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Former Head Of US Mint: The $1T Platinum Coin Is Legal AND Feasible

Posted by Phoenix Woman on January 9, 2013

I think this should settle it once and for all as to whether the famed Platinum Coin Option is feasible.

Via Daily Kos, we see that Philip N. Diehl, who was not only the Director of the United States Mint under Bill Clinton but the co-author (with Mike Castle) of the bill making platinum coinage legal, says the PCO is legal and easily done — and if you read between the lines, he’s just about jumping up and down yelling “DO IT DO IT DOOOOO ITTTTTTT!”

I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.

* In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8). What is unusual in this case is that the law gives the Secretary discretion regarding all specifications of the coin, including denominations.

* The accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

* Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

* This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

* This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

* Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

* Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.

Philip N. Diehl
35th Director
United States Mint

Heh heh heh heh.


9 Responses to “Former Head Of US Mint: The $1T Platinum Coin Is Legal AND Feasible”

  1. joel hanes said

    I’ve never understood why the discussion centers around the reductio ad absurdum limit of one coin, value $1T.

    Would the opposition be as intense to minting 100,000 coins, face value $10 Million each?
    Or to minting a million $1M coins ?
    I suspect the answer is “no”.

    Of course, at each step in this progression, we lose some of the leverage of unrestricted seigniorage — assuming the coins are one ounce regardless of denomination, the materials cost of the platinum is a million times higher in the last case than in the first. With platinum at about $1,600 / oz, it would take a billion and a half dollars worth of platinum to create a trillion dollars in $1 M face-value 1 oz. coins. That’s still a 98.5 % markup, which should be an adequate gross margin for any product other than high-end perfumes or illegal drugs.

    • Charles II said

      I think the Trillion dollar value suggests that this is a one-off, not something that will become part of a regular system. If one makes the value $1M, then, well, we could always run off a few hundred more….

      I do not like the idea of going to the coin, because it demystifies money. If money is demystified, we discover that it has no intrinsic value whatsoever… even gold, land, rice, or clamshells have value only to the degree that people are willing to sacrifice their labor to obtain them. If the system of money breaks down, so will the system of law. People will take what they need rather than offer up their labor.

      But, having said that, we are on a much shorter route of approach to that situation than the demystification inherent in the platinum coin offers. If people cannot obtain the necessities of life through honest labor, they will obtain them by other means. We need to end the unemployment crisis and start raising wages.

      • jo6pac said

        I agree with what you’re saying and I don’t think this a good idea either. Then wouldn’t it be better to take this law that the newt got passed when he was speaker to court. It seems to me that the 14th amendment is pretty clear on this and the law would go down in Flames. The only problem I see is neither side would have anything to use to scare us on Main Street. I think even nancy p. brought this up just a few days ago but of course the wh isn’t listening do to the fact they’re using it to their advantage. SS and other cuts are on the way to Main Street and rewards to ws/dod vendors.

      • The thing is, it’s not so much legal tender as it is like bumping up the limits on one’s credit card to pay for obligations already incurred. That’s why it’s just a single $1T coin and not twenty billion $50 notes; if you’re not putting the coin into circulation — and you don’t want to do that as it would be inflationary — you don’t need to make more than one. Once the crisis is over, the coin is melted down.

        As for the mystique of money, we’ve been living in a fiat currency world since 1972. Might as well take advantage of the fact.

  2. Here’s Laurence Tribe on the issue: Not only is it legal, it’s not even a loophole.

    Recall that Tribe dismissed the 14th Amendment option — the one most journalists have been coached to consider the more “serious” proposal — back in 2011:

  3. ezra abrams said

    Does anyone remember, just last summer, every law professor in the country was confidently predicting how the SCOTUS would vote on ACA.
    And all those law profs were dead nuts wrong.
    you would think that a failure of that magnitude would chasten them a little, but no.

    31 USC 5112 (k) is whatever 5 SCOTUS judges say it is; the idea that no one has standing – r u really gonna say not one judge will grant standing ??

    and, as someone who is very liberal, think this whole thing is liberal hypocrisy in action:
    Imagine if R Reagan tried to use a coin to fund the contras; liberals like tribe would scream bloody murder about such a patently un constitutional lawless act.

    • Charles II said

      Ezra, when the former head of the mint says that it’s legal, modesty dictates that one should be careful with hard words like “lawless.”

      In the larger picture, the United States is in a state of cold civil war. There is a faction that is determined to radically reduce the role of the federal government, in effect returning us to the Articles of Confederation. They have been indifferent to the needs of the country in their attempted seizure of power. And, indeed, they have been lawless. They passed laws authorizing spending and now they don’t want to obey those laws.

      They have to be resisted, with exactly the same determination as if this were a hot civil war. For a faction to use its position in government to wreck the functioning of government is deadly dangerous to the survival of the nation.

    • “Imagine if R Reagan tried to use a coin to fund the contras..”

      Naw, he used drug money instead — which compounded the illegality of the action. Iran-Contra, by the way, is the main reason why his approval ratings were a lot lower than what the hagiographers in the national corporate media would have us believe.

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