Law prof: it would be legal to mint 2x $1 trillion platinum coins & use them to pay the US debt

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78 Responses to “Law prof: it would be legal to mint 2x $1 trillion platinum coins & use them to pay the US debt”

  1. Stefan Jones says:

    They tried something like that on The Simpsons, and the only person who ended up benefiting was Fidel Castro.

  2. What does this really solve…

  3. technobach says:

    There must be a reason that it’s a law prof, not an economics prof…

    • Paool says:

      On that note as well, most of Congress is comprised of lawyers and yet they run the economy. Tell me how THAT makes since. Sure they have staffing and advisors but shit that just means any good ideas have to run through a filter thick as lead.

  4. Have they heard of something called….INFLATION? Dumbfucks… >.>

    • Ed O'Connor says:

      Wait, issuing coins to borrow against is stupid and creates INFLATION, but creating bonds out of thin air to sell and raise money is okay? 

      Where is all of the inflation that this technique has been generating for the past few years?!?!

      • ChicagoD says:

        The story doesn’t say you borrow against the coins, it says you deposit them into the checking account and write checks. That way you create two trillion dollars, with bonds you borrow two trillion existing dollars. Seems like a significant difference to me . . .

        • Ed O'Connor says:

          The Federal Reserve is the bank in this case, and the govt will write incremental checks against the total, putting the money into circulation. The money supply is managed by the US Treasury in coordination with the Federal Reserve. Minting $2 Trillion in coins and having the Federal Reserve use QE to balance their books has exactly the same effect as borrowing $2 Trillion via the bond market. To the extent that minting the coins is inflationary (and in this economic environment, there is plenty of room for debate), borrowing that same amount via bonds is equally inflationary.

  5. RichardHenderson says:

    And if they increased the money supply that quickly, we’d see hyperinflation similar to what the Germans experienced between the two wars… people who didn’t hedge against gold or silver would almost instantly be wiped out. 

    Fuck guys – read your history.

    • Ed O'Connor says:

      Gimme a break, the 21st century US and 1920′s Germany are not comparable. After minting two $1 Trillion coins, the Treasury would not just flood the money supply– the coins would never leave the vault. Money supply is money which is “in play” in the economy at any given moment. Please read some economics.

      • ChicagoD says:

        But, but, but . . . if your write checks against the coins and the checks are (inevitably) cashed, the value of the coins is “in play.” As long as you mint the coins but don’t ever do anything with them, this will be moot (but also won’t change the debt situation). If you use the coins, you will eventually put them “in play.”

        • Ed O'Connor says:

          My point is that you don’t need to dump $2 Trillion into play all at once. Just as with issuing bonds, you put money into circulation according to the immediate needs for the country’s finances.

  6. xenphilos says:

    For those against the idea: I think the guy was pointing something out, not making a serious proposal.

    • RichardHenderson says:

      What exactly was he pointing out, then?

      • Chevan says:

        That it was legal, not that it was a good idea.

      • EvilSpirit says:

        Without being able to read his mind, one thing he *could* have been pointing out is that default on debt was never a (legal) possibility in this whole thing, regardless of what people liked to say. The executive is required by the 14th amendment to honor all debts, and has the means (via control of the money supply) to do so.

        The real risk in all of this, assuming the law was obeyed, was not default, but some combination of shuttered services and inflation.

    • mattatlaw says:

      I agree, he was presenting it as an unrealistic option, but he did point out that “some commentators have suggested [it],” so the sarcasm is directed at them.

  7. Isn’t that pretty much just asking for hyperinflation, like what Germany did in the 20s?

  8. Brie says:

    I suspect the Chinese would prefer the actual platinum coins and not a check written against it.  Just saying.

  9. RoofusKit says:

    We can print a 3rd one and build a new capital city in the middle of the forest too! Sounds like a great idea, we could call it Brasilia.

  10. Glippiglop says:

    This guy thinks too small!  Just mint a coin for infinity dollars and the US will be perpetually wealthy!  Woohoo!

  11. petertrepan says:

    WORLD (Reuters) – International markets wait in anticipation, poised for rebound or collapse as the U.S. Department of the Treasury searches frantically beneath the couch cushions.

  12. mattatlaw says:

    Wow, so simple! While we’re at it, let’s end poverty by giving everybody a million dollars. We can also end all wars by making them illegal.

