The chatter this week in global economic circles is all about the coin.
The trillion dollar platinum coin.
The growing movement, naturally, has its own hashtag: #MintTheCoin.
It also has a simple idea, and one that took off yesterday when Nobel Prize-winning economist and New York Times columnist Paul Krugman came out in support of the measure.
Here's how Krugman explained it in a post that went viral yesterday:
"Enter the platinum coin. There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all."
Now the #MintTheCoin movement has gained another key supporter.
Our friends at Business Insider last night obtained an email from Phillip Diehl, a former Mint director who also — by the way — helped write the law that allowed for the above minting.
So, yes, he's got some credibility on the subject.
Here's an excerpt of what Diehl sent to Business Insider (read the full email here). It makes for a fascinating inside view of the emerging idea:
* In minting the 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 about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations.
* Moreover, 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.
* 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.
Reuters blogger Felix Salmon, however, has added his normally astute thoughts to the debate, calling the measure "the fiscal equivalent of the Flying Spaghetti Monster: a logical reductio ad absurdum designed to emphasize the silliness of an opposing position."
The absurdity here, Salmon colorfully points out, is the debt ceiling itself, which he calls "profoundly stupid, self-defeating and generally idiotic."
Finally, for a more humorous and satirical account of the platinum coin idea, there's Stephen Colbert.
And while Mr. Colbert has yet to win a Nobel Prize on the subject, his particular brand of economic analysis is always worth watching: