Origin and Early History of Platinum Coin Seigniorage In the Blogosphere

By Joe Firestone

[Revised 1/6/2013]

This post records the history of platinum coin seigniorage in the blogosphere through the debt ceiling agreement on August 2, 2011. Its purpose is to correct errors in the record about the history of this idea appearing on mainstream blog posts by Joe Wiesenthal, John Carney, and Brad Plumer, during the past week. The idea of using coin seigniorage, the profits made from minting proof platinum coins,  depositing them at the Fed, and receiving electronic credits in return, to remove the need for issuing debt, and so to always stay under the debt ceiling is due to a  commenter (and occasional blogger) on economics and politics blogs whose screen name is beowulf (Carlos Mucha). Beowulf’s first comment on Platinum Coin Seigniorage (PCS) was on Brad Delong’s site on July 6, 2010 (h/t Cullen Roche, 01/05/13). But, the first comment of his I noticed on PCS was at New Deal 2.0. Unfortunately, when The Roosevelt Institute redid its New Deal 2.0 site, it wiped out the record of beo’s comment. However, I quoted his ND 2.0 proposal in a post on November 12, 2010 discussing a possible Government shutdown due to the debt ceiling. I cross-posted this at Correntewire too where beowulf commented further on the platinum coin option.

Beowulf continued his work on the coin seigniorage proposal as the weeks went by in various comments made at blog posts such as this one at FDL, and this one, also at FDL. Then on 12/15/2010 there was an exchange between beo and I about platinum coin seigniorage.

Following that beo wrote to me revealing who he was, and we corresponded by e-mail from 12/15/10, roughly until the Christmas break, exchanging views about PPCS, with me urging beo to blog it, and telling him that I would blog in support of him soon after he did. On January 3, 2011, he posted  the seminal blog on coin seigniorage. I followed two days later, raising the question of whether President Obama would use it to forestall an attempt to use the debt ceiling to extract cuts in the social safety net or not.

These posts were noticed by Warren Mosler, one of the originators of the Modern Monetary Theory (MMT) approach to economics, who sponsored what turned out to be a wide-ranging and very high quality discussion of the coin seigniorage option at his site. Beowulf contributed extensively and very creatively to this discussion, which remains one of the most important resources on the coin seigniorage option.

Throughout the next six months, I pushed platinum coin seigniorage in blog posts at Correntewire, FDL, and DailyKos from time-to-time and in comments at various sites. Then, in late June and July a spate of posts on platinum coin seigniorage appeared, beginning, I think, with wigwam’s at FDL and DailyKos.

He’s followed up since with a number of other posts including this one with a variation on how coin seigniorage might be applied by buying $2 Trillion in debt from the Fed to create “head room” relative to the debt limit.

Other important posts appeared in the first two weeks of July 2011 by Mahilena, DC Blogger, ubetchaiam, Cullen Roche, and Scott Fullwiler.

Accompanying the last two are extensive discussions of coin seigniorage and constitutionality of the debt ceiling with contributions from beowulf.  Scott’s post also received extensive discussion with beowulf contributing at Cullen’s site. Trader’s Crucible, presented a post on the unconstitutionality of the debt ceiling. Its comment thread however, focused very much on platinum coin seigniorage with beowulf and myself making contributions.

In addition, I added a couple of my own posts, one on constitutionality of the debt ceiling and coin seigniorage (06/29/2011), and another on the President’s obligation, if  no agreement on the debt ceiling is forthcoming (07/11/11).

At this point, the platinum coin seigniorage debate began to hit the mainstream blogosphere. Felix Salmon at Reuters provided the opening blog post (07/14/11) and he was followed a day later by Matt Yglesias at Think Progress. I replied to Salmon and Yglesias in this post, presenting a fairly comprehensive view of platinum coin seigniorage up to that time, with critiques of their posts (07/17/11).

