Avoiding default: The trillion dollar platinum coin option?
While raising the US debt ceiling has not gotten as much attention — yet — as the risk of falling off the fiscal cliff, it soon will. …
So what to do? Analyst Chris Krueger at Guggenheim Securities’s Washington Research Group outlines four options. …
“4. Platinum Coin Option. This is even more theoretical than the Constitutional Option, though some argue that it is a stronger legal option. There are limits on how much paper money the U.S. can circulate and rules that govern coinage on gold, silver, and copper. BUT, the Treasury has broad discretion on coins made from platinum. The theory goes that the U.S. Mint would create a handful of trillion dollar (or more) platinum coins. The President would then order the coins deposited at the Fed, who would then put the coin (s) in the Treasury who now can pay all their bills and a default is removed from the equation. The effects on the currency market and inflation are unclear, to say the least. You would also likely trigger a wave of lawsuits similar to the Constitutional Option and create two tranches of treasuries. Both this option and the Constitutional Option are VERY low probability options”
Blowback
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Don’t give SCOAMF any ideas.
Steve Eggleston on December 5, 2012 at 5:14 PM
Speaking of defaults, S&P put Greek debt in the Selective Default category (for the second time in 2012).
Oh yeah, last I checked, it was Congress that had the authority to mint coins, not the Executive Branch. OTOH, the Constitution no longer applies.
Steve Eggleston on December 5, 2012 at 5:18 PM
More than enough CASH comes into the Treasury to service the debt. The only way the US would default on our debt is if the Executive branch intentionally caused it – which is exactly what Barky was threatening to do through all of the 2011 “negotiations”. That threat by the Precedent is un-Constitutional and should have gotten him impeached and tossed from office right then (just one of TENS of clearly un-Constitutional and impeachable acts by the Ineligible Indonesian Dog-eater).
What these fanciful money-printing options are addressing is not servicing the debt but servicing the bankrupt and un-Constitutional social spending of the feral government.
ThePrimordialOrderedPair on December 5, 2012 at 5:19 PM
Why not trillion dollar ALUMINUM coins? Or PLASTIC?
Pork-Chop on December 5, 2012 at 5:19 PM
FIFY
WeekendAtBernankes on December 5, 2012 at 5:20 PM
Just create the quadrillion platinum coin.
We’d not only have the debt paid off, there would be a surplus!
/sarc
ProfShadow on December 5, 2012 at 5:22 PM
Why not just use unicorn dust?
rbj on December 5, 2012 at 5:26 PM
“Progessive” logic. Print money, dump into economy, profit (Krugman). Destroy jobs, increase unemployment, profit (Pelosi).
WeekendAtBernankes on December 5, 2012 at 5:27 PM
This idea was floated last time when we were near the debt ceiling. While it’s still a stupid idea, at the same time, it would be kind of neat to see the coin.
In case anyone’s interested in viewing the designs for the upcoming 2013 platinum eagle (not valued at $1 trillion, thankfully): http://news.coinupdate.com/platinum-eagle-design-candidates-reviewed-by-cfa-1728/
Doomberg on December 5, 2012 at 5:27 PM
Because it’s already standing law since 1996 authorizing them to do it with platinum (and only with platinum).
That means that they don’t need any cooperation at all from the GOP, nor any new legislation at all if they do it with platinum.
The cost of the platinum becomes a rounding error when you can legally set the face value at anything the Secretary of the Treasury decides it needs to be.
I provided more details in the “Falling back to the debt ceiling?” thread.
VekTor on December 5, 2012 at 5:27 PM
At today’s price of $1,579 per ounce of platinum, a trillion dollar platinum coin, if it were worth its weight in platinum, would weigh almost 18,000 tons. But what today is worth what it purports to be. Obama is supposed to be a lightworker, a god, and he’s just a community organizer Marxist, in way over his head.
Paul-Cincy on December 5, 2012 at 5:29 PM
This is not far from the truth. It’s literally monetizing the debt and would crash our currency and the entire world economy.
