(originally published on May 21, 3023) During the 2011 debt ceiling crisis, Washington scrambled around trying to figure out how to avoid the self-imposed debt ceiling limit in order to avoid default on U.S. government securities and other payment obligations. One possible solution was to find space under the then current debt ceiling which could be achieved through the elimination of existing debt. Based on a proposal from an early 1990’s political candidate, a unique idea was discussed which would free up space under the debt ceiling limit.
The U.S. Mint, a bureau within the Treasury Department, is charged with creating and stamping U.S. coins. The idea was to have the U.S. Mint stamp a $1 trillion platinum coin. The $1 trillion had nothing to do with the value of the underlying coin, and it is legal to stamp the coin with this value under U.S. law. The Treasury would then have used the $1 trillion coin to purchase, or pay-off, $1 trillion of U.S. debt then currently being held by the U.S. Federal Reserve. Just like that, $1 trillion of U.S. debt would have magically disappeared, and debt ceiling space would have been created.
The idea received much support from various economics and financial heavyweights which included Nobel Prize Winning Economist and New York Times Columnist Professor Paul Krugman, along with numerous other recognized economics and financial minds. Others viciously attacked the idea as an end-run around the separation of powers between the legislative and executive branches. Harvard Constitutional Law Professor Laurence Tribe, however, stated: “The statute [31 USC § 5112] clearly does authorize the issuance of trillion-dollar coins.”
Rashida Tlaib, U.S. House Representative of Michigan’s 13th Congressional district, along with a handful of her House colleagues, introduced a Bill during April of 2020 entitled “Automatic BOOST to Communities Act” (H. R. 6553, 116th Congress). This Act would have granted $2000 monthly payments to every U.S. citizen, and some non-resident aliens, during the remainder of the declared COVID emergency period, and $1,000 monthly payments for one year after the end of the declared emergency period. This federal spending was to be funded through the U.S. Mint’s production of two $1 trillion coins with the possible issuance of additional coins if the program required additional funding. The Bill called for the Federal Reserve (FED) to purchase the coins from the Treasury Department through the deposit of $2 trillion into the Treasury’s general account at the New York Federal Reserve Bank. If the influx of additional spending were to interfere with the FED’s monetary operations, i.e., were to be inflationary, the Bill authorized the FED to absorb excessive money out of the economy through the issuance of Federal Reserve bill’s, notes, and bonds up to an amount equal to the value of the coins issued.
Undoubtedly, the elimination of $1 trillion of U.S. debt through the mere minting of a coin, or the creation of $2 trillion, by the same process, to fund supplemental incomes, would expose the creative possibilities inherent to a sovereign monetary system. This burst of monetary enlightenment might have planted an idea within the heads of the working classes that through the mere act of money creation, the working class could increase their share of the economic pie. Surely, lifting the veil on the creative possibilities of the monetary system must have caused fear in the hearts of those wedded to the monetary status quo, and would certainly have altered the balance of power between capital and labor–which is likely why the Bill never became law.
Current Treasury Secretary Janet Yellon has stated the Treasury is not considering the creation of a trillion dollar platinum coin in order to avoid the current debt limitations.