By Ethan Shea

Once again, the infamous American debt ceiling is all over the news.

Last Thursday, the United States hit the $31.4 trillion debt limit. What does that mean? In brief, the debt ceiling (or limit) is the amount of money the United States government can borrow to spend on programs such as social security, paying government workers and anything else the government deems necessary. Because the United States must borrow money to afford such payments, failing to raise the debt ceiling means the government could default on its debt.

Even when the United States technically reaches the debt ceiling, there is still time to avert economic ruin. By taking “extraordinary measures,” the government can continue to pay debts for a few months even after the limit is reached.

There are plenty of ideas floating around that all claim to be solutions to this economic issue, but there is one particular plan I find both fascinating and hilarious.

Trillion-dollar coin design by DonkeyHotey

This idea is known as the trillion-dollar coin. The concept involves minting a coin worth one-trillion dollars and placing it in the Federal Reserve. This would give the United States more spending power and the ability to pay its debts.

Miraculously, because of a 1996 law, such coinage would be legal if it were minted with non-traditional metal such as platinum, as there are no value restrictions officially imposed on platinum coinage.

This concept was first introduced in 2011 during a debt ceiling crisis that lasted until the end of July, just days before the U.S. would officially default. Ever since, the trillion dollar coin has faded into obscurity and subsequently reemerged when another debt crisis looms.

Despite the appealing simplicity of the idea, there are quite a few reasons why minting a one-trillion dollar coin could be harmful. The biggest risk is rapid inflation, which is already a major issue in the United States.

But above all, minting such a coin would be an action never taken before, so despite speculation, no one truly knows what would happen. Markets generally dislike such unpredictability, so to keep investors calm, government will most likely avoid such a move.

If you’re interested in learning more about the trillion-dollar coin or economics in general, check out Falvey Library’s subject guide on economics. There, you can access economic article databases, peruse relevant statistics or even chat with Linda Hauck, Falvey’s Business Librarian.

With complimentary access to the New York Times provided by Villanova University, you can also read this in-depth article on the current debt ceiling debacle.

Ethan Shea is a second-year graduate student in the English Department and Graduate Assistant at Falvey Library.

Matthew Fagerstrom receives the Falvey Scholar Award from Jeehyun “Jee” Davis, Associate University Librarian for Collections and Stewardship.

BY SHAWN PROCTOR

This is part 4 of a 6-part series featuring the 2019 Falvey Scholars. Read more about them every Tuesday and in the upcoming issue of Mosaic: the library’s bi-annual publication.

Scholarly Stats:

Matthew Fagerstrom ’19 CLAS

Hometown: Hershey, Pa.

Faculty Mentor: Michael Curran, PhD, Assistant Professor, Economics

Research: The Financial Industry in the Era of Fiat Currency: An Empirical Approach

Other Honors: Villanova Undergraduate Research Fellows Summer Program Grant

In his own words:

Matthew’s Research:

My research project involved curating a literature review covering developments in the measurement of financial regulation, monetary policy, and the growth of the financial industry.

Following understanding the literature surrounding these topics, I conducted a Vector Autoregression (VAR) and Structural Vector Autoregression analysis using data on financial compensation, monetary policy, financial deregulation, and unionization.

Through my research I found that as the money supply in the economy increases that wages in the financial industry rose faster than wages in the rest of the economy. Between 1973 and 2015 employees in the financial industry saw their wages grow from 80 percent of averages wages to 150 percent.

Today, we assume that money is neutral. This study suggests significant non-neutralities of money due to the persistent relationship between the monetary base and financial variables. Banks need to be aware of how their policies will impact the distribution of jobs and production, and plan monetary interventions accordingly.

Matthew’s “Falvey Experience”:

The library was of immeasurable value, especially in writing the literature review. Writing the literature review involved reading and compiling sources from the cutting edge of the economics discipline, as the topic I researched has not been researched by many other scholars. I accessed almost every journal through the library, as they were restricted by “paywalls,” which made my research efficient.

Moreover, the private study spaces that populate Falvey Memorial Library were oases where my productivity could flourish.

In previous, but related research, Linda Hauck, Academic Librarian for Business and Human Resource Development, assisted me with finding data sources that I carried over into this project.

The Impact on Him:

I learned a great deal about writing literature reviews from this process, and I also learned applications of matrix algebra in the VAR setting. This experience has made me more confident about becoming an academic economist and has given me the confidence to write literature for my graduate-level political science classes.

What’s Next:

I am continuing my Villanova education next year in order to earn a master’s in political science and Government. Beyond that, I plan to pursue a pre-doctoral fellowship then a PhD.

Shawn Proctor, MFA, is communications and marketing program manager at Falvey Memorial Library.