[Kevin Drum suggests and I strongly concur that the language seemingly enabling the Trillion Dollar Coin does no such thing - briefly, "bullion coin" has a meaning upon which Congress relied in drafting the law. See "BEFORE THEY STRIKE THAT COIN THEY BETTER GET THE US MINT ON BOARD", after the opening frivolity.]
Paul Krugman explained that as long as we can get comfortable with the idea of our Treasury Secretary briefly donning a clown suit to save the country, we should be ducky with the idea of the Trillion Dollar Platinum Coin.
Well, the reported new Treasury Secretary will be Obama's chief of staff, Jack Lew. Ryan Lizza has a pic of the signature that will soon grace our currency, and I think we can all agree that the clown suit will fit him well.
BEFORE THEY STRIKE THAT COIN THEY BETTER GET THE US MINT ON BOARD: Kevin Drum delivers a breakthrough insight in this post:
In a way, though, I wonder if this is yet another reason to think that the trillion dollar coin wouldn't be legal. Remember that its authorization comes in a sentence devoted to the minting of bullion coins. But as a lawyer friend emailed to me this morning, "bullion coins are generally understood by other statutes within the US Code to be coins with a value effectively equal to the market value of the precious metal bullion in them. The trillion dollar coin is not that."
Excellent point! As I peer through this section of the law on coinage I can't find a specific definition of "bullion coins". However, as I argued earlier, it was clear that in the cases of gold, silver, and later palladium Congress intended the value of the coin to be determined by the value of the metal, not the nominal value stamped on it. For example, the one ounce gold coin is struck at $50, with gold over $1,600 an ounce.
For the meaning of "bullion coin" we can turn to the US Mint for guidance:
Congressionally authorized American Eagle Bullion coins provide investors with a convenient and cost effective way to add a small amount of physical platinum, gold, or silver to their investment portfolios. The American Eagle Bullion program was launched in 1986 with the sale of gold and silver bullion coins. Platinum was added to the American Eagle Bullion family in 1997.
A bullion coin is a coin that is valued by its weight in a specific precious metal. Unlike commemorative or numismatic coins valued by limited mintage, rarity, condition and age, bullion coins are purchased by investors seeking a simple and tangible means to own and invest in the gold, silver, and platinum markets.
They don't seem to be in much doubt as to the meaning of "bullion coin". Nor will a judge, or a Treasury lawyer, or a Fed lawyer when asked to opine on the legality of the Trillion Dollar Dodge. A quick reprise of the text authorizing platinum coins (my emphasis):
(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.
Proof platinum coins won't provide wiggle room for the Coiners - they are a subset of bullion coins. Back to the Mint:
Aside from the proof version, the United States Mint does not sell American Eagle Bullion coins directly to the public. Instead, the Mint distributes uncirculated Bullion coins through a network of wholesalers, brokerage companies, precious metal firms, coin dealers, and participating banks, a network known as Authorized Purchasers.
The minimum impact of the "bullion coins" language will be to give any Treasury lawyer opining on the legality of the Trillion Dollar coin very serious pause, since the issuance would be defying Congressional intent, customary practice, and the conventional meaning of "bullion coin". The maximum impact would be to persuade Treasury that the Trillion Dollar coin is clearly out of bounds.
SINCE YOU ASKED MY OPINION: As to the legality of the Trillion Dollar Coin, Congress routinely has limited the Treasury Secretary's authority to print money or issue gold and silver coins. The platinum glitch was at worst a drafting error which violates history and past practice. Issuance of the Big Coin would be an institutional power grab moving the creation of money from the Federal Reserve back to Treasury, so the Fed may want to protect its turf.
My call - even 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.ONE WORD: Sale-leaseback. 'Nuff said.
...Or is that two words? Fine. Sell the Seventh Fleet, or ANWR, or Yellowstone National Park to the Japanese for $500 billion and lease it back at $25 billion a year for twenty years (plus a bit more to reflect the time value of money, but not "interest" since this isn't debt). Include a cancellation/payback option for the US.
The Treasury nets $475 billion the first year and then bleeds out over time. But in the interim the debt ceiling problem ought to be resolved, in which case new debt can be issued and the cancellation option of the lease can be exercised. As long as we have friends in Japan willing to play ball it should work fine. We do have friends there, yes? They better be friends, becasue we aren't really going to deliver the Seventh Fleet, or ANWR, or Yellowstone in the event of default, so it is a bit of sham security.
Is this legal? HTFWIK? But it has to be legaler than a trillion dollar platinum coin.
- ‘(A) BULLION- The bullion versions of the coins issued under this Act shall be sold by the Secretary at a price equal to the sum of--
- (i) the market value of the bullion at the time of the sale; and
- (ii) the cost of minting, marketing, and distributing the coins (including labor, materials, dies, use of machinery, and promotional and overhead expenses).
- (B) PROOF VERSIONS- Proof versions of the coins issued under this Act may be sold by the Secretary at a price equal to the sum of--
- (i) the cost of designing and issuing the coins (including labor, materials, dies, use of machinery, overhead expenses, marketing, and shipping); and
- (ii) a reasonable profit.
Why that language disappeared in the final version adopted a few years later is a legislative mystery. Coiners can insist that dropping the language shows Congress intended to open the door to the Trillion Dollar Dodge. Others will say that "bullion coins" is a phrase with a well-known meaning in numismatic circles.
Well - there is a glaring drafting error in ObamaCare relating to state-run exchanges, so mindless literalism might not be the best path for Dems to take.KEVIN DRUM, ALCHEMIST: Platinum, lead - everything he touches turns to gold.