  13. Ramone says:

    I love the idea of  the existence of Trillion Dollar coins, but then again: http://www.theonion.com/articles/clinton-seduced-by-suave-international-diamond-thi,20015/

  14. yri says:

    After which we’ll soon see Ronald Reagan’s face on $1,000,000,000 “Gipper” notes. Me, I’m moving to Mr. Lee’s Hong Kong, as the Kong Buck is a much more stable currency.

  15. awjt says:

    Umm, why not just mint ONE $2 trillion dollar coin?  Half the effort.  C’mon people, use yer friggin maths.  That’s what the maths are for.

  16. wastrel says:

    The idea here is to allow the executive to circumvent debt ceiling limit by adding to the debt without breaking the law.

    Since the debt ceiling has now been raised the original point is moot.  It would still be a good idea to do this anyway as a form of economic stimulus that circumvents the dysfunctional congress which is currently opposed to any measure that would improve the economy.

    • Chevan says:

      “The idea here is to allow the executive to circumvent debt ceiling limit by adding to the debt without breaking the law.”

      The issue wasn’t about doing it without breaking the law, it was doing it unilaterally. If the President had felt so inclined, he could have legally raised the debt ceiling himself via the 14th Amendment. But just because it would have been legal doesn’t mean he thought it would have been a good idea.

      • wastrel says:

        I read that there was some question as to the legality of the 14th amendment option, depending on interpretation, while the “coin seigniorage” was more unambiguously legal.

      • billstewart says:

        The 14th Amendment doesn’t let the President raise the debt ceiling – it simply requires the US government to pay the debts it has already incurred, but doesn’t authorize issuing new debt.   Scare tactics by both sides that hitting the debt ceiling would cause a default was dishonest, though speechmaking about all the spending cuts that would have to happen was largely legitimate.

        But there are other ways for the President to avoid the Debt Ceiling law.  After all, it’s not a Constitutional requirement, it’s just a law passed by a previous Congress, and the President could contend that any more recent budget bills or spending authorizations supersede it – if they authorize more spending than revenue, that’s obviously incurring a debt.  The Debt Ceiling law probably has various spending cut triggers and limits on who you can stiff by how much, some of which might still apply, but most of those are things that the President could spend now and weasel out of in court later. 

        This whole set of arguments has conflated three different problems
        - The debt ceiling, which is an artificial limit being used to force political crises and risk more serious effects, like China raising the interest rates they’d demand from the US
        - The Federal Government’s actual spending imbalances, including the overall debt and the ongoing deficits and their obvious long-term unsustainability
        - The damage to the economy from whatever the Feds end up doing to respond to their problems.

        Printing trillion-dollar coin isn’t just a trick that gives you a legal loophole around the Debt Ceiling (cute as it is) – it also causes the rest of the world to question the probability that the US will pay them back in useful money as opposed to devalued paper.  A friend of mine had a Zimbabwean trillion-dollar bill, which was pretty much worthless – they’ve dropped at least 30 zeros off the Z$ in the last few years, leaving what he described as “homeopathic quantities of money”.

      • Ed O'Connor says:

        Legally, the 14th Amendment is a LOT riskier. The Treasury law, on the other hand, is very clear about the authority to mint coins.

        We mostly pooh-pooh this idea as crazy because Democrats are in office, and expect them to behave in a sanely. However, now that the debt limit is officially fair game for holding the nation’s finances hostage (even though Congress approved the spending in the first place!), if in the future Democrats decide to filibuster the debt limit, we will congratulate the Republicans for having the fortitude to pull an end-run and mint coins and rescue the economy.

  17. AirPillo says:

    Instead of tackling the absurdity of the deficit problem head on, he encapsulates that absurdity in discussing the idea of minting a pair $1 trillion platinum coins, and then using just two coins to pay the deficit of an entire nation.

    I seriously respect how cleverly he manages to use reductio ad absurdum and agitate discussion on a topic where it’s easy to lose your sense of scale and forget how silly things are getting.

  18. bcsizemo says:

    All my RAGE.

  19. Anne Trotter says:

    Can you imagine owning a 1 trillion dollar coin? Those things would become the MacGuffins for every major heist so fast your head would spin around then vaporize. You could not keep them safe. Jeez. 

    • A major heist to capture something that would be impossible to redeem in actual money, since it is pretty unique in existence? Now that’s a scenario for encapsulating how truly abstract modern economics is.