And it bothers me tremendously that anyone would consider this an “option.” Why not just repudiate the debt and skip to the end stage?
jr.ewing.78 on December 5, 2012 at 5:30 PM
They could do it, but it would be a grotesque abuse of authority. The authority to mint platinum coins was intended primarily for the platinum eagle program, a small numismatic program that brings in some extra revenue for the Mint. Of course, Obama has no problem abusing his authority, which moves me on to my next argument…
Minting these coins would also be a recipe for wild hyperinflation. It would be the equivalent of printing $1,000,000,000 bills. I find it unlikely in the extreme that even the Obama administration would be dumb enough to do this.
Doomberg on December 5, 2012 at 5:32 PM
31 USC § 5112 – Denominations, specifications, and design of coins
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
VekTor on December 5, 2012 at 5:32 PM
Why don’t we just mint a coin every year to cover all government expenditures. Then we can put taxes at zero.
besser tot als rot on December 5, 2012 at 5:33 PM
?!
besser tot als rot on December 5, 2012 at 5:33 PM
It might eventually get there, but dollars only have any use at all because they are required for the purposes of paying taxes, so if they were self-destructive enough to take it that far, there’s no reason for a currency at all.
Besides, without taxes, what tools do they have for equalizing outcomes? If the rich have to have dollars in order to pay their taxes, then there’s a reason to keep dollars around, and the Animal Farm game can continue.
Taxes will likely be eternal if only for that reason.
VekTor on December 5, 2012 at 5:36 PM
Tulips.
connertown on December 5, 2012 at 5:38 PM
Ha ha, I know, right?
The thing is though, the Democrats have to be careful. If we get instant hyperinflation that would probably bring out the rioters (the real ones, not the paid protestors and bored/drunk college kidz). Inflation is certainly Obama’s policy, but the idea is to cause it in a somewhat orderly manner to get people used to this “new normal.”
I personally think that at some point the central planners will lose control anyway, but I think even they are smart enough to avoid suicide by minting a $1 trillion platinum eagle coin.
Doomberg on December 5, 2012 at 5:38 PM
The MMT eggheads insist that the only inflationary effects of this are the actual gaps between tax revenue and appropriations / expenditures (what we currently think of as “the deficit”).
From behind their rose-colored glasses, they therefore believe that such a move isn’t any more inflationary than our current practice of funding those gaps via borrowing, and they even make the argument that it’s more stable since the government stops having to “borrow their own money”.
What they largely neglect is the crisis of confidence that this move could engender. They are utterly convinced of their ability to sell a notion like this to the general public, and prevent a monetary crisis. They don’t fear foreign investment failing to buy Treasuries… that plays right into their hands! Any Treasury not sold is “debt” that is retired, and more credit for the Lightworker.
VekTor on December 5, 2012 at 5:44 PM
Sounds like something President Obama would consider.
DeathtotheSwiss on December 5, 2012 at 5:44 PM
Here’s a one stop shop to see all of their ‘logic’ laid out, with what passes as ‘argument’ in favor of the option spelled out for all to see.
VekTor on December 5, 2012 at 5:47 PM
Hello Weimar Republic! With the minting of trillion dollar coins, Cloward-Piven implementation will be complete. And with such swiftness and dexterity. He truly is the lightworker.
JustTruth101 on December 5, 2012 at 5:51 PM
According to the Fed:
Putting Coins into Circulation
The procedures for putting coins into circulation are similar to those for currency. The U.S. Mint produces coins in Philadelphia, Denver, and San Francisco, and ships them to the Federal Reserve Banks and to authorized armored carriers, which supply banks that need coins to meet the public’s demand.
The distribution of coins differs from that of currency in some respects. First, when the Fed receives currency from the Treasury, it pays only for the cost of printing the notes. However, coins are a direct obligation of the Treasury, so the Reserve Banks pay the Treasury the face value of the coins.
So, it seems that the Fed would have to print up trillions in paper to get these laughable coins issued, anyway. I don’t see the great advantage over having the Fed just print up trillions in paper as it’s doing, now (but at a greatly increased rate, of course).
ThePrimordialOrderedPair on December 5, 2012 at 5:51 PM
And the problem is, other than hyperinflation?
Steve Eggleston on December 5, 2012 at 6:01 PM
Hyperinflation didn’t stop the Weimar Republic, Argentina, Zimbabwe,….
