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$1 trillion coin is nuts but not $25 billion - Opinion
WASHINGTON (CNNMoney) Policy wonks are debating whether a $1 trillion platinum coin would be a clever or insane way for President Obama to play hardball with Republicans in the upcoming debt limit battle.
Here's what you should know about this crazy-sounding idea:
1. A legal loophole gives the Treasury Secretary apparently unlimited authority to mint platinum coins.
Treasury is forbidden from printing money to cover government deficits. Treasury must issue debt, while the Federal Reserve independently controls our nation's monetary printing press.
That is exactly as it should be. But there is an arcane exception for platinum coins. To serve coin collectors, Treasury can issue platinum coins of any denomination. That creates an intriguing loophole: Treasury could bypass the collector market and mint a $1 trillion platinum coin. By depositing it at the Federal Reserve, Treasury could keep paying bills after we've fully exhausted our borrowing limit.
2. Most observers think this is a terrible idea, but the legal arguments against it are weak at best.
I'm no lawyer, but the legal arguments seem wholly unconvincing. The language of the statute is clear, and in any case, the executive branch gets away with expansive actions in extreme times. During the financial crisis, for example, Treasury aggressively interpreted its authorities in order to bail out GM and Chrysler and to backstop money market funds. If default became a real possibility, the same expansiveness could easily justify a platinum coin.
3. The economic arguments against the coin are stronger but manageable.
There's a good reason that Treasury is forbidden from printing money to pay our debts: inflation. Many economies have been ruined when profligate governments turned to printing money. But minting the platinum coin needn't mean monetizing our debt. The Federal Reserve has ample ability to offset any inflationary impact by selling some of the trillions in Treasury securities it already owns. As long as the Fed does its job, inflation would not be a risk.
4. The best arguments against the platinum coin involve image and politics.
Minting a $1 trillion coin sounds like the plot of a Simpsons episode or an Austin Powers sequel. It lacks dignity. And despite modern cynicism, that means something.
It would also be premature. Obama and the Republican and Democratic members of Congress have roughly two months to strike a debt limit deal. There is no reason to short-circuit that process, as painful as it may be, with preemptive currency minting as the now-famous #MintTheCoin petition to the White House suggests.
5. Nonetheless the platinum coin strategy might be better than the alternatives if we reach the brink of default.
Analysts have considered a range of other options for avoiding default, including prioritizing payments, asserting the debt limit is unconstitutional, and temporarily selling the gold in Fort Knox. All raise severe practical, legal, and image problems.
In this ugly group, the platinum coin looks relatively shiny. In particular, it would be much less provocative than Obama asserting that the debt limit is unconstitutional. That nuclear option would create a political crisis, while a platinum coin could be a constructive bargaining chip.
6. If necessary, Treasury should mint smaller platinum coins, not a $1 trillion one.
A $1 trillion coin is eye-catching and ridiculous. That's why it's filled the punditry void left by the fiscal cliff. But a single coin makes no policy sense. No federal transactions occur in $1 trillion increments.
Among the largest transactions are Treasury bond auctions, which today raise about $25 billion at a time. If necessary, Treasury could issue individual $25 billion coins, each in lieu of a needed bond auction. Still ridiculous, to be sure, but less so as it would calibrate coin issuance to immediate financing needs.
Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such "small" denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits.
Of course, the best path would be a bipartisan agreement to increase the debt limit, address scheduled spending cuts, and strengthen our fiscal future, all settled before the precipice.
If we reach the brink, however, minting million- or billion-dollar platinum coins would be better than default.
SOURCE: http://money.cnn.com/2013/01/09/news/economy/platinum-coin-debt-ceiling/
Here's what you should know about this crazy-sounding idea:
1. A legal loophole gives the Treasury Secretary apparently unlimited authority to mint platinum coins.
Treasury is forbidden from printing money to cover government deficits. Treasury must issue debt, while the Federal Reserve independently controls our nation's monetary printing press.
That is exactly as it should be. But there is an arcane exception for platinum coins. To serve coin collectors, Treasury can issue platinum coins of any denomination. That creates an intriguing loophole: Treasury could bypass the collector market and mint a $1 trillion platinum coin. By depositing it at the Federal Reserve, Treasury could keep paying bills after we've fully exhausted our borrowing limit.
2. Most observers think this is a terrible idea, but the legal arguments against it are weak at best.
I'm no lawyer, but the legal arguments seem wholly unconvincing. The language of the statute is clear, and in any case, the executive branch gets away with expansive actions in extreme times. During the financial crisis, for example, Treasury aggressively interpreted its authorities in order to bail out GM and Chrysler and to backstop money market funds. If default became a real possibility, the same expansiveness could easily justify a platinum coin.
3. The economic arguments against the coin are stronger but manageable.
There's a good reason that Treasury is forbidden from printing money to pay our debts: inflation. Many economies have been ruined when profligate governments turned to printing money. But minting the platinum coin needn't mean monetizing our debt. The Federal Reserve has ample ability to offset any inflationary impact by selling some of the trillions in Treasury securities it already owns. As long as the Fed does its job, inflation would not be a risk.
4. The best arguments against the platinum coin involve image and politics.
Minting a $1 trillion coin sounds like the plot of a Simpsons episode or an Austin Powers sequel. It lacks dignity. And despite modern cynicism, that means something.
It would also be premature. Obama and the Republican and Democratic members of Congress have roughly two months to strike a debt limit deal. There is no reason to short-circuit that process, as painful as it may be, with preemptive currency minting as the now-famous #MintTheCoin petition to the White House suggests.
