Can the US Mint Solve the Debt Ceiling Crisis and Create a $1 Trillion Platinum Coin?

With Congress refusing to raise the legal debt ceiling, some are asking the US Mint to create a single platinum coin and then “sell” it to the Federal Reserve for $1 trillion. If the Fed were to play along, they would pay the coin by waving their hand and typing “1,000,000,000,000” into an Excel sheet – thus conjuring up the dollars needed. Is it legit?

Congress has granted the United States Mint the power to mint coins that honestly contain what they claim. For example, a one ounce gold coin must contain one ounce of gold. The creation of a platinum coin with an imaginary price to finance government operations would mark a radical departure from the historical understanding of the Mint’s role and powers.

The United States Constitution (Article 1, Section 8, Clause 5) grants Congress “the power to mint currency, to regulate its value and that of foreign currency, and to fix the standard of weights and measures”. The Coinage Act of 1792 created the United States Mint for this purpose. It allowed citizens to convert gold, silver, and other metals into coins issued by the government mint, which attested to the value and purity of those coins. This service was initially provided almost free of charge except for a small fee to cover the expenses of the process.

The Mint’s mission changed as it became a complement to 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 has retained the responsibilities and powers delegated by Congress under Title 31 of the United States Code. 31 USC §5111(a)(1), which directs the Secretary of the Treasury to produce the exhibits described in Section 5112″ such quantities as the Secretary deems necessary to meet the requirements of the United States.” These coins, from pennies to half dollars, are specified – along with their compositions – in 31 USC §5112.

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

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Since the Mint’s inception, the Treasurer has ensured that there are enough coins in circulation so that those engaged in day-to-day commerce can transact without having to resort to giving candy change, as is made in some countries in shortage of parts. The Mint sends its newly minted coins to the Federal Reserve, which then distributes them to its member banks as needed.

The Mint produces about 14 billion coins – worth about $1.1 billion – each year. This is about the same level of production as in 1976, despite massive population and economic growth. With more transactions being made by check or credit card, there was no need for a large increase in change.

Congress further expressly authorized the Mint to mint commemorative coins and collectibles that could be sold to the public at a markup. It can also produce pure gold and silver coins – not usually used for day-to-day trading – sufficient “to meet public demand” and made available to the public at a cost no greater than production plus marketing expenses (Section 5112(i) and (f).

There is no reason to believe that Congress, when it enacted this legislation largely for the creation of souvenir coins, also intended to give the Mint effective control of the money supply. , which would be exactly what would happen if the Mint could issue coins without any sense. values ​​like $1 trillion.

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Moreover, the exercise of such power – even if it is legal – would fuel economic chaos by inducing unlimited increases in the amount of existing dollars.

Today, the Treasury has only a very limited capacity to issue US dollar notes – only up to $300 million can be in circulation and in circulation. (31 US Code Section 5115) and none may be held or used in reserve. These should not be confused with Federal Reserve Notes which we consider cash. Although the Bureau of Engraving and Printing in the United States produces these notes, it is done at the request of the Federal Reserve under the authority given to the central bank by Congress under the Federal Reserve Act of 1913 which in delegated responsibility for monetary creation to the Fed.

Minting $1 trillion coins dutifully purchased by the Fed would effectively end the supposed independence of the Federal Reserve. The Treasury has already significantly eroded the separation between the politically motivated administration and the Federal Reserve’s supposed neutral pundits by effectively forcing the Fed to buy trillions in new debt during the COVID shutdowns.

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

Such a concept falls within the realm of the banana republics. Indeed, a trillion dollar coin would further concentrate American monetary policy in the hands of one of the most reckless administrations in our nation’s history, while setting the stage for much higher inflation in the future. coming.

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Peter St. Onge is the Mark A. Kolokotrones Fellow of the Economic Freedom Think Tank.