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Random Notes on the Trillion-Dollar Coin Scheme

There is not much that can be added to what has already been said about the proposal for the Treasury to mint a $1 trillion platinum coin to circumvent the debt limit, an absurd and gimmicky fiscal restraint which politicians impose on themselves and routinely honor in the breach. We may however usefully consider here some of the curious background details and one important possible implication of the proposal.

The trillion-dollar coin scheme was concocted by a Georgia lawyer whose online handle is "Beowulf"—a serious name for a serious schemer. As Beowulf himself tells it, the idea started out as "a silly question" in a "pointless, online bull session" among amateur monetary policy aficionados in the comment section of a blog. Some of Beowulf's fellow bloggers aggressively spread the idea via comments on other blogs, including a left-wing, Post-Keynesian Modern Monetary Theory (MMT) blog. Soon enough, it was picked up by establishment liberal economists such as Paul Krugman and James K. Galbraith.

Although he is serious about his proposal, Beowulf himself is apolitical and compares himself and his circle of monetary obsessives to "players in a fantasy football league" who are "just in it just for the . . . LOLs" Of course the platinum coin the Treasury would mint would not be a full-bodied coin whose denomination would reflect the market value of platinum contained therein. If it were full-bodied, then, it is calculated, it would weigh 42,778,918 pounds and occupy 31,947 cubic feet. If such a coin were to retain the dimensions of the U.S. dollar coin, for example, it would be approximately 80 feet wide and 6 feet thick.

The coin that was minted would legally have to be a commemorative or numismatic coin. So let us say that the coin were struck at the same size as the current U.S. dollar coin. It would contain platinum worth about $1,200 at current market prices. But—here is the key to the schem—numismatic coins issued by the Treasury are legal tender at their face value and must be accepted by the Federal Reserve, which is why the coins are always struck with a denomination far below the market value of the material that they contain, lest the Treasury introduce gold and silver coins that would circulate in trade and accidentally reintroduce the gold standard. Thus, by minting a commemorative coin that costs $1,200 to produce with a face value of $1 trillion, the Fed would have to accept for deposit in the Treasury's account at its face value.

The economics of the scheme involving the coin is straightforward.

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Joseph Salerno is academic vice president of the Mises Institute, professor emeritus of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.