My post appeared in an abbreviated form at Naked Capitalism, and was also cross-posted at MyFDL, New Economic Perspectives and Global Economic Intersection. It appeared amidst an explosion of blogosphere posts on the subject, including posts on the subject by many mainstream bloggers and others including: Tom Hickey: “Coin Seignorage Breaks into Mainstream,” (07/18/11) Scott Sumner: “Is coin seignorage Obama’s magic bullet?” (07/19/11) Joshua Holland: “There’s a Solution to the Debt Fight That Could Avert Catastrophe — Why Is Everyone Ignoring It?” (07/20/11) Darrell Delamaide: ”Smoke and mirrors with the federal deficit,” (07/20/11) Mark Kleiman: “Phony problem, phony solution,” (07/20/11) wigwam: “Mark Kleiman calls Coin Seigniorage a phony solution; to a phony problem,” (07/23/11) upyernoz: “Platinum Pieces Were Always My Favorite,” and Yves Smith: “We Discuss the manufactured UD Debt Crisis at the Real News Network.” (07/25/11)

These posts were an immediate wave, so to speak, of responses to the Salmon and Yglesias posts. But there was more to come in July. I posted again, presenting a variety of platinum coin seigniorage face value options, along with differing political and inflation implications of the options (07/20/11).

Then I followed with an open letter to Congress and the President on getting around the debt ceiling (07/25/11), and a post on the President’s apparent views on the debt ceiling. (07/26/11)

Meanwhile, Jack Balkin, a Constitutional Law Professor at Yale, had blogged about coin seigniorage telling a good story in an important post (07/18/11).

And Balkin next did a post at CNN, where he reviewed a number of options for getting around the debt ceiling (07/28/11). And, in doing so, brought the platinum coin seigniorage idea into the mainstream discussion.

Balkin’s efforts seemed to fuel another wave of the July 2011 platinum coin seigniorage explosion. These include:

”Capt. Fogg: Billion Dollar Coins and Exploding Options — oh my!”  (07/28/11)

Logan Penza: “(Platinum) Pennies From Heaven (UPDATED);” (07/28/11)

Jonathan Chait: “The Coin That Will Save The World;” (07/28/11)

Matthew Yglesias: “The Platinum Coin Option;” (07/28/11)

Brad DeLong: ”The President’s Obligation to Take Care That the Laws Be Faithfully Executed Requires Him to Start Minting Large Denomination Platinum Coins” (07/28/11)

upyernoz: “platinum, baby, platinum” (07/28/11)

Master of Interesting Links: “The meme that will not die!” (07/28/11)

Tyler Cowen: “Crank up the mint for the platinum coin!” (07/28/11)

Edward Harrison: “The #trilliondollarcoin meme” (07/28/11)

Matthew Yglesia: Neutralizing Platinum Coin Finance (07/29/11)

The Economist: “The trillion dollar coin solution;” (07/29/11)

Eric Hayden: “A $1 Trillion Coin Seems Like a Nice Idea” (07/29/11)

Paul Krugman: “Lawyers, Coins, and Money” (07/29/11)

Annie Lowery: “The $5 Trillion Coin” (07/29/11)

Johnsonville: “Debt Watch/Coin Trick: the Trillion Dollar Coin” (07/29/11)

Seneca Doane: “Cut the Gordian Knot with the Platinum Sword;” (07/30/11)

Laurence Lewis: “The Debt Ceiling Dance and the Trilion Dollar Coin.” (07/31/11)

David Weigel: “The Platinum Coin Hysteria of 2011;” (07/31/11)

So, that was the second wave of responses by mainstream bloggers, and others, to the Platinum Coin Seigniorage idea. In addition, I added two posts on 07/31/11:

What If a Debt Limit Extension Is Voted Down? (07/31/11) and

Progessives In Congress: Vote for The President To Do It! (07/31/11)

Also, the last notable post on Platinum Coin Seigniorage (08/01/11) before the debt ceiling settlement of 08/02/11 was Scott Fullwiler’s Coin Seigniorage and Inflation. It’s still the most comprehensive and rigorous discussion available of the relationship between the two.

But then, and lastly, there was Beowulf responds to Dave Weigel of Slate. (07/31/11) I think this reply is worth quoting, because, in a way, Weigel’s reaction is pretty typical of most mainstream posts, reacting to the idea in what only can be described as a superficial way, part brush-off; part poking fun, almost as if mainstream bloggers were afraid of discussing the idea without an obligatory heaping slice of skepticism accompanying their mention of it. Obviously beo’s reply doesn’t apply to everyone, so I don’t want to over-generalize it. But if you read all the posts, I think you’ll see that Weigel’s reaction is pretty common, so beo’s reply is pretty broadly applicable.

There’s nothing fanciful about it. The strange thing is that the USG is constrained by debt ceiling but a part of the USG (The Fed describes itself as “an independent government agency”) is unconstrained by a debt ceiling. Even more anomalously, Fed-held Treasuries are counted against the USG debt ceiling.

This isn’t about selling drilling rights on the moon but a practice almost as old as the Republic. The US Mint has used coin seigniorage continuously since the Coinage Act of 1792 (in a legal sense, a single $1 trillion platinum coin is the same as trillion $1 coins but with far less expense and effort). It violates no laws nor federal regulations nor prior obligations for the USG to transfer debts from the constrained whole to an unconstrained part (that is violates all logic is the fault of Congress).

The idea actually originated in a note I sent the Department of the Treasury on a collateral issue (as it happened, I had “buried the lede”). I posted about this on Firedoglake (and Correntewire) only after discussing the issue at Warren Mosler’s blog (Incidentally, I’m hardly a lefty. I voted for Romney in the 2008 GOP primaries, will probably do so again next year).

Writer Joe Firestone suggested to me that the platinum coin seigniorage issue was something worth posting a blog about and bugged me until I did (after which, Joe took the leading oar on developing the idea). I’d point out that Warren Mosler also picked up on the economic ramifications very early. But I trust that every reader here with an interest in economics has already read his book The Seven Deadly Innocent Frauds (you can download for free from his site if you haven’t), so that should come as no surprise.

http://moslereconomics.com/2011/01/20/joe-firestone-post-on-sidestepping-the-debt-ceiling-issue-with-coin-seigniorage/

Of course, there is historical precedence for using coinage to pay the national debt, the Legal Tender Act of 1862 authorized the issuance of fiat currency, US Notes or “Greenbacks” (the predecessor of today’s Federal Reserve Notes) required that Tsy pay debt service only with US Mint-issued coins. Of course Nixon freeing us from the gold standard changed everything, but if our politicians understood that, we wouldn’t have a debt ceiling now would we?

And finally, I should note, that once the debt ceiling compromise was agreed to on 08/02/11, the sudden explosion of posts on platinum coin seigniorage quickly faded away, as I predicted it would then. I’ve blogged a lot about it, since, trying to develop the political context further and to make people aware of the policy variations available in the platinum coin seigniorage toolbox. But bloggers doing posts on it were few until just this past week.

Now people are starting to see that there may be a fiscal cliff settlement and immediately afterward a new debt ceiling crisis for us to cope with. So, suddenly the mainstream has taken up where it left off with platinum coin seigniorage in early August 2011. It’s again in a frenzy about it, and it’s again making errors in its analysis of it and in the information it’s spreading about the history of the platinum coin seigniorage idea.

In future posts of mine, I’ll look at the new wave of blog posts and discuss the issues they raise. But for now I want to correct one immediate thing. Joe Wiesenthal, Brad Plumer, and John Carney have been saying that the platinum coin seigniorage idea originates with Cullen Roche’s blog post of 07/07/11 cited earlier with a commenter on that post. Plumer even says:

 *Update: Cullen Roche appears to have been one of the first people to discuss the platinum coin idea in 2011 ― it came from one of his readers. See also here.

If Plumer had read the first of his references with the accompanying comment thread, he would have found a host of links to earlier work on PCS. And if he had read the 07/17/11 post of mine he references (also linked to in the review above), he would have found that the first statement of the PCS idea by beowulf, Cullen Roche’s commenter, was on November 4, 2010, more than 8 months before Cullen’s own post. As it turns out even this date is too late, since Cullen, himself, (h/t to Cullen Roche, 01/05/13) discovered an even earlier occurrence at Brad Delong’s blog in another comment of beowulf’s, a full 12 months earlier than Cullen’s first post on PCS.

