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Friday, January 4, 2013

Hammering Away at the Platinum Coin Gambit

The use of trillion dollar Platinum Coin Seigniorage (PCS) to magically erase the federal debt limit has caught the fancy of a growing number of Democrats.

Rep. Jerrold Nadler (D-N.Y.) will propose this idea of using trillion dollar platinum coins to the President as bargaining chip in his negotiations with Congress over the debt limit. The fact that a congressman is now openly talking about using the magic platinum coin trick and there is also a petition to use a trillion dollar coin on the Whitehouse website has stirred the debate up a few decibels. The furor can only get more fierce as the debt ceiling debate builds. Stay tuned for much more on the trillion platinum coin solution.

Here is a round-up of the latest sound and fury:
Michael Castle does not think his 1997 law should be use for minting trillion dollar platinum coins
update: former Congressman Michael Castle (R-Delaware) who created the 1997 law that allows the backdoor minting of $1 trillion platinum coins does not sign off on the bastardization of his law. That was not the intent of the law he says.

Dylan Matthews / Washington Post:
Michael Castle: Unsuspecting godfather of the $1 trillion coin solution -- The weirdest solution to the impending debt-ceiling crisis is finally having its day in the sun.
As Brad Plumer explained last month, the Treasury secretary has the authority to mint platinum coins of any quantity and denomination. So, hypothetically, Tim Geithner could mint a $2 trillion coin, deposit it in the Treasury’s account at the Federal Reserve, and use that money in lieu of additional borrowing. Suddenly, no one needs to worry if Congress refuses to raise the debt ceiling...

“I [Michael Castle] want to give it my seal of approval,” he said, adding quickly, “Just kidding.” The plan, he said, is an irresponsible run-around that would undermine the federal government’s credibility. The plan is “so far-fetched and so black helicopter-ish a type of methodology of trying to resolve something like this that I think the public would totally scoff at it…It would be an artificial way of trying to create money and I think everybody will see that.” It would be better, Castle argues, for the government to actually raise the debt ceiling using normal measures while cutting the deficit.
Rep. Jerrold Nadler (D-N.Y.) proposes using Platinum Coin Seigniorage (PCS)
Reid Pillifant / Capital New York:
Looking to the next debt-ceiling fight, Nadler proposes a trillion-dollar coin trick Rep. Jerrold Nadler has an admittedly "out of the ordinary" solution to the coming fight over the debt ceiling.

"There is specific statutory authority that says that the Federal Reserve can mint any non-gold or -silver coin in any denomination, so all you do is you tell the Federal Reserve to make a platinum coin for one trillion dollars, and then you deposit it in the Treasury account, and you pay your bills," Nadler said in a telephone interview this afternoon.

I asked whether he was serious.

"I'm being absolutely serious," he said. "It sounds silly but it's absolutely legal. And it would normally not be proper to consider such a thing, except when you're faced with blackmail to destroy the country's economy, you have to consider things." ...

"It gets around this artificial debt-ceiling thing which has no economic justification," he said. "And, by the way, by the way, none of this has to be done. All the president would have to say is, 'I would do it if necessary.'"
Paul Krugman / NY Times:
Debt in a Time of Zero --
The peculiar exception is that clause allowing the Treasury to mint platinum coins in any denomination it chooses. Of course this was intended as a way to issue commemorative coins and stuff, not as a fiscal measure; but at least as I understand it, the letter of the law would allow Treasury to stamp out a platinum coin, say it’s worth a trillion dollars, and deposit it at the Fed — thereby avoiding the need to issue debt.

In reality, to pursue the thought further, the coin really would be as much a Federal debt as the T-bills the Fed owns, since eventually Treasury would want to buy it back. So this is all a gimmick — but since the debt ceiling itself is crazy, allowing Congress to tell the president to spend money then tell him that he can’t raise the money he’s supposed to spend, there’s a pretty good case for using whatever gimmicks come to hand... 
Michael Sankowski / Monetary Realism: Trillion Dollar Coin Explodes: Krugman, Congress is talking about it
Is minting a Trillion Dollar Platinum Coin legal?
Kevin Drum / Mother Jones:
No, a $1 Trillion Platinum Coin is Not Legal  —  For some reason, the possibility of evading the debt ceiling by minting a $1 trillion platinum coin is getting some blogospheric love again.  This is based on a 2000 revision to the U.S. statute on money and finance that reads:
The Secretary may mint and issue bullion 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.
Read literally, this places no limitations on the Treasury Secretary's authority to mint platinum coins. If Tim Geithner wants to mint a $1 trillion coin and deposit it at the Fed, he can do it...
John Carney / CNBC:
Sorry Folks, The $1 Trillion Coin Is Unconstitutional — The platinum coin solution seems to me to be at least arguably authorized by statute. But that statute seems to represent an unconstitutional delegation of legislative authority. Given this very plausible ground for finding the $1 trillion platinum coin maneuver unconstitutional, it would be extremely unwise for the Treasury Department to pin its hopes on avoiding a fight over the debt ceiling on its platinum mint.

