Trillion $ coin would be awseome.

Jan 14, 2013, 7:28 AM

Treasury: We won’t mint a platinum coin to sidestep the debt ceiling

Posted by Ezra Klein on January 12, 2013 at 3:32 pm

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

The idea of minting a platinum coin to invalidate the debt ceiling comes from a few key sentences tacked onto the 1997 Omnibus Consolidated Appropriations Act. “Notwithstanding any other provision of law,” it reads, “the Secretary of the Treasury may mint and issue platinum coins in such quantity and of such variety as the Secretary determines to be appropriate.”

The author of those sentences was Mike Castle, a Republican congressman from Delaware. The intent was to help coin collectors who wanted the Treasury Department to mint cheaper platinum coins. “People couldn’t afford the $600 investment, so they wanted the flexibility to put in smaller coinage so that people could collect them,” Castle told Wonkblog this month. But in giving the Treasury Department the flexibility to mint platinum coins of little value, Castle accidentally gave them the flexibility to mint platinum coins of unlimited value. “That was never the intent of anything that I drafted or that anyone who worked with me drafted,” Castle continued.

The idea of minting a trillion-dollar platinum coin was first floated in May 2010, in the comment section of “The Center of the Universe,” a blog devoted to Modern Monetary Theory. The author was a lawyer writing under the pseudonym Beowulf. “Curiously enough Congress has already delegated to [Treasury] all the seignorage power authority it needs to mint a $1 trillion coin (even numismatic coins are legal tender at their face value and must be accepted by the Federal Reserve) — the catch is, it’s gotta be made of platinum.”

The platinum coin idea gained some powerful adherents during the debt-ceiling crisis of 2011, but it really developed traction following the 2012 fiscal cliff deal, as politicians and economics writers realized that the country would, indeed, be facing another debt-ceiling crisis in a matter of months. A Twitter campaign by Joe Weisenthal, of Business Insider, and Josh Barro, of Bloomberg View, forced it into the conversation, and subsequent endorsements by Rep. Jerry Nadler (D-NY), Nobel Prize-winning economist Paul Krugman and former U.S. Mint director Philip Diehl gave it further legitimacy.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/12/treasury-we-wont-mint-a-platinum-coin-to-sidestep-the-debt-ceiling/