Thu January 10, 2013
Crazy Or Canny? Talk Grows About $1 Trillion Platinum Coin
Originally published on Fri January 11, 2013 12:15 pm
We're pretty sure this won't happen.
You practically can't visit a news site these days without seeing a story about why President Obama should or should not order the Treasury Department to strike a platinum coin "worth" $1 trillion and deposit it with the Federal Reserve.
And why would Obama want to do that? Because, as we've said, the next big political battle in Washington comes in mid-February when the federal government again hits its "debt ceiling" and won't be able to borrow any more money. Republicans are saying they won't go along with an increase of the debt ceiling unless Democrats agree to some serious spending cuts. President Obama has said he's not going to go through another battle like the one in 2011 when much of the government almost had to shut down.
So, the idea has been raised of putting a $1 trillion coin in the Fed's vaults — which in theory, at least, would mean the government has more money available to borrow against and won't bump up against its debt ceiling.
New York Times columnist and Nobel Prize winner Paul Krugman is on board:
"Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that's silly but benign, the other that's equally silly but both vile and disastrous. The decision should be obvious."
Washington Post columnist and Wonkblog economics editor Neil Irwin calls the idea "idiotic," but says "if there is no resolution of the debt ceiling through the legislative process, I hate some of the alternatives more."
At Forbes, though, columnist Maura Pennington reads such opinions and says "forgive me for hoping that the standard of behavior for adults was a little better than 'just don't be the most ridiculous person in attendance.' "
Wednesday at the White House, The Hill writes, spokesman Jay Carney "was asked repeatedly to clarify the White House's position on the platinum coin during his daily press briefing, but seemed to downplay — although not completely proscribe — the idea."
But is it remotely likely to happen? One of the Times' more conservative columinsts, Ross Douthat, thinks not:
"A White House that played the coin card in negotiations would be answering threats to sabotage the nation's credit with a threat to ... massively sabotage its own political position. And that sabotage would have inevitable consequences for the actual effectiveness of the coin maneuver in the event that the debt ceiling wasn't lifted: If Republicans were successful in portraying coin-minting as a Bond villain scheme rather than a legitimate policy move — and I really, really think they would be, no matter how the media covered it — then it's hard to see the markets maintaining any kind of equilibrium while the White House used a maneuver that even its apologists concede is 'usually a sign of severe distress' to cover the government's obligations."
By the way, why platinum? Because, as The Christian Science Monitor and others have pointed out, it's the one metal that Treasury can use to produce coins of any denomination. That's a legal loophole some lawmakers are trying to close.
And one more thing about a $1 trillion coin: Slate, which asked readers to offer potential designs, also debunks "the biggest myth about the platinum coin option" — that is, you don't actually need $1 trillion worth of platinum to make the coin. After all, "saying that the government would need a lot of platinum is like saying a $100 bill needs to have 100 times as much cotton in it as a $1 bill. Nobody would be able to fit them into their wallets."
Finally, we have to ask:
Note: It's probably obvious, but that's not a scientific survey of public opinion. It's just a question.
Update at 11:30 a.m. ET. A Video Explainer:
Business Insider has done both a story and a video to explain what this is all about. Later today, Business Insider deputy editor Joe Weisenthal is due to talk about the mythical coin on All Things Considered. Click here to find an NPR station that broadcasts or streams the show.
AUDIE CORNISH, HOST:
It's ALL THINGS CONSIDERED from NPR News. I'm Audie Cornish.
MELISSA BLOCK, HOST:
And I'm Melissa Block. Could a coin, a trillion dollar platinum coin, avert the next showdown on Capitol Hill? Very soon, the federal government will hit the debt ceiling. Republicans say they won't lift the ceiling unless Democrats agree to significant spending cuts. It's a drama we've watched before. Remember August of 2011? But now, the idea of creating a trillion dollar coin to save the day is gaining some traction.
It sounds fanciful, ridiculous even, but Joe Wiesenthal of the Business Insider website says, why not, and he joins me to talk about it. Hey, Joe.
JOE WIESENTHAL: How are you doing?
BLOCK: How would this trillion dollar coin work as a way around the debt ceiling? The Treasury secretary goes to the U.S. Mint, tells them to make a platinum coin and then what?
WIESENTHAL: Yeah, that's basically it. Tim Geithner mints a trillion dollar coin, tells the mint to, and then delivers it at the Treasury's bank account at the Federal Reserve. The Treasury can then go about continuing to make its payments, even though we haven't actually gone out and borrowed more money.
BLOCK: And the genesis of this authority you're talking about goes back to a law. It had to do with commemorative coins, right, to increase government revenue. This wasn't the idea. This is kind of an adaptation of an existing law?
WIESENTHAL: That's correct. But lawyers who have looked at this, including, you know, top constitutional minds like Laurence Tribe at Harvard Law School have concluded that it's fine.
BLOCK: And just to be clear, there is not one trillion dollars' worth of platinum in this hypothetical coin.
WIESENTHAL: That's right. This is one of the main confusions that people have. Yesterday, the National Republican Campaign Committee slammed the idea and they had this cartoonish version of a monster coin with a trillion dollars' worth of platinum in it sinking the Titanic, which is kind of amusing maybe from a political standpoint, but it's definitely not what the coin would be.
BLOCK: Here's another argument against the platinum coin, that this would be inflationary, the equivalent really of printing money. Why is it not inflationary?
WIESENTHAL: When you hear about the government creating high denomination currencies you obviously think about Zimbabwe and Weimar Germany and these trillion dollar bank notes floating around and destroying the dollar. But here's why it's different. What's usually happening in those countries is a government is running low on money and wants to boost the economy, so they just start pumping a lot of currency right into the economy.
This is not what would be happening here. We wouldn't be increasing our spending levels by any amount. It's just a different way of financing it.
BLOCK: You do hear people saying why not mint $16 trillion in coins, pay off the entire debt? Where does this end?
WIESENTHAL: That gets back to this question of why isn't it inflationary. And so if you start thinking of the coin, if the purpose is to pay off the debt, then you're actually talking about creating coinage so that we can spend a lot more money and that would be inflationary. The purpose of this is not to pay off the debt. It's a legal loophole essentially of debiting on $1 trillion to the Treasury's account at the Fed and then continuing normal spending.
BLOCK: This legal loophole that you're talking about, Joe, is really, in the end, it's a way to do an end run around Congress, right?
WIESENTHAL: Yes, but it's important to recognize what it is an end run around. It's specifically about allowing the government to pay bills which have already been accumulated. The idea of a trillion dollar coin, I think everyone recognizes that it's absurd, but the debt ceiling fight itself is absurd because it's basically a fight about whether we're going to pay our bills.
BLOCK: Joe Wiesenthal, deputy editor of the Business Insider website and a booster of the idea to mint a $1 trillion coin to bypass the fight over the debt ceiling. Joe, thanks so much.
WIESENTHAL: Thank you. Transcript provided by NPR, Copyright National Public Radio.