The US government could be forced to print a $1 trillion coin soon.
Democrats and Republicans are yet to reach an agreement on a debt ceiling.
Analysts expect that the two sides will ultimately reach an agreement.
The US government is at a crossroads as divisions in Congress put the country at an elevated risk of a default. In a recent statement, Janet Yellen, the Treasury Secretary warned that the American government could default in June if Democrats and Republicans fail to reach a deal. This is one of the top reasons why gold price has now soared to an all-time high.
The trillion-dollar coin
It is still unclear whether the US will default on its obligations if Congress fails to raise the debt ceiling. I believe that the situation will not get to that point because of its impact to the American economy.
Analysts believe that a default will lead to higher unemployment and possibly the collapse of the economy as we know it.
Therefore, the two sides will likely reach an agreement in the coming days. Signs of potential compromises will happen when Biden will meet Kevin McCarthy on Monday.
There are several options if the two sides fail to raise the debt limit. A likely solution will be to print a trillion dollar coin. The concept of that coin was mooted in 2011 when the US faced another debt ceiling issue.
It would allow the Mint to come up with one platinum coin valued at $1 trillion. These funds would then be distributed to the Federal Reserve, which would then deposit it to the National Treasury. By doing that, the Treasury would then elimiate part of the national debt and postpone the need for raising the debt ceiling. A professor at Willamette University said:
“At this point, if any of the other solutions, the so-called more serious solutions would work, then they would’ve been used by now. But they keep not actually being strong enough. The coin’s the only one that’s strong enough.”
Bullish for Bitcoin, Solana, Cardano
Such a move would be positive for Bitcoin, which is seen as a digital version of gold. Unlike fiat currencies, Bitcoin cannot be printed because its supply of 21 million coins cannot be adjusted. If Bitcoin rises, we could now see altcoins like Solana, Cardano, and Tron rise because of the close correlation that exists.
The reality is that the American government is at risk of major changes going forward. For one, the total public debt has been in a strong upward trend in the past few years. It has jumped from just $320 million in 1970 to over $31.4 trillion today.
And the situation will continue worsening because of the large budget deficits. By 2030, analysts expect that debt will rise to over $44 billion. The CBO believes that the budget deficit will hit 5.9% of GDP by 2040.
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