Also the first full blog post on PCS, as you can see from both Plumer’s reference and the account above is on January 3, 2011. And after that, there are numerous blog posts on the subject before Cullen’s post on 07/07/11. So, I think that Wiesenthal, Plumer, and Carney, all got it wrong. Probably because they relied on each other, rather than on reading their own links, or on using “the google.”

31 Responses to Origin and Early History of Platinum Coin Seigniorage In the Blogosphere

  1. Does Cullen claim to be first with this? He should disavow that position.

    Another question. Has anyone in the administration weighed in n this one way or another and if so what did they say? This seems very logical and Beowulf is a pretty good lawyer. I think he once said the Rs would be the first to use it.

    I think he is right about the Rs but for different reasons. I think the Pres. could also use the 14th but he has said he won’t do that. Reason? Well when he cuts entitlements he can say those other guys made me do it.

    • Hi JonF, He seems to have said that here: https://twitter.com/PragCapitalist/status/277092220996308992 In any event, the three miantsream bloggers were saying it and they’re the ones who need to correct their posts.

      Beo’s a great lawyer; but as far as we know no one in the Admin has said anything about it! Perhaps the President’s recent assertions that we won’t play the debt ceiling blackmail game any more has PCS in mind. But I wouldn’t bet on that!

      I don’t think SS will be cut right now. Too many Senators against it and I don’t think House members are interested in walking the plank again for the 2014 election. As for Medicare, the word late last night from Ezra and in PK’s column today is that they’ll raise the eligibility age. But I think they’ll get a firestorm over that. Too many people are just marking time w/o insurance waiting until 65 to get affordable Medicare. They’s going to go ballistic over this, and Dem House members and Senators will be risking their seats in 2014 if they do this!

      • Thanks Joe.

        I doubt President will use the coin too. None of this makes any sense to me. How can someone say he won’t play the blackmail game and not embrace a way around it? Senseless. If he just paid the bills I’m not at all sure anyone can do anything other than complain. Imagine the supremes telling the Treasury not to pay the country’s obligations? What a spectacle.

        The change in Medicare is so unnecessary and hurtful to too many people. What can you say about this ugly stuff? SS will be an issue for another day. Too many think it is going broke. It’s the sort of thing that makes me nuts.

        Well at least Cullen didn’t say he was first with the PC. The first I heard of it was from Beowulf. But you were pretty close. I’m not sure if I saw it on Cullen’s site or not.

        • JonF, in the twitter link above Cullen said this:

          “Even better. It was started by an attorney commenting on my blog. Ha.”

          Well, yes, Beo is an attorney, and he was commenting on the PPCS idea Cullen was writing about on 07/07/11, more than 6 months after Beo posted his first piece on the subject, and also more than 6 months after I posted mine.

          On this:

          “If he just paid the bills I’m not at all sure anyone can do anything other than complain. Imagine the supremes telling the Treasury not to pay the country’s obligations? What a spectacle.”

          Right on, I think. I’m not at all sure the Supremes would interfere at all. They’d probably just chalk it up to a conflict between the other two branches and figure that if Congress didn’t like, then they didn’t have to appropriate the deficit spending in the first place.

          • Got it. Thanks again, Joe.

            • One more thing. Cullen has now disavowed any suggestion that he was the first; but believes he played a big role in popularizing the idea in July 2011 through his well-attended blog. This claim may well be true. But you can see from the above that may others also contributed in that climactic month!

              • This “mint a coin with a high face value to pay the Fed” idea actually goes back to at least 1992, when Bo Gritz made it a standard part of his stump speeches while running for president. He even carried around a sample 5 inch $4 Trillion face-value coin to exhibit during his speeches.

                Quotes and links to a representative sample of his original comments are available at http://comeletusreasontogether.com/where-does-mint-coin-pay-debt-idea-originate .

                The above article may trace the origin of the idea’s current incarnation, but it’s not a brand new idea.