      “This coin has a theoretical value of 1 trillion dollars!”
      “Hooray! What can we do with it?”
      “Eh.. flip it to decide who pays for burgers next?”

      On the other hand, the economics of the black market for collectables (be it art or artifacts) comes into play here. No doubt some weird russian oligarch would pay you handsomely to own said worthless coin. Making it worth something.

      Oh boy, this “everything is worth what the purchaser is willing to pay” logic does your head in.

  20. MandoSpaz says:

    All your platinum are belong to us!

  21. MDwebguy says:

    I know this coin idea is crazy as hell, but it has a certain simple elegance to it.  And it would remind those Repugnican bastards exactly who’s in charge.

    It would have been such a thrill, had Obama enacted this strategy a week ago.  Once the coins were minted he could have personally handed them to Geithner and said, “There you go, Tim.  Take care of business.”  The tea baggers would have stormed the fence surrounding the White House, their hair on fire and their mouths yapping like rabid Pomeranians.

    • Shawn RIchardson says:

      “remind those Repugnican bastards exactly who’s in charge.”

      Lol, I think they know exactly whom isn’t in charge, but I’m not so sure about you. And yeah it would have been such a thrill to watch the price of bread skyrocket over night.

    • J B says:

      People don’t need reminding who is in charge: a bunch of morons who think spending trillions more than you have is a good idea.  We already know.

      Only morons and tea baggees think this is a good idea.

      • MDwebguy says:

        So much for civility and politeness.  I said in the opening words of my post that I recognize the craziness of the whole notion.  That said, you’re being deliberately insolent and rude on the basis of differing political views.  GrowTFup.

  22. calvert4096 says:

    Even disregarding the other effects of the consequential inflation, banks would throw a shit-fit, since inflation devalues the debt held by creditors.  They would probably prod the GOP-controlled House to find/invent some political maneuver to stop the Executive from minting any significant amount of money at once.

  23. kmoser says:

    They’re going about it all wrong. They should mint several negative trillion dollar coins and give them to the Chinese (while being careful to state “no backsies”), at which point China will owe us a couple trillion dollars.

  24. Greg F says:

    Apart from being a dumb idea, there isn’t enough Platinum on reserve to cater to this fuck-wittery — surely they would need to be intrinsically *worth* a trillion bucks apiece — they would literally need to be the size of a two-story house!

    Money is a big enough illusion as it is without this kind of crap making it even more meaningless?

  25. How about an Infinite banknote? There actually is one that already exists: http://blog.artasmoney.com/?p=214171

  26. teambeaker says:

    Um, not to hinder “progress” but, at current Pt prices, a coin of that size would be 12″ tall, 226′ in diameter and weigh 815tons. 

  27. jpr0 says:

    You don’t mint a coin at its actual material value, that would be pointless…
    They make it whatever size and shape they desire.

    • Greg F says:

      Erm … that’s precisely the point. And its why we’re currently in DeepShit Arkansas.

      Not so much coinage as promissory notes. But all of it is smoke and mirrors. And now that everyone has (in some cases painfully and tragically) noticed the system is a load of hogwash, we need a serious rethink on what money actually *is*.

    • Pondering_It_All says:

      That’s what you think, anyway:  Using today’s closing prices, the metal value of the nickel and copper in a US nickel is 6.44 cents!

  28. greebo says:

    aw, come on. They ought to at least use imaginary numbers for these coins. What’s the square root of minus one trillion?

  29. If the coin(s) simply have an arbitrary value assigned to them (not based on the mineral value), then the trick is to find someone stupid enough to accept them at the assigned value.

    In this case, the Federal Reserve (which is a private organization) would be asked to accept a handful of metal and pretend it has some value.  The result would be such a massive devaluation of US currency that they’d have to immediately start issuing $1 trillion coins to everyone so we’d have enough to buy a cup of coffee.

    They tried this in the Wiemar Republic and it didn’t go over too well there.
    They’re still playing this game in Zimbabwe.  I have 5 $100 trillion Zimbabwe dollar bills.  Who will trade me an ounce of gold for them?

    • Antinous / Moderator says:

      They’re still playing this game in Zimbabwe.

      I read the other day that they recently gave up and are using US dollars.

    • Spikeles says:

      In the US economy, all coins/money have arbitrary values assigned to them, that’s what a Fiat Currency is.

