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What We Saw Through the Looking Glass: A Trillion Dollar Coin
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(January 10, 2013) You may have heard the idea that the upcoming debt ceiling battle could be avoided by having the US Mint strike platinum coin(s), each with a stated face value of $1,000,000,000,000.00. Of course, it’s easy to just laugh (or cry) about this monumental absurdity. But, we believe that Mr. Spock from Star Trek would probably agree with us that if Quantitative Easing is logical, then so is creating a trillion dollar coin.
That most famous and popular entertainer/commentator of the 20th century’s first decades, Will Rogers, once said, “There is no trick to being a humorist when you have the whole government working for you.”

In that spirit, we bring you the following without editorial comment.

First, some words from the former Director of the US Mint, Philip Diehl. The platinum coin law he refers to in his first paragraph is the enabling legislation for the US Mint’s platinum Eagle bullion program, Public Law 104-208, passed on September 30, 1996:

"I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

What is unusual about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations.

Moreover, the accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess."

- Philip N. Diehl

35th Director, United States Mint

And now this statement dated 1/8/13, from Senator Greg Walden (R-Ore):

“Some people are in denial about the need to reduce spending and balance the budget . This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution. I’m introducing a bill to stop it in its tracks.”

“My wife and I have owned and operated a small business since 1986. When it came time to pay the bills, we couldn’t just mint a coin to create more money out of thin air. We sat down and figured out how to balance the books. That’s what Washington needs to do as well. My bill will take the coin scheme off the table by disallowing the Treasury to mint platinum coins as a way to pay down the debt. We must reduce spending and get our fiscal house in order.”


Fox News reported that on Wednesday 1/9/13, White House press secretary Jay Carney was asked about the trillion-dollar coin proposal, and answered:

"You could speculate about a lot of things, but there is -- nothing needs to come to these kinds of speculative notions about how to deal with a problem that is easily resolved by Congress doing its job, very simply." Later he referred further questions on the subject to the Treasury Department "since Treasury, I believe, oversees printing and minting." Then he joked, "I have no coins in my pocket."

The search engine Google reports that there are currently more daily searches for the phrase ‘trillion dollar coin’ than were ever seen for the phrase ‘debt ceiling.”

 

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