Rodger Malcolm Mitchell / Monetary Sovereignty:
The real benefits of the Platinum Coin Solution —  The majority of suggestions see a $1 trillion coin. I suggest a $100 trillion coin, so the mythical federal debt disappears forever, never again to rise from its stinking grave. Good riddance, federal debt, for all the damage you have done, and continue to do, to America. And good riddance, ultra-rich, to your lies that brought the austerity monster to our nation. The only question is whether the Supreme Court, which also has a romance with the ultra-rich, will find some reason to overturn the clear reading of the law.
Jason Linkins / The Huffington Post:
Can We Avert The Coming Debt Ceiling Crisis With A Magic Coin?  — Because of the deal made on New Year's Day that averted the immediate impact of the so-called fiscal cliff, America will face a sequel to the debt ceiling hostage crisis that led to the super committee and the sequester and the fiscal cliff and the fiscal cliff solution and the sequel to the debt ceiling hostage crisis that led to the super committee and the sequester and the fiscal cliff and the fiscal cliff solution, et cetera, ad infinitum. The best of all possible fiscal cliff deals would have included a guaranteed de-weaponization of the debt ceiling. Since the fiscal cliff deal did not include any such de-weaponization, America's credit and the global economy are still very much jeopardized by the dangerous lunatics who have threatened another round of hostage-taking.

What can be done about it? Well, what about a magic trillion-dollar coin, wrought from platinum? Would that help?

Actually, in an interview with Capital New York's Reid Pilifant, Rep. Jerrold Nadler (D-N.Y.) suggests that it is possible to mint just such a coin, stick it in the Treasury, and stick a fork in the coming debt ceiling crisis before it begins. "I'm being absolutely serious," Nadler told Pilifant, adding, "It sounds silly but it's absolutely legal. And it would normally not be proper to consider such a thing, except when you're faced with blackmail to destroy the country's economy, you have to consider things." ...
Josh Barro / Bloomberg: 
Why We Must Go Off the Platinum Coin Cliff — I'm glad to see Representative Jerrold Nadler lending his support to the idea that President Barack Obama should avert a debt-limit crisis by issuing large-denomination platinum coins, as permitted by 31 USC § 5112.

In case you're not familiar with this idea: In general, the Treasury Department is not allowed to just print money if it feels like it. It must defer to the Federal Reserve's control of the money supply. But there is an exception: Platinum coins may be struck with whatever specifications the Treasury secretary sees fit, including denomination...

Tommy Christopher / Mediaite:   How President Obama Can Out-Gator Republicans On Debt Ceiling
Alex Pareene / The Atlantic Wire:   Why Is Everyone Talking About a Platinum $1 Trillion Coin?  
Allahpundit / Hot Air:   Hey, let's avoid the debt-ceiling standoff by minting a trillion-dollar platinum coin instead 
The Week:   4 reasons the government won't mint a trillion-dollar coin to prevent a debt-ceiling crisis
Reid Pillifant / Capital New York:
A trillion-dollar-coin idea takes off, and a former head of the U.S. Mint doesn't see why it shouldn't — The idea, which Nadler assured me was "absolutely serious," was endorsed by Josh Barro of Bloomberg View and a Twitter campaign by Joseph Weisenthal of Business Insider using the hashtag #mintthecoin, and it's now one of those White House petitions.

The idea, which Nadler didn't make explicit, is that the coin is a bargaining chip, meant to counter the equally ill-founded idea that Congress' discretion over the debt ceiling was intended to be used regularly as a negotiating tool. (Congressional Republicans are explicitly promising, once again, to use the threat of national default to compel the president to cut spending in the next round of budgetary negotiations.)

At one point this morning, #mintthecoin was fifth on Yahoo's front page of top searches, and shortly thereafter, Weisenthal was on Bloomberg TV, which had already begun asking other guests about the prospects for the instant, trillion-dollar solution.

"It does address another bad law, and that's why it's worth promoting," said Weisenthal.

Matt Yglesias gave the idea a straigtforward look on Slate; the Daily News wrote a humorless editorial about how funny it is; and Kevin Drum of Mother Jones said he didn't think courts would allow it, though he was admittedly unsure
Heidi Moore / The Guardian:
'Mint the coin': why the platinum coin campaign doesn't even work as satire   — Twitter's call for the Treasury to mint a $1tn coin to solve the debt crisis has all the charm and logic of a mad scientist's plot

White House petition to mint trillion dollar platinum coin
we petition the Obama administration to:

Direct the United States Mint to make a single platinum trillion dollar coin!

With the creation and Treasury deposit of a new platinum coin with a value of $1 trillion US Dollars, we would avert the absurd-yet-imminent debt ceiling faceoff in Congress in two quick and simple steps! While this may seem like an unnecessarily extreme measure, it is no more absurd than playing political football with the US -- and global -- economy at stake...

Signatures needed by February 02, 2013 to reach goal of 25,000: 22,703
Total signatures on this petition: 2,297 (as of Jan 4, 2012, 2:30pm EST)

Total signatures on this petition: 3,329 (as of Jan 5, 2012, 1:00am EST)

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