5. Nonetheless the platinum coin strategy might be better than the alternatives if we reach the brink of default.
Analysts have considered a range of other options for avoiding default, including prioritizing payments, asserting the debt limit is unconstitutional, and temporarily selling the gold in Fort Knox. All raise severe practical, legal, and image problems.
In this ugly group, the platinum coin looks relatively shiny. In particular, it would be much less provocative than Obama asserting that the debt limit is unconstitutional. That nuclear option would create a political crisis, while a platinum coin could be a constructive bargaining chip.
6. If necessary, Treasury should mint smaller platinum coins, not a $1 trillion one.
A $1 trillion coin is eye-catching and ridiculous. That's why it's filled the punditry void left by the fiscal cliff. But a single coin makes no policy sense. No federal transactions occur in $1 trillion increments.
Among the largest transactions are Treasury bond auctions, which today raise about $25 billion at a time. If necessary, Treasury could issue individual $25 billion coins, each in lieu of a needed bond auction. Still ridiculous, to be sure, but less so as it would calibrate coin issuance to immediate financing needs.
Steve Randy Waldman suggests as even more granular approach: issuing coins denominated in millions not billions. Such "small" denominations would be even less ridiculous and could potentially be used in transactions with private firms, not just Fed deposits.
Of course, the best path would be a bipartisan agreement to increase the debt limit, address scheduled spending cuts, and strengthen our fiscal future, all settled before the precipice.
If we reach the brink, however, minting million- or billion-dollar platinum coins would be better than default.
SOURCE: http://money.cnn.com/2013/01/09/news/economy/platinum-coin-debt-ceiling/
Aw, that brings back memories. I used to have a fancy cardboard jewelry box (like for a bracelet/necklace) full of foreign coins my dad always brought home from his MANY trips.
Rather than exchanging them, you should look into what they're made of. I believe silver prices are still very high. You could go to one of those jewelry stores that pays cash for metals...you may some money!! Just know your prices before you go in,..know what gold, silver, is going for.
Rather than exchanging them, you should look into what they're made of. I believe silver prices are still very high. You could go to one of those jewelry stores that pays cash for metals...you may some money!! Just know your prices before you go in,..know what gold, silver, is going for.
Ahhh... the Loonie.
I have several hundred of them stashed away in a drawer someplace. I have a shoe-box full of old currency, from business-trips past, vacations of old, etc. It seems like every time I come back from a trip, I've got a pocket full of coins and paper currency, so into the shoe-box it goes.
I have to say though, the Loonie is my fovorite, if for no other reason, than the NAME of the coin. "LOONIE". Sorta reminds me of the old Saturday-morning cartoons I used to watch!
I should probably look into exchanging all the foreign currency I have. Might be worth some dosh!
I have several hundred of them stashed away in a drawer someplace. I have a shoe-box full of old currency, from business-trips past, vacations of old, etc. It seems like every time I come back from a trip, I've got a pocket full of coins and paper currency, so into the shoe-box it goes.
I have to say though, the Loonie is my fovorite, if for no other reason, than the NAME of the coin. "LOONIE". Sorta reminds me of the old Saturday-morning cartoons I used to watch!
I should probably look into exchanging all the foreign currency I have. Might be worth some dosh!
And we on our side of the border thought we were all clever with our loonie's and twoonies..(1 and 2 $ coins...). A trillion $ coin...now why didn't we think of that. Clearly we canucks think far too small.....
“This coin nonsense is just a way to print more money, legally...it's a way around the rules.”
This reminds me of when my son was a child and wanted me to buy him something we couldn’t afford. I tried to explain we didn’t have the money. His response was “Just Wright a Check.” It’s a shame that our Administration has the same mentality as a child.
This reminds me of when my son was a child and wanted me to buy him something we couldn’t afford. I tried to explain we didn’t have the money. His response was “Just Wright a Check.” It’s a shame that our Administration has the same mentality as a child.
I only read part of the article and remembered that this mentality is the problem in DC. Only a hard core liberal could come up with that idea.
Is there even still gold in Fort Knox? I've heard conflicting stories about that, that no gov't official has SEEn any gold since the 70's.
We should have NEVER changed from a gold backed monetary system. It would be nice if the gold standard still existed.
This coin nonsense is just a way to print more money, legally...it's a way around the rules.
"Why not just mint a $20 Trillion dollar coin, pay off the national debt, and be running a surplus?!?"
There ya go! Although, by the time printing was complete, it will be up to $30T. ;0)
We should have NEVER changed from a gold backed monetary system. It would be nice if the gold standard still existed.
This coin nonsense is just a way to print more money, legally...it's a way around the rules.
"Why not just mint a $20 Trillion dollar coin, pay off the national debt, and be running a surplus?!?"
There ya go! Although, by the time printing was complete, it will be up to $30T. ;0)
Why not just mint a $20 Trillion dollar coin, pay off the national debt, and be running a surplus?!?
Screw this chinsy $1 Trillion coin... if we're gonna go big, we might as well go HUGE!!!
GoBama go... all aboard the Obama Express to debt resolution!! Choo-choo! Print-more-money, print-more-money, choo-choo! Print-more-money, print-more-money, print-more-money.... CHOO-CHOO!!!
Screw this chinsy $1 Trillion coin... if we're gonna go big, we might as well go HUGE!!!
GoBama go... all aboard the Obama Express to debt resolution!! Choo-choo! Print-more-money, print-more-money, choo-choo! Print-more-money, print-more-money, print-more-money.... CHOO-CHOO!!!
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