024,604.05 - nearly $36 trillion.
Paying the interest on that debt is currently costing US taxpayers $1.12 trillion a year, as you can see in this graph from the Federal Reserve Bank of St Louis.
You can see that roughly one third of the debt is held by foreigners, led by Japan and China. Of the remaining two thirds, a very large slice (27%) is owned directly by the Federal Reserve System. A surprisingly small amount (just over $1 trillion) is held by pension funds.
It is here that it is worth mentioning an idea that has been floated on numerous occasions since 2011. It is the idea that the US Treasury could mint some extremely high value Platinum coins, that could be deposited with the Federal Reserve to cancel out the $5 trillion debt. There's a remarkably complete presentation of the Trillion Dollar Coin idea on Wikipedia that I can recommend.
Ellen Brown published a fascinating piece in 2013 entitled "The Democratization of Money: The trillion dollar coin, Joke or Game Changer?" and I gave a plug to the idea on my blog way back. It also got support from Nobel Prizewinner Paul Krugman in a piece in the New York Times.
At the time, the only reason it was not used was that apparently the Fed objected - not very surprising really. And the idea was again rejected in 2013 by the Treasury Secretary, Janet Yellen. Back in 2021 she had said "I wouldn't be supportive of the trillion-dollar coin. I think it's a gimmick. I think it jeopardizes the independence of the Federal Reserve,"
But maybe with a Trump appointed Treasury Secretary, the Fed would have no choice. The Treasury would deposit $1 trillion coind at the Fed, who of course would not be able to spend them - I doubt they could find anyone who could find the change for a 1 trillion dollar coin! But it would mean that the hundreds of billions of interest payments would be no longer due.
If the Fed could be forced to take the trillion dollar coin, the investors who currently hold US government bonds could hand their bonds back to the Federal Reserve, and every time the Fed's holding reached $1 trillion, another coin could be minted.
Trump would be able to claim that he was saving US taxpayers a fortune.
Does it sound too good to be true? Maybe not.
Comments please!
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