  2. I hope everyone will Facebook and Tweet this as much as possible. We need to get the mainstream bloggers to make corrections when they screw up, which is frequently. We also need to get them to read the Posts of people who know something. Right now they’re just blogging off the top of their heads.

  3. When I read articles such as this and the comments I re-read the last section of Chapter 10 of Keynes’s General Theory. I suggest that others do the same. What possible difference is there between going back onto a gold standard and using platinum deposits in Fort Knox?
    I could make one suggestion; package all the public assets into one mortgage held by the Reserve Bank. Don’t let Wall Street near the mortgage. Some of the assets would be difficult to value for mortgage purposes such as the knowledge stored in all sorts of repositories and placed there from posterity. The various governments in the USA hold assets which must surely have value far in excess of the government debt.
    The whole debt issue and fiscal cliff debate is pure bullshit. The only limit to the rate of growth of government debt internally is that imposed by the prospect of inflationary pressure. Inflationary pressure never seems to influence the thinking of the CEOs and the other wealthy when they want to increase their own incomes in dollar terms.

    • The platinum coin has nothing to do with the gold standard because the face value of one is pure fiat, decided upon by the mint. Read one of the key posts referred to in the post and you will see this.

    • John Turner,”…The whole debt issue and fiscal cliff debate is pure bullshit…”
      Certainly on target there.
      John Turner,”… one suggestion; package all the public assets into one mortgage held by the Reserve Bank. Don’t let Wall Street near the mortgage. Some of the assets would be difficult to value for mortgage purposes such as the knowledge stored in all sorts of repositories and placed there from posterity. The various governments in the USA hold assets which must surely have value far in excess of the government debt.”
      *****ISN’T that what “money ” really is ?
      Money is now NOTHING that is in the form of fancy colored paper, electronically formed digits in a bank account,metal etc., which are used as a receipt of all the SOMETHINGS, the goods and services, before you can get ANYTHING .Quote Frederick Soddy,” Money is now the nothing that you get for the something before you can get anything. (“The Role of Money”).
      A Monetary Sovereignty uses money as a distribution system for all the goods and services (wealth)
      of its community.

  4. Even if someone told this coin idea to Barack Obama, and even if it was in such a way as to make him believe it, the probability that he would act on it is precisely zero. He wants to win the debt standoff, not avoid it. And, sadly, his idea of winning, and his idea of a fine legacy to leave behind, is to join Bill Clinton in the pantheon of corporate Democrats who have had the guts to do some serious damage to the poorest and most vulnerable on behalf of his pals amongst the elite-of-the-elite.

    Read his book. It’s all in there under “What I think about when I’m hitching rides on Gulfstreams.”

    • You may be right about what he wants to do. But the Democrats remember 2010. They lost the Congress by walking the plank for him on a number of issues. I don’t think they want to do that again. Already SS is off the table and the left is organizing for Medicare. This may well go over the cliff, and then the debt ceiling and the cliff may be too close together. If the left doesn’t fold then Obama’s boxed in. He may need a year. Minting a coin would get him that.

  5. Joe Firestone, “Minting a coin would get him that.”
    Justaluckyfool says perhaps,”QE would make his term “Lincolnesque”-
    Lincoln freed the slaves, he could free mankind from servitude.
    Google :Justaluckyfool, QE

  6. What will the people who make multi-billions per year from interest on USG bonds do when a 20T$ coin is minted and the debt is wiped out? :) or :(

  7. The wayback machine has a version of Marshall’s ND 2.0 post at Obama Faces His Own “Teachable Moment”.

    Unfortunately it was only crawled once, and too early to catch Beowulf’s comment in that thread, that you quoted at FDL. But I have an earlier comment in that thread, referring to the coin. As my old comment indicates, and as beowulf suggests above, the coin had been discussed earlier than the ND 2.0 post, at Warren’s blog.

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  18. Most of the citations are from blogs. On my blog I’ve rounded up the best of Twitter (http://gonzoecon.com/2013/01/the-one-trillion-dollar-coin/). I also have the official results of a Twitter poll for the name and design of this coin. It will be called the Freddie Krugerrand (@ProofBlog is our lucky winner). A mockup of the coin is included in my blog entry.

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