Green Room

Deep thoughts: Is the platinum coin scheme even legal?

posted at 3:26 pm on January 10, 2013 by

Virtually everyone seems to agree that minting the fiscal equivalent of magic beans is patently insane and embarrassing — excepting a klatch of hard Lefties, which may or may not include the White House, of course — but would the idea amount to a constitutional or statutory violation?  Attorney Gabriel Malor doesn’t think so, even though he hates the concept as much as the next guy (via Ace of Spades):

Congress has also set on the Secretary a guiding principle for the minting of all coins: “The Secretary of the Treasury…shall mint and issue coins…in amounts the Secretary decides are necessary to meet the needs of the United States.” Note the word “shall” in the preceding mandate. Congress has also set on the Secretary some discretionary authority, namely he may borrow on the credit of the United States, but not more than the debt ceiling. And he is obligated to transfer to federal agency sub-accounts amounts appropriated by Congress in its occasional appropriations bills. [John] Carney thinks this isn’t enough of an “intelligible principle” to guide the Secretary’s discretion when it comes to the platinum coin. I am here to tell you that if it went to the Supreme Court, the justices would say this was more than enough (with Justice Thomas dissenting). The Supreme Court has upheld broad grants of generalized authority to executive agencies for sixty years now and this is no different. See, for example, the FDA, the IRS, and HHS…Congress very specifically stated in the statute that bullion gold and silvercoins must be valued at the market value of the metal plus costs. That is extensively prescribed by statute. Congress placed no similar restriction on the value of a bullion platinum coin and, in fact, Congress dropped from the proposed statute such a provision when it considered it in 1995. Unlike for gold and silver bullion coins, Congress left the value of a bullion platinum coin up to the Secretary…In short, the platinum coin trick an unnecessary idea and a bad one, but it is not, as some have argued, unconstitutional or illegal.

Malor links to an especially colorful rant from the typically genteel Megan McArdle, a portion of which made the cut for AP’s QOTD post on Tuesday.  It’s really worth a full read.  On CNBC last night, Larry Kudlow argued that the Super Coin is not only a “third world, banana republic idea,” but illegal on its face.  I dissented, making the case “in favor” of the coin, tongue planted firmly in cheek:

Just imagine the investments in our children’s future™ we could make with that surplus, guys.  Seventeen special pieces of platinum is all it would take.  If we’re going to totally jump the shark, why not go for the gold platinum, liberals?  And before you fill up the comments section with corrections, yes, I realize that the coin(s) under discussion wouldn’t actually go into circulation. They would merely act as a temporary interest-free loan that would further delay the debt limit reckoning.  That money would have to be borrowed or otherwise presented eventually.  The key point here is that S&P downgraded our AAA credit rating for the first time in US history despite Washington’s compromise and subsequent debt limit increase.  The ratings agency’s stated rationale was an indictment of our fundamental unseriousness of purpose and systemic political dysfunction on the matter of genuinely addressing the underlying problem.  Minting trillion dollar coins would drag that unseriousness to farcical new lows.

UPDATE – See Tom Maguire’s piece from the headlines, which advances the “it’s illegal” case.  Malor addresses some of Maguire’s points in his analysis.

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The Supreme Court has upheld broad grants of generalized authority to executive agencies for sixty years now and this is no different.

Which is the real problem. Not the S.Ct. rulings, but Congress’s broad grants of power to executive agencies.

rbj on January 10, 2013 at 3:43 PM

I think they should instead go with a plutonium coin. Talk about money burning a hole in your pocket. (h/t Larry Niven)

apostic on January 10, 2013 at 3:48 PM

The coin is entirely legal – as is Obamacare, Fast and Furious, and the various kinetic actions we are undertaking in support of the brothers.

That question is racist.

CorporatePiggy on January 10, 2013 at 4:14 PM

I saw the writeup by Malor earlier today and people should read the whole thing. It’s an exhaustive and thoughtful discussion of the legal aspects of the issue.

That said, I think this coin idea is totally insane and I cannot believe we are actually discussing this still, to the point now where we’re seeing at least one story a day. Is this really going happen?!

Doomberg on January 10, 2013 at 4:27 PM

All the world’s problems could be solved if we just sat down and had a “rational conversation” about it. What a pathetic, shameful, liar she is.

joekenha on January 10, 2013 at 4:39 PM

I’ve read several lawblog posts, so I’m definitely an expert :) It appears that in order for a coin to be legal tender according to the various proof-set laws, it has to be redeemed using other coins or currency, and the various definitions of “bullion coins” (which is the law they’re referencing) appear to require that the coin’s physical contents come at least somewhat close to the face value.

Other than minting a “coin” out of a normal bullion metal like gold or platinum that would weigh thousands of tons, about the only substance that’s expensive enough is antimatter, which “costs” about $25 billion per gram. If the theoretical antimatter coin contained about two ounces of antimatter (and the relatively minor cost of a containment vessel to keep it from blowing up everything around it), you’d just about have a trillion-dollar coin.

Even though there’s something poetic about the coin itself being the deadliest WMD ever made, they probably shouldn’t try…

foobarista on January 11, 2013 at 4:40 AM

foobarista on January 11, 2013 at 4:40 AM

The face value requirement only applies to gold and silver bullion, and is more a ceiling than a floor. A $2000 coin can have a $10 face value, but a $10 coin cannot have a $2000 dollar face value. Forgot which Zerohedge link it was but we really could end up with Zimbabwe coins in short order.

abobo on January 11, 2013 at 4:45 PM