A New Coin For All Numismatists

Can a $1 Trillion Coin End Debt Ceiling Crisis?

By Charles Riley | CNNMoney.com

What if the threat of a voluntary default by the United States could be erased by simply turning one tiny scrap of platinum into a coin?

That's right. No debt ceiling problem. No bickering in Congress. No market jitters. The only thing needed is for the Treasury Department to mint a platinum coin with a face value of $1 trillion.

Of course, this is not going to happen. Creating money out of thin air is hardly a solution. It could lead to even more concerns from those worried about inflation. Critics of the Federal Reserve's monetary easing programs would likely be apoplectic if the Treasury Department trumped Ben Bernanke's "helicopter drop" by minting a trillion more new dollars.

The influential New York Times columnist Paul Krugman has already dubbed the talk a "gimmick." But here is why some people think this bizarre strategy could work.

Last week, Treasury Secretary Tim Geithner made it official: Federal borrowing has reached the $16.394 trillion debt ceiling.

Treasury, which runs the government's debt-issuance operation, is busy creating about $200 billion of headroom by employing what it calls "extraordinary measures." That should cover about two months' worth of borrowing.

When the two months expire, Treasury will no longer be able to pay the country's bills -- that is, it won't be able to borrow more money to pay for spending already authorized by Congress.

If Congress does not act to raise the debt ceiling, the U.S. will default on its debts. Not good. But this is where the platinum coin comes in. Normally, the Federal Reserve is charged with issuing currency. But U.S. law, specifically 31 USC § 5112, also grants Treasury permission to "mint and issue platinum bullion coins and proof platinum coins."

This section of law was meant to allow for the printing of commemorative coins and the like. But the Treasury Secretary has the authority to mint these coins in any denomination he or she sees fit.

With a $1 trillion coin in hand, Treasury could deposit the money into Fed accounts, and pay its debts in that manner, instead of relying on bond issuance.

And none of this requires Congressional consent. Talk about an elegant solution.

The White House unsurprisingly hasn't commented on the idea. But Rep. Jerrold Nadler is on board. "I'm being absolutely serious," he told Capital NY. "It sounds silly but it's absolutely legal."

No problem Bill. I am told privately that they will mint several Billion dollar coins and for light change, the occasional million dollar coin.

Will President Obama order the Treasury to mint a $1 trillion coin? It’s possible.......

National Monitor

It’s the question making its way around Washington: Will President Barack Obama order the U.S. Treasury to mint a $1 trillion coin in order to avoid the debt ceiling debate.

Early indications seem to point in the direction of the White House wanting to avoid a debate over executive power. The debate over minting a $1 trillion coin hinges on a relatively obscure law that allows the Treasury to mint platinum coins in any denomination he sees fit. The legal clause grants the secretary of the Treasury the right to mint and issue platinum coins in any quantity or denomination he chooses. Following the creation of the coin, he might deposit it at the Federal Reserve, providing the Reserve with the ability to continue its buying and selling operations. When Congress raised the ceiling again, the administration could then take the platinum coin and destroy it. With Treasury Secretary Timothy Geithner remaining a close ally of Obama, it seems unlikely he would reject an order if given.

Still, taking into account the current politics of Washington, it remains unlikely Obama will side with issuing a directive. Speaking from the White House on Thursday, White House Press Secretary Jay Carney downplayed the possibility of avoiding the debate over raising the nation’s debt ceiling by minting a $1 trillion coin, saying all options are on the table, but that the president would prefer to work with Republicans.

Trillion-Dollar Coin? White House Says No Way

By Matthew Larotonda | ABC News

The Obama administration has killed any notion of minting trillion-dollar platinum coins to solve the nation's debt ceiling woes.
In a written statement released today, White House Press Secretary Jay Carney says there are only "two options" to deal with the looming need for the U.S. government to pay creditors for federal funding it has already spent. Minting the proposed currency to pay it off and avoid an impending battle with Capitol Hill is not one of them.
"Congress can pay its bills or it can fail to act and put the nation into default," he writes.
Carney blames Congressional Republicans for having "played politics" during the last negotiations over the country's borrowing limit in summer 2011. The stalled talks resulted in a downgrade of the U.S. credit rating by Standard and Poor's.
"The President and the American people won't tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy," the statement reads. "Congress needs to do its job."
The Treasury Department has been staving off the ceiling using accounting tricks for months - most recently on Dec. 31. But with no comprehensive solution reached during the recent " Fiscal Cliff" negotiations, a brewing fight on how to deal with the $16.4 trillion borrowing limit is set for the late winter.
ANALYSIS: How do you solve a problem like the debt ceiling?
The coin proposal has floated around academia and economic policy circles for some time, but gained traction after the cliff ordeal, when it was taken up by cheeky monetary wonks and some members of the progressive left.
The idea follows that should Congress fail to extend the debt limit, Treasury could begin minting trillion dollar coins (in a process explained mostly seriously by Jim Pethokoukis on his American Enterprise Institute blog), a number of which could then be put toward fulfilling debt obligations in the event new legislation stalls in Congress. The Federal Reserve would hold the hefty currency until it was time to pay the bills.
While there are laws in place to regulate how much paper, gold, silver or copper currency can be circulated by the government, there is nothing so clearly stated when it comes to platinum.
The White House statement comes a day after Senate Majority Leader Harry Reid and Democrats urged the president to "take any lawful steps" to avoid default - "without Congressional approval, if necessary." In response Republican Leader Mitch McConnell railed against the notion in a written statement.
"Democrats are looking at everything from the ridiculous (printing a trillion-dollar coin) to outright abdication of Congressional responsibility," it reads. "But avoiding this problem will only make it worse."
The idea to mint the coins as a way around the federal debt ceiling won a high profile advocate Friday when Pulitzer Prize winning economist Paul Krugman used his New York Times column to say "Mint the coin!"
But a senior administration official told ABC News there was one key factor in making that course of action impossible: The Federal Reserve said it would not view the coin as viable.
"Since they wouldn't view the coin as viable, the issue isn't not wanting to do the coin. We just can't," the White House official said.
In other words, the scheme favored by folks like Krugman just would not work.