From Ezra Kelin's Wonkblog, the death jingle of the Trillion Dollar idea that never quite arrived:
The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.
That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.
The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.
The notion that the Fed, as buyer, might actually be entitled to an opinion is news? From Just One Gloat a few days back:
[E]ven if the Treasury can find lawyers willing to sign an opinion blessing their sale of the coin, the Fed will not want to find lawyers blessing their purchase of it. The Fed will want to protect their turf, duck an obvious Executive-Legislative struggle, and stay away from a coin the legality of which is far from obvious. No Sale.
Ezra Klein provides a summary of the history of the coin idea but is not feeling sufficiently wonky to tackle the legal issue. We can help.
As to the legality, an informed reading of the controversial text makes it pretty clear that this idea was implausible. Here we go, my emphasis, starting with the relevant passage of the law on coins:
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.
"Bullion coin" has a specific meaning in the world of coins; here is the US Mint definition:
A bullion coin is a coin that is valued by its weight in a specific precious metal.
A bullion coin is valued by the weight of its metal, not its face amount. For example, the Gold American Eagle contains one ounce of gold, making it worth over $1,600 at current prices. But its face amount is a mere $50, so there is no seigniorage.
By this criteria, a trillion dollar platinum coin would need to contain a trillion dollar's worth of platinum (which doesn't exist) and would weigh roughly 18,000 tons.
And a proof platinum coin? Well, proof coins are simply specially produced, cosmetically enhanced strikings of conventional circulating, commemorative or bullion coins produced for the collecting market. This concise definition comes from a coin site:
Proof Coins are specially made examples of regular issue coins historically used as gifts or for presentation.
In over 200 years of operation there are many examples of coins the US Mint has struck only in conventional form. However, they have never (as best I can glean from paging through two coin guides at my local library) struck a proof coin that does not have a conventional counterpart.
So this law authorizes the Secretary to (hypothetically) strike a Proof Platinum Quarter, as a beautiful collector's piece with a face value of $0.25. Or they could strike a beautiful proof version of their one ounce Platinum Bullion coin, with a face value of $100.
But since there is no Trillion Dollar Platinum coin, an enhanced version of that coin can't be called into being without violating the conventional meaning of "proof coin" and 200 years of Mint practice.
I should note that Coiner Paul Krugman remains in denial despite the Treasury statement and his presumed ability to read a one-sentence law and consult a reference or two to pin down the meanings of "bullion coin" and "proof coin":
The thing is, the coin option sounds silly, but it clearly obeys the letter of the law. As far as I can tell, none of the other options — other than outright surrender — has the same virtue.
Krugman's critique of the Administration's negotiating strategy would stagger off in a very different direction if he took the trouble to figure out whether the Trillion Dollar coin is likely to be deemed to be legal. Oh, well, I guess even Obama-bashing is more fun than researching - Laurence Tribe didn't do the homework, and now Krugman won't pause and check Tribe's work. Did I say "Echo chamber", Echo chamber, echo chamber... Yes I did, did, did...
IN AN UNCHARACTERISTIC MOMENT OF HUMILITY... Kevin Drum has been an ardent coin skeptic from day one; his post pointed the way to the bullion and proof problem. And Edmund Moy, a former director of the Mint, buried the bullion coin concept in this guest piece at CNBC but spent less time on the 'proof' question.