The $5 Trillion Coin

[Beet]

The countdown clock to the Debtpocalypse now stands at four days, give or take. Soon, the Treasury will start receiving bills it cannot pay, and the United States will fall delinquent on billions of dollars in promised payments to Social Security recipients, government contractors, and so on. Congress remains deadlocked. So, the chattering classes have started getting creative. If you cannot lift the debt ceiling, maybe you can vault over it.

One option is coin seigniorage—aka, the "really-huge-coin workaround." The United States has a statutory limit on the amount of paper money in circulation, but no such limit on coins. The Treasury secretary has the authority to mint certain coins of any denomination, with no need for the value of the metal to equal the value of the coin. (It gets a bit technical.) But the idea is that Secretary Timothy Geithner could order the Mint to make a, say, $5 trillion coin. It could then use the coin to buy back and extinguish debt from the Fed, pushing the country back under the ceiling. Or it could deposit it, and the Fed could counteract the inflation by selling government debt.

The idea originated in the lefty blogosphere; FireDogLake writer "beowulf" wrote about this "escape hatch" or "subway tunnel" all the way back in January. Most commentators dismissed it as fanciful. But it does seem to be entirely legal, and is getting renewed attention and a wee bit of credibility as the negotiations drag on. Yale constitutional law professor Jack Balkin floated it as an option in a CNN op-ed this week.

http://www.slate.com/id/2300428/

[Lief 🗽]

Yes, this is the best option at this point. As an added bonus, we'd get a nice bit of inflation as well. And it would drive the Paultards crazy.

[Torie]

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Really?  What is the limit at present? 

[🐒Gods of Prosperity🔱🐲💸]

Yes, this is the best option at this point. As an added bonus, we'd get a nice bit of inflation as well. And it would drive the Paultards crazy.

Assuminga huge amount of inflation isn't a good thing, Ron Paul's idea of having the Fed destroy it's bonds is a lot better.

[True Federalist (진정한 연방 주의자)]

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Really?  What is the limit at present? 

The limit is on the amount of United States Notes issued directly by the Treasury as opposed to Federal Reserve Notes.

The limit is $300,000,000 and they were last issued in 1971 so they are rarely seen in circulation.  (Altho I did get a $5 US Note in change last year and have kept it.)  The designs are similar to those of Federal Reserve Notes, with the most noticeable difference being that instead of a green seal, they have a red seal.  (Silver Certificates had blue seals, Gold Certificates had yellow seals and brown seals were on National Bank Notes and Federal Reserve Bank Notes.  The difference between Federal Reserve Bank Notes and Federal Reserve Notes was that the FRBN were backed by only one of the twelve Federal Reserve Banks)

Actually, there is a portion of the amount that has been authorized but not currently issued, so there is a small pittance that could be made available by printing new ones. Indeed, since the only denomination limit is that they must be at least $1, they could print a single note for the outstanding authorization and deposit it in a Federal Reserve Bank if they needed to.

Personally, I think they should authorize the issuance of additional U.S. Notes anyway, but not as money intended for general circulation.  Issues of commemorative paper money would be a way for the U.S. Treasury to make a modest profit.  Why should the Mint and the USPS be the only makers of collectibles?

[True Federalist (진정한 연방 주의자)]

As for the idea of a $5 Trillion dollar coin, I was going to say impossible, but it seems there is a loophole in 31 USC 5112, the section of law that authorizes the minting of coins.  For the coins normally minted for circulation, the denominations that are authorized for minting are specified, with the largest value circulating coin being the dollar coin.  The various bullion and commemorative coins that the mint is authorized to make also have their denominations generally set by law.  However, by oversight the size and denomination of the platinum bullion coins are left to the discretion of the Secretary of the Treasury.

Since they were first issued, the platinum bullion coins have carried nominal denominations of $100 per troy oz.  However, there is nothing in the law that would prevent the minting of a $5 trillion coin, provided that it is minted in platinum bullion.

Given how volatile platinum prices have historically been, I suspect the authority to set the denominations was given so that if platinum plunged, the denominations could be adjusted to be lower than the bullion price without requiring an Act of Congress.

[○∙◄☻¥tπ[╪AV┼cVê└]

Liberals want a $5 trillion coin. Republicans want no coin. Obama will probably compromise and make a 50 cent coin that should solve all the problems.

[Bleeding heart conservative, HTMLdon]

Liberals want a $5 trillion coin. Republicans want no coin. Obama will probably compromise and make a 50 cent coin that should solve all the problems.

