About That Trillion-Dollar Coin
So the trillion dollar coin is now kaput. I thought those guys were for real, or at least pretending to be. Paul Krugman, poster-economist for the fringe left, wrote superficially serious commentary, and Rep. Jerrold Nadler (D-N.Y.) seemed to like the idea. People you never heard of were suddenly big fans.
But the White House has seemingly put it all to rest.
In case you somehow missed all the fun, the concept was for the Treasury (that's the United States Treasury, not Zimbabwe's) to mint a $1 trillion platinum coin and deposit it at the Fed, which keeps an operating checking account for the U.S. government, which could then just spend the money.
This would neatly bypass Congress and the need to raise the debt ceiling.
Of course, fiat currency is nothing new. That's what we have now; the difference is that Congress has to create it rather than the Treasury Department. I suppose the case can be made for bypassing the middleman; there has certainly been little effort at controlling cash creation for the past 50 years.
Still, it does seem a little too easy.
There is a statute in place empowering the Treasury to mint platinum currency in any denomination. It was intended to permit the minting of ceremonial coins for the government to sell us. Evidently the Franklin Mint was raking in all the profits from overpriced metal. It's sort of like the post office selling all those special edition unmailed stamps to collectors. It's good for profit margins.
The statute does not specify how much platinum should be in such a coin. That's a good thing, because a coin actually containing a trillion dollars' worth of platinum would weigh around 900,000 pounds.
Instead, the Treasury could just plate a little platinum on a nickel and call it a trillion. If it weren't for the statute, it could stamp it out of plastic or scribble Jack Lew's signature on a Post-It note. The value would be essentially the same.
There were some folks out there making the case that this would be legal.
It seems to be one of those things not mentioned in the Constitution. It is probably legal in Zimbabwe.
Here's the thing: If you're going to do it, you might as well do it right. Mint up a $16 trillion dollar coin and pay off the national debt.
Or, better yet, make it $100 trillion, and get us into next year.
Can't you picture an assistant secretary of something-or-other from the Treasury Department strolling over to the Fed with a trillion dollar coin in hand?
"Ummm ... Mr. Bernanke, sir, I have that coin for you."
"Oh. Thanks. Just put it here on my desk. It'll make a nice paperweight."
Suddenly the Fed Chairman is seized by a desire for a Starbuck's triple-half-decaf-mocha-latte. He has left his wallet at home. He picks up the paperweight and heads out for coffee.
"Here you are sir, that will be $9.75."
"I'm sorry, I don't have any change. Here's a trillion."
"I'm very sorry sir, but we can't change a trillion. Would you care for an extra hundred billion gallons of coffee to go?"
"No thanks. Excuse me, pal. May I borrow a 10-spot?"
So the chairman of the Federal Reserve is going to leave a 25-cent tip with borrowed money. That's Washington for you.
If we started coining these things, you can be pretty sure it would go on for a long time. One day the Fed chairman, or somebody else, would go for coffee, plunk down a trillion dollars and be told politely, "I'm sorry, sir, but that will be two trillion."
Fred Wolferman lives in Southern Pines. Contact him by email at fwolferman@ sbcglobal.net.
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