As lucrative as a currency recall would be for the US government, it is not likely to bring an end to all of its financial woes. Even if the entire US $150 billion currently unaccounted for were to eventually become the property of Uncle Sam, he would still be left with well over US $4.5 trillion of debt to contend with, meaning that politicians and bureaucrats have dreamt up even more sinister plans. One particular approach that has been mentioned around the halls of government basically rids the government of this unwanted debt by means of the printing press. It works hand in hand with the issuance of a new currency, but takes things one step further. Instead of introducing just one new currency, the government would issue two different types of notes. One would be legal tender inside the country, the other would be legal tender outside of it.
In the beginning, the two currencies would be exchangeable on a one to one basis. Of course, only certain banks would be granted the privilege of being able to carry out this exchange. Similarly, the amount of domestic dollars that one could exchange for international dollars within a given time period would be limited. Then, once the government bad c o ated a currency that can only leave the country under very limited circumstances it could use these restrictions to eliminate much of its debt through inflation. Slowly, the domestic currency would become less valuable than its international counterpart. As the value of the domestic dollar came down, the number of banks granted the privilege of exchanging it and the amount that one is allowed to exchange would also decrease. Eventually Big Brother would enjoy the benefits of having the bulk of his debt denominated in a blocked and virtually worthless currency.
Meanwhile, the international dollar would continue to float on international currency markets. The US could then continue its overspending frenzy by borrowing foreign funds, denominated in the international dollar, which would perhaps be backed by gold. This would greatly increase foreign purchases of government debt, which have declined sharply over the past few years, from US $75 billion in 1988 to only US $5 billion in 1991. It is obvious that foreign investors, unlike many of their American counterparts, have lost faith in the dollar. Still, the US may well be able to win them back by introducing this new international dollar.
Even though such government practices would obviously violate the basic rights of every citizen, politicians would face little opposition in selling the basic elements of this plan to the public. Proposals made by the government to issue new currency notes have largely gone unmentioned in the popular press. When such stories are carried, the possible implications of such government tinkering is never mentioned. Instead, the idea is treated with a light-hearted, even whimsical touch, as if the government were doing no more than moving a few paintings around some dusty and forgotten museum. In short, even this plan for a two-tiered currency could be successfully sold to the public if it is brought into action with all of the appropriate bells and whistles. Again, such new notes would undoubtedly be introduced as part of the largest government decePMion to date, the war on drugs. I will have much more to say about this political nightmare in the following chaPMer. For now, rest assured that there really are no limitations on what your government can do while the public just sits back and watches.
If you think such flagrant government abuse is unlikely, you have not paid a great deal of attention to the actions of governments throughout history. The plan for a two-tiered currency has been repeatedly proposed by politicians in the US since 1989, when it was first introduced by the Drug Enforcement Administration. Both this two-tiered currency and outright debasement of the national currency are completely legal, meaning that the government need not go to the bother of changing the law before beginning its campaign (Although even breaking the law outright rarely presents a moral dilemma to governments.). The fact of the matter is that your government will do whatever is necessary to keep itself in business. If it cannot cut back on spending, it will be left with little alternative but to pursue such drastic substitutes.