And the Tea Partiers will primary any Republican who agrees to the 50 cent coin compromise.

[King]

Liberals want a $5 trillion coin. Republicans want no coin. Obama will probably compromise and make a 50 cent coin that should solve all the problems.

And the Tea Partiers will primary any Republican who agrees to the 50 cent coin compromise.

jfern and htmldon's tears taste so good...

[tpfkaw]

Yes, this is the best option at this point. As an added bonus, we'd get a nice bit of inflation as well. And it would drive the Paultards crazy.

Please Brer Fox, not the briar patch!

[Swing low, sweet chariot. Comin' for to carry me home.]

i'm sure the markets would just love the idea of a 5t coin

[Lief 🗽]

i'm sure the markets would just love the idea of a 5t coin

I'm sure the markets would just love a second, even worse recession.

[patrick1]

i'm sure the markets would just love the idea of a 5t coin

Not that I agree with this stupid idea, but "the markets" haven't exactly done us any favors lately.

If the supposed job creating class is not going to invest their capital, then a portion should be taxed from them. Spending must be lowered to levels in line with our revenue receipts.  That is my ham handed take on things at least...

[Хahar 🤔]

Why is it that the markets govern our lives?

[Okay, maybe Mike Johnson is a competent parliamentarian.]

Why is it that the markets govern our lives?

Deciding that 'the market' would be the specific social construct that we would measure the other ones against was one of the stupider decisions we as a civilization have made.

[Swing low, sweet chariot. Comin' for to carry me home.]

i'm sure the markets would just love the idea of a 5t coin

I'm sure the markets would just love a second, even worse recession.

which is exactly what a 5t coin would give us. 

[Okay, maybe Mike Johnson is a competent parliamentarian.]

i'm sure the markets would just love the idea of a 5t coin

I'm sure the markets would just love a second, even worse recession.

which is exactly what a 5t coin would give us. 

Please Elaborate.

[Joe Republic]

Stick Ronald Reagan's face on it and the Tea Party will buy into it, no problem.  Make sure it has "In God We Trust" on it, of course.

[courts]

Stick Ronald Reagan's face on it and the Tea Party will buy into it, no problem.  Make sure it has "In God We Trust" on it, of course.

First, it is President Ronald Reagan, not Ronald Reagan!

Second, there is no 'Tea Party.' It is the Tea Party movement.

Lastly, we don't need 5 trillion dollar coins. We need government to get smaller and focus on its constitutionally defined obligations, like paying for my medicare!
sorry CARL, had to do it

[J. J.]

Putting $5T in the system, in platinum, would essentially be buying back some deficit.  The markets might not react too badly, if it is backed up with platinum.  It would take a half billion Troy ounces of platinum to meet that.

Also, since Congress can regulate the power to coin money, they could easily remove the power to create the coin.

[True Federalist (진정한 연방 주의자)]

If Obama took advantage of the loophole to mint fiat platinum coins, do you think the Democrats in the Senate would stop him?

Besides, it shouldn't be a single $5 trillion coin.  They should be $1 billion coins with Senator Everett Dirksen on the obverse.

[J. J.]

If Obama took advantage of the loophole to mint fiat platinum coins, do you think the Democrats in the Senate would stop him?

Besides, it shouldn't be a single $5 trillion coin.  They should be $1 billion coins with Senator Everett Dirksen on the obverse.

Yes, because the markets would react badly.

[Swing low, sweet chariot. Comin' for to carry me home.]

Putting $5T in the system, in platinum, would essentially be buying back some deficit.  The markets might not react too badly, if it is backed up with platinum.  It would take a half billion Troy ounces of platinum to meet that.

there would be no platinum backing up the $5T coing, except maybe a single ounce (remember, it is a single coin were talking about, marked with a denomination of $5T).  the markets would see it as the joke that it is.

[Swing low, sweet chariot. Comin' for to carry me home.]

i'm sure the markets would just love the idea of a 5t coin

I'm sure the markets would just love a second, even worse recession.

which is exactly what a 5t coin would give us. 

Please Elaborate.

if I have to elaborate, then there is no need to explain it.  but if you need an example, try it yourself:  get some cement and make yourself a concrete round coin stating that it is worth $100k and walk down to your local BMW dealer and try to buy a 7 series with it.

[King]

Ernest brings up a good point.  Ron Paul's face should be on the $5 trillion coin.