or: Do We Believe in Magic…
or: One Coin to Rule Them All…
or: I guess I’d better post this before midnight tonight
or: Looks like there’s a deal so what you’re about to read is pointless. Read it anyway.
So it’s been a while (again) but I’ve been urged via the ol’ social network site to post something about the shutdown. But I’d rather not. The shutdown is no more than what it was when Clinton was in office – a temper tantrum thrown by grown men and women who haven’t gotten their way. (Though let’s face it; it’s mostly men – this is the Republican party we’re talking about.) What I’m saying is, temper tantrums don’t phase me – I’ve got a toddler. What does have my wheels turnin’ these days is the possibility (likelihood?) of default. Not so much because it’s going to send the global financial system into a tailspin (though there’s that too) but because it brings into focus my favorite thing about money: it’s worthless. Yep. Worthless. All of it. The euro, the franc, the pound, the dollar bill and even gold are all worthless.
Well… worthless with one rather large caveat.
If we agree something has value then it has value. But until then it’s just a piece of paper or some shiny metal. Big deal. Now, I’d go so far as to say the whole notion of value is a farce but I’m not a sociopath. Value exists in and emerges from human interaction – be it with each other or the material world. Trust bears value by strengthening bonds between people. Creativity bears value when it consoles and inspires the creator and consumer of art. And while value does not exist inherently in any material object, it does begin to take on a life of its own once embodied in our legal and cultural infrastructure. Money of course is the most tangible and universally accepted expression of the intangible life of value. And I suspect somewhere in its bodiless nature is the real reason we can’t just mint the damn coin.
Once a certain value has been assumed for long enough it takes on a very – for lack of a better term – real realness. And we believe in it much the same way that religious believers hold true to religious tenets. That is, our behavior reflects our assumptions about the value of currency the same way believers’ behavior reflects the assumptions built in to their faith. It’s weird to say but when thought of in this way, the entire global financial system rests on faith. Sure, that faith rests upon a particular Treasury bill that can of course be backed up by the world’s largest economy and and most powerful military. (The same can be said of the Catholic Church seven or eight-hundred years ago). But if everyone stopped believing in it, you can imagine the financial shitstorm that would follow.
Or would it?
Thanks to the current make up of the House of Representatives we might find out sooner than later. But again, that’s not what I want to talk about.
So back to the coin… err… I mean The Coin.
The Treasury has the legal authority to mint a platinum gold coin for whatever value it chooses. So legally(?) the treasury could mint a trillion dollar coin, deposit it with the Federal Reserve, and fund the government. This would allow the US to meet its financial obligations and render the House’s authority over the debt ceiling moot. But it would also state rather clearly that currency of any sort is only worth what those with the power to do so determine. And while we already know to be the case, like many other cultural fictions, the idea that paper given a certain color and made of particular fiber holds some inherent value is pervasive and not easily dismissed – which is part of its strength as currency. It’s value is simply assumed. Markets ebb and flow and sometimes inflate and crash. We go to the grocery store and buy what we need. And then we check our accounts. Sometimes we’re up. Sometimes we’re down. And while the value of a certain currency may go up or down relative to other currencies, we never question that it holds value of some sort.
But to say that a belief is pervasive is not the same as saying it is essential. So I guess what I’m asking is, “Can the global economy still function if backed up by one magic coin versus a deluge of magic treasury bills?”. Would we be able to believe in the “full faith and credit of the United States” if it rests on a single piece of shiny metal?
Sure, the trillion dollar coin seems like a slight of hand but, then again, isn’t all currency? And if we all come to terms with the idea that money is little more than a tangible abstraction of real value, why wouldn’t we continue to act in good faith (pun intended) on the debts of exchange in which we’ve already engaged? Sure, as demonstrated by the GOP over the last few years (decades?) some of us would not act in good faith. Could be that they’re simply not capable. But let me draw a parallel between the high priests of finance and the high priest of… well, I guess he’s just the high priest. It might be be a bit of a stretch but that’s what I do here at the ol’ JobSite Liberal blog.
Not too long ago Pope Francis gave an interview in which he called into question the idea of absolute truth saying, “I would not speak, not even for a believer, of ‘absolute’ truth, in the sense of absolute as disconnected, lacking any relationship”. In the same interview, he stated that following one’s conscience is of greater import than belonging to a particular faith, even if doing so leads a person towards atheism or agnosticism. Pretty sophisticated thinking for the Catholic Church I’d say. What he’s essentially saying is that he trusts people to act in good faith in relation to one another without the Church’s guidance. But he’s also saying your beliefs don’t determine what happens. Now suppose that this line of thinking about absolutes is applied to the almighty dolla dolla bill instead of uh, the Almighty.
Regardless of our ability to believe that a value of a trillion dollars can be summed up in one platinum coin, if there is a legal framework for it, and more importantly, if there are a variety of institutions able to continue the circulation of capital, then POOF, the global economy is held up by one magic coin. Yes, the coin is symbolic. But the legal and cultural infrastructure that support it are not. If only the masters of the economic universe were as savvy and sophisticated as the leader of the Catholic Church.