The Trillion Dollar Platinum Coin: Believe or Make-Believe?
A petition started in early January on the White House official website calls for the president to mint a platinum coin worth $1 trillion. The United States Treasury technically cannot print its own debt-free currency as a result of the Federal Reserve Act of 1913. President John F. Kennedy signed an executive order in 1963, which temporarily gave the Treasury the power to print debt-free United States Notes, in an effort to tackle rising war debts. A trillion-dollar platinum coin would solve the debt-ceiling issue and relieve Americans of a large chunk of debt accrued by Congressional spending. As sensible as the idea may sound, it may have too many political and legal hurdles to actually happen.
Article 1, Section 8 of the United States Constitution gives Congress the power to coin money and regulate its value. The Federal Reserve Act gave the Fed, a private central bank, the exclusive power to print paper money. The U.S. Treasury currently mints all coins used as legal tender. Technically gold coins, which can be purchased through providers such as US Money Reserve, are still legal tender if they were minted prior to 1933. However, said coins are worth far more than their face value (unlike the potential trillion-dollar coin). Current statutes and the Constitution specifically mention gold and silver coins, but there is nothing pertaining to platinum coins as far as regulations.
Congress could pass a law calling for the coin’s creation. President Obama could sign it and also do it by executive order. The coin could then be deposited into the Federal Reserve, effectively giving the United States $1 trillion in debt-free equity. Some economists think this would cause hyperinflation because the government would be creating money out of thin air. However, this is what the Federal Reserve does every time it prints money, while passing along the interest to American taxpayers.
Cuts to Social Security and Medicare
Upcoming debt-ceiling talks by Congress will be a rerun of what happened in 2010, which resulted in the Budget Control Act of 2011 (aka the sequestration). All spending cuts included in the legislation would have automatically went into effect had Congress and the president not reached a compromise. The 2013 edition of debt-ceiling talks will discuss massive cuts to social security and Medicare, to the tune of hundreds of billions of dollars. The age of eligibility would also be raised from 65 to 67. The trillion-dollar platinum coin would effectively fund both programs for the next 10 years, which would give Congress the opportunity to make cuts elsewhere.
The Federal Reserve
A trillion-dollar coin minted by the U.S. Treasury would technically usurp the Federal Reserve’s power to print and regulate all U.S. legal tender (except small coins). A flurry of lawsuits and Capitol Hill bickering would certainly ensue, as the question of who controls the currency would be completely muddled. Some have went as far to call the entire idea “quirky,” but the arbitrary creation of money is exactly what the Federal Reserve does every single day. It would be somewhat of an economic coup for a vast majority of Americans. The coin would be the first debt-free currency produced for the people since the 1960s and JFK. The Federal Reserve would use every bit of power they have to prevent the coin from being produced. It would take money out of their pockets and (God forbid) help the American people.
Guest post by Norman Fuchs