There is a new idea racing through the chattering classes for how President Obama could avoid the debt ceiling. It’s simple: He instructs the Treasury to mint a $1 trillion coin made of platinum that is then sent to the Federal Reserve. The Fed, in turn, credits the Treasury with $1 trillion and the Treasury, its coffers replenished, then goes on its merry way writing checks.
Is it legal? Well, yes, in the narrowest sense. Section (k) of 31 USC § 5112 says that:
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.
Of course, there is one small problem: Platinum is currently selling for about $1,590 a troy ounce. So a $1 trillion coin would weigh 26,221 “troy tons,” which might present a bit of a transportation problem getting from the mint to the Federal Reserve. There is also the problem that nowhere near that much platinum has ever been mined since the metal first came to the attention of chemists in the 1740s. Last year a grand total of 211 tons was mined worldwide, almost all of it from South Africa, Russia, and Canada.
So the Treasury doesn’t have that much platinum. Indeed, as far as I know, it doesn’t have any at all, as platinum has never been considered specie, the metals from which coins are minted.
And coins, by economic definition, must be made of metal whose value approximates the face value. (Coins, even when not debased, have always contained a little less metal than the face value to discourage melting them down. The difference is known as “seigniorage,” and provided the sovereign power that minted the coins with a tidy profit.) The United States hasn’t minted coins for general circulation since 1965. Those bits of metal jingling in your pocket are technically tokens. And they aren’t legal tender.
So could the Treasury mint a coin, say the size of a silver dollar, out of platinum, and simply inscribe it $1,000,000,000,000? To do so would be indistinguishable, in a practical sense, from sending over new bonds with the face value of $1 trillion, as the coin would have an intrinsic value that would be only the tiniest fraction of a trillion dollars. That would violate Congress’s sole power to borrow money.
And, of course, if the Treasury were to try such a stunt, it would only make the lawyers rich and would, inevitably, cause the world’s money markets to think the United States government must be in really bad financial shape to even think about doing such a thing. The result of that: Good luck rolling over outstanding federal debt at anywhere near the same interest rates the government is paying now. We would be instant Greece.
So the platinum coin idea is nice for cocktail-party chatter, but it won’t solve the Obama administration’s desire to gut the constitutional power of the House of Representatives and do as it damn well pleases with regard to spending. Indeed, how such desperate ploys can exist in the same intellectual universe as the idea that the government doesn’t have a spending problem is a question only a liberal could ignore.