Trillion-dollar coin will hyperinflate US currency

Although the U.S. government “averted” the fiscal cliff, a new proposal has risen that could send us maybe not off the fiscal cliff, but into hyperinflation and total destruction of the U.S. dollar. Paul Krugman, and others who have power or influence, but still don’t understand economics, have proposed the minting of a trillion-dollar coin.

Minting a $1 trillion coin is exactly what it seems — not actually worth a trillion dollars. The Federal Reserve, which prints money for the U.S. government, can put anything it wants on a coin, but it doesn’t mean the coin carries that value intrinsically.

Any U.S. bill or coin in circulation in itself isn’t worth the denomination it says. We agree that a $20 bill is worth $20. The paper isn’t worth $20, though. When it comes to a trillion-dollar coin, one small piece of silver, nickel, platinum or whatever metal they make it from will not really be worth one trillion dollars.

Money without the backing of a physical metal, such as gold or silver, is called “fiat money.” Fiat money is worthless. Fiat money only survives when a government allows for one entity to mint the currency, criminalizes counterfeiting and remains without a backing. Sound familiar? The Federal Reserve mints currency while the U.S. government does not allow anything or anyone else to mint money or back up the money by gold or silver.  
The United States, throughout most of this country’s history, has had gold or silver behind the dollar to ensure the dollar remains valuable. In 1971, however, President Nixon removed the last of the dollar’s peg to gold and we’ve had fiat money ever since.  
Now, with the Federal Reserve possibly minting a trillion-dollar coin, the economy already sits gingerly on the verge of collapse. If the Federal Reserve does mint the coin, get ready for hyperinflation.  
Hyperinflation will yield huge increases in prices. If gas seems expensive now, just wait until it’s  four or five times as much. I don’t know exactly where gas prices will end up, maybe a lot higher, or a little higher. Regardless, prices of all products will go up, and most likely dramatically.

Post World War I Germany and Zimbabwe in the early 2000s are some of the most widely used examples. Both governments printed huge sums of money in an effort to pay down debt, yet both saw prices jump to huge levels.  
Zimbabwe even printed bills with denominations of $10 million, $100 million and $100 billion. Sounds great to have, a bill worth $100 billion. However, if a bill carries that much “worth,” it won’t buy much. If a loaf of bread costs a few dollars, would anyone pay with a 100 billion dollar bill? Of course not. No store would have enough change on hand. Bills of huge denominations are only printed because things cost so much.  
Beyond the simple examples of Germany and Zimbabwe, which had respective hyperinflation crises, logic tells us prices would rise with an increased minting production. When more money is injected into the economy, more money exists to buy the same amount of goods. Individual dollars are worth less, which leads prices to climb.  
Although the Federal Reserve has not minted the $1 trillion coin, it currently puts $85 billion more per month into the economy. Quantitative easing 3 (QE3) and QE4, created by the Federal Reserve in 2012, make up this $85 billion. Quantitative easing is just another governmental attempt at stimulating the economy.

The Federal Reserve hasn’t gotten us to hyperinflation yet, but it’s sure on the way, especially if the $1 trillion coin comes in an effort to pay off the debt.  
The only way to really get away from any dollar crises is to end the Federal Reserve. The United States continues a monetary policy that hasn’t worked in other countries, and won’t work here or in any other situation.

Central banking doesn’t work, and we, as citizens, shouldn’t rely on it. Granted, citizens don’t decide this policy, a few people in Washington D.C. do. We need to stop relying on the government. We need to either put people in office that understand economics and reality, or better, make the changes ourselves by learning more, rejecting the Federal Reserve and working to end it.  
The $1 trillion coin might be the end of the U.S. dollar, but other parts of the country have led us to this point as well. We need to stop the Federal Reserve, and the U.S. government, before it’s too late.  

Drew Pells is a senior in business administration. The opinions expressed in his columns do not necessarily represent those of The Daily Barometer staff. Pells can be reached at forum@dailybarometer.com.