    • strstu says:

      No, the Fed already increased the money supply by at least $2 trillion during the last few years. During the liquidity crisis and then afterword during the liquidity trap increasing the monetary base has benign if not beneficial effects.

      Having the treasury pay off the Fed with a $2 trillion coin would simply reduce the debt owed to the Fed. In fact, non other than Ron Paul suggested the Fed could just forget it had monetized the debt in the first place.

    • TheMudshark says:

      All the coins and bills we use have had an arbitrary value assigned to them since at least 1973 and so far the whole world has been stupid enough to accept them.

  30. Jim Donovan says:

    stick with the law dude

  31. Jay Cantrell says:

    Guys, the Fed has been doing the equivalent of this anyway. Look up ‘quantitative easing’. The only difference is that instead of making up electronic money to buy undervalued financial assets, we would be minting two coins to represent the increase in money supply and using it to pay debts. If inflationary pressure was a real concern in the world marketplace, interest rates would be much higher than they are now. In fact, until very recently, DE-flation was the primary concern. 

  32. digi_owl says:

    The problem is that for years the USD have not been backed by any real production, only asset based ponzi schemes.

  33. eric42601 says:

    Has no one ever heard of what happened in Zimbabwe?

  34. eerd says:

    The idea about minting a trillion dollar coin – or two – would be to deposit them in the Federal Reserve. The government could then borrow against them. It’s not a question of inflation – or at least not more so than is already set out under the spending programme.

  35. ChicagoD says:

    “Uh oh. I think I just put the billion dollar platinum coin in a vending machine. We’re about to get a whole shitload of Sacagawea dollars back.”

  36. This idea could be the cold fusion of econonic theory. 

    With platinum around $1700/oz a trillion dollar coin would need to weigh about 37 million pounds.  So the 2 coins would use around 74 million pounds of platinum.  This would surely create a platinum shortage sending platinum prices skyrocketing, thus driving up the value of our newly minted 74 million pounds of platinum coins.

    BRILLIANT!!!!!!!!

    • Jamie Roberts says:

      Following which will be a huge recession in the high-tech manufacturing industries that depend on the supply of industrial platinum.  The government, in turn, suffers a huge loss in revenue in the form of taxes.  Finally, the government is forced to sell its platinum at a loss as suddenly the value of their platinum stockpile is vastly diminished from anemic demand from the destruction of manufacturing capacity.

  37. Even if every dollar was spent in the most efficient manner possible it would still be necessary to raise the debt limit to keep up with inflation.  The next argument you’ll have is that the federal government should’nt carry any debt at all… well that’s dumb too – borrowing money at a low enough interest rate so that it can be put to use and yield a higher rate of return is just smart money management.  People and businesses do it everyday.  It applies the same to the federal government. 

    We just need to figure out how stop letting the most unqualified people possible decide how trillion dollar budgets get allocated.

    politician != economist

  38. Thebes says:

    It would also be legal to buy our way out of the Federal Reserve system, and indeed the Federal Reserve Act allows for just that.

    But neither of these things will happen. Not unless maybe we have a revolution of some sort.
    Our Political Class is beholden to bankers and to corporate interests. The interest on our debt is most of the reason our politicians create so damned much of it.

  39. Johnny Milaychev says:

    Anybody remember what happens at the end of fight club?

  40. DouglasLucchetti says:

    One difference between printing paper money and money on precious metal is that no matter what happens to the banking system, the value of the metal is still worth something and in the case of platinum, that would be considerable and therefore might be worth consideration. I can easily imagine lot of people around the world eager to send the treasury their paper in return for precious metal as a hedge against the paper money which costs practically nothing to mint and whose strength is dependent on how confident others are to accept it…something that we are seeing being eroded when it comes to greenbacks which used to be the indisputable leader. 

  41. Pondering_It_All says:

    You can actually take your US paper currency and trade it anywhere for existing US coins that have higher metal value than their face value.  For example, using today’s closing metal prices a normal circulating US nickel contains about 6.44 cents worth of nickel and copper.  Hand the bank teller two dollar bills, and she will hand you a roll of nickels worth about $2.57.

  42. I say do it just for kicks.

  43. hostile_17 says:

    A PROFESSOR suggested this? Oh dear.

  44. digi_owl says:

    In the end it seems the problem hinges on how money is seen. Is it a physical object, or is it a community lubricant?

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