Can US Mint fix the debt ceiling crisis and summon a $1 trillion platinum coin?

With Congress refusing to raise the legal debt limit, some are calling for the US Mint to create a single platinum coin and then “sell” it to the Federal Reserve for $1 trillion. If the Fed played along, it would pay the coin by waving its hands and typing “1,000,000,000,000” into an Excel sheet — conjuring up the dollars needed. is this legit

Congress gave the US Mint authority to mint coins that honestly contain what they claim. For example, a 1 ounce gold coin must contain one ounce of gold. The creation of a platinum coin with an imaginary price to fund government operations would represent a radical departure from historical understanding of the mint’s role and power.

Federal Reserve Chairman Jerome Powell testifies during a House of Representatives hearing on Capitol Hill on September 30, 2021. (Al Drago/AFP via Getty Images)

The United States Constitution (Article 1, Section 8, Clause 5) grants Congress “the power to mint money, to regulate the value thereof and foreign coinage, and to establish the standard of weights and measures.” The Coinage Act of 1792 established the United States Mint for this purpose. It allowed citizens to convert gold, silver and other metals into coins issued by the state mint, confirming the value and purity of these coins. This service was initially provided almost free of charge, apart from a small fee to cover the cost of the process.

The mint’s mission changed when it became an adjunct of the Federal Reserve, to which Congress delegated the expansion or contraction of the money supply under the Federal Reserve Act of 1913. As a result, the Mint retained the responsibilities and powers delegated by Congress in Title 31 of the United States Code. 31 USC §5111(a)(1), directing the Secretary of the Treasury Department to produce the coins described in Section 5112 in quantities the Secretary deems necessary to meet the needs of the United States.” These coins, by pennies up to half dollars, are specified—along with their composition—in 31 USC §5112.

The Federal Reserve Building in Washington, DC on January 22, 2008. (Chip Somodevilla/Getty Images)

DEMOCRATIC SPENDING THREATENES THE HIGH LIVING OF AMERICANS

Since the Mint’s inception, the Treasurer has ensured that there are enough coins in circulation to ensure that those involved in day-to-day commerce can transact without resorting to candy, as is the case in some coin-scarce countries case is. The Mint sends its newly minted coins to the Federal Reserve, which then distributes them to its member banks as needed.

The Mint produces approximately 14 billion coins worth approximately $1.1 billion each year. That’s roughly the same level of production as in 1976, despite massive population and economic growth. As more transactions are conducted by check or credit card, there was no need for a large increase in coinage.

Congress also specifically authorized the Mint to mint commemorative coins and collectibles that can be sold to the public at a premium. It can also produce pure gold and silver coins – not normally used for day-to-day commercial transactions – sufficient “to satisfy public demand” and made available to the public at a cost not exceeding production plus marketing costs (Section 5112(i) and (f ).

There is no reason to believe that when Congress enacted this legislation largely for the production of souvenir coins, it also intended to give the mint effective control over the money supply, which would be exactly the case if the mint minted coins in Nonsense could spend values ​​like $1 trillion.

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Moreover, the exercise of such power, even if legitimate, would foment economic chaos by causing an unlimited increase in the dollars in existence.

Today, the Treasury Department has very limited capacity to issue US notes – only up to $300 million can be outstanding and in circulation. (31 US Code Section 5115) and none may be held or used as a reserve. These are not to be confused with Federal Reserve Notes, which we consider cash. Although the US Bureau of Engraving and Printing produces these banknotes, it does so at the behest of the Federal Reserve, under the authority granted to the central bank by Congress under the Federal Reserve Act of 1913, which effectively delegated responsibility for money creation to the Fed.

The minting of $1 trillion worth of coins dutifully bought by the Fed would effectively end the supposed independence of the Federal Reserve. The Treasury Department has already dramatically undermined the disconnect between the politically motivated government and the Federal Reserve’s supposedly neutral pundits, effectively forcing the Fed to buy trillions in new debt during the COVID lockdowns.

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But never has the US Mint used its limited minting authority as a mechanism to create coins of counterfeit denominations for the purpose of funding government operations.

Such a concept lies in the realm of banana republics. In fact, a trillion dollar coin would further concentrate American monetary policy in the hands of one of the most ruthless governments in our nation’s history, while also paving the way for much higher inflation in the future.

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Peter St. Onge is the think tank’s Mark A. Kolokotrones Fellow in Economic Freedom.