Steve Eggleston on December 5, 2012 at 6:02 PM
Printing Trillion Dollar Notes worked for Mugabe and Zimbabwe didn’t it? So it should work for the
Kenyan, I mean American president.kh6zv9 on December 5, 2012 at 6:03 PM
The Fed carries a balance, which is generally rising monthly now due to Bernanke’s QE-Infinity program. They don’t have to print any paper, since they can just do an asset swap: They swap their current balance (which ends up in the Treasury accounts) in exchange for an equivalent face value on the coins. They can do it with 10 billion dollar coins as easily as they can trillion dollar coins.
In the case of such an asset swap, it’s “money” on both ends of the transaction, so no debt is issued in the process. It’s just a mechanic to turn the value of seigniorage (the difference between the cost of manufacturing a currency unit and the face value of that currency) into a spendable balance.
After the swap, instead of an electronic balance of X billion dollars, the Fed ends up with X billion in platinum coinage, and Treasury ends up with a balance which can be applied towards appropriations.
It’s pretty sick, but legal as far as anyone can tell. It just makes it marginally more clear that any sovereign (including the US) manufactures “money” out of thin air via the process of seigniorage.
VekTor on December 5, 2012 at 6:07 PM
That would be a mighty big coin.
Maybe an acre or two.
NeoKong on December 5, 2012 at 6:41 PM
This would be his first choice on the multiple choice questionnaire he does each morning when he gets into the office at 11:55 AM.
CorporatePiggy on December 5, 2012 at 7:15 PM
The Platinum Coin proposal is silly.
Unless ALL currency is linked to the precious metal, nothing will be accomplished.
The whole point of making currency represent something of tangible value is to keep government printing presses from turning out worthless paper. Simply creating two or more classes of currency, SOME of which can be redeemed for precious metal, accomplishes absolutely NOTHING: the printing presses will still be running full speed churning out the most worthless of the currencies.
The author of this proposal merely demonstrates that he needs an ECON 101 refresher course.
landlines on December 5, 2012 at 7:43 PM
This was precisely the point of the gold/silver standard.
It wasn’t to keep gov’t from mishandling money period, just to keep them from printing worthless paper, and also to help keep our economy from generating ‘wealth’ that was basically also worthless paper without the fancy printing.
For all that people whine about how it would’ve slowed down our economy, I ask you where the Fiat Money Express is about to take us. What’s that you say? Right off the cliff? Gee, imagine that!
MelonCollie on December 5, 2012 at 7:48 PM
Not quite that big – it would be somewhere around 56 tons if its physical value matched its face value. Of course, the Mint doesn’t have to follow that rule-of-thumb.
Steve Eggleston on December 6, 2012 at 1:14 AM
The biggest problem with the gold standard is the same entity that overspends also sets the standard – government. Hence, it’s not really a standard, much less a firewall against government overspending or inflation, but for the few who have private holdings of gold, a government-guaranteed better-than-government-caused-inflation investment (at least until the next FDR comes along and simply seizes the gold, which incidentally is the second-biggest problem with the gold standard).
As for the author of the proposal, I agree. He got his degree from Turbo Tax Timmy’s School of Tax Evasion and Economics. Let’s see if I can paraphrase his inane babblings:
- Debt ceiling? What debt ceiling? After all, despite the fact that the 14th Amendment doesn’t address who can issue federal debt, it strips from Congress any ability to control it because any debt issued in the name of the federal government, regardless of who issues it or whether Congress authorized it, is “valid”.
- Increase the money supply by $60 trillion? Nope, won’t cause any inflation because the Federal Reserve promises to simply put the 60 coins in between the couch cushions.
- Repudiate the debt swapped from the Fed because simply buying maturing debt from the Fed won’t keep the total debt from hitting the ceiling? Even though he just asserted that all debt, whether or not authorized by Congress, is “valid”, not a problem.
- When the Treasury burns through the $4 trillion in debt the Fed currently holds, simply use some of that $60 trillion in coins that, despite being real, don’t really exist, to buy off every other bond holder? Why, there won’t be hyperinflation from the sudden injection of $7 trillion in greenbacks into the economy because they’ll do what the Fed did with the 60 coins.
What I want to know is, where can I get some of Snake Plissken’s bluebacks?
Steve Eggleston on December 6, 2012 at 1:37 AM