The Platinum Coin Returns

Upon my oath, I didn’t intend to bring back the coin proposal until much later in the renewed process of Republican hostage-taking over the debt ceiling. After all, there’s not much chance that the President would ever use the platinum coin option, because his budget policy direction of getting ever closer to a budget surplus, is best served by a “forced” compromise with the Republicans, that results in another few hundred billion in spending cuts for 2016, while allowing him to place the blame on them for that outcome. Using the platinum coin option would not have that result, because it would deliver a clear victory to him.

Of course, he doesn’t want a default due to Republican brinksmanship either, so if the Republicans do drag everyone too close to the cliff, then he may decide to take some extraordinary measures and the coin is one that is available, so it’s conceivable that he might choose this undoubtedly, from his point of view, distasteful option. It is for this reason, I suppose, that the Brookings Institution is warning him off the coin to weight his choice towards some more conventional approach.

The Brookings Warning

The warning was delivered in the form of a paper by Philip A. Wallach, in which after devoting a good deal of attention to the historical and current political context of the coming probable crisis over the Treasury breaching the debt ceiling law he asserts the “enormity of the threat posed by a failed debt ceiling negotiation.” But nevertheless he also asserts that any of the solutions proposed by those advocating for a way around such a crisis would not work because:

. . . the political dynamics of the debt ceiling standoffs make it so that any deus ex machina capable of extracting us from our current fights will strike people as deeply illegitimate, heighten political tensions, and potentially accelerate the constitutional crisis it is meant to ward off. A brief consideration of two of the most-discussed options shows why this is the case.

This is not really an argument, but a conjecture, and one that is a matter of opinion, certainly not backed by any empirical evidence, and not blindingly obvious to many people, including myself. Wallach claims this conjecture applies to all of the main proposals for getting around the debt ceiling, but focuses on two: first, a 14th Amendment-based challenge to the debt ceiling law accompanied by continuing debt issuance in violation of the debt ceiling legislation; and second, the President using the Platinum Coin authority, accorded to the Treasury in a 1996 law to have the Treasury Secretary order the US Mint to create a trillion dollar platinum coin, deposit it at the Federal Reserve, and then use the seigniorage from the coin to make debt payments, and to deficit spend to avert the current debt ceiling crisis.

I won’t discuss the constitutional challenge to the debt ceiling law using the 14th amendment in this post, because, for reasons I gave in much detail in my book on this subject, I don’t think it is a valid challenge to the law, until all other possible solutions to the debt ceiling crisis have been tried. In other words, I think that the 14th amendment move is a last resort, and that if the Court decides a case on this correctly, then it would throw out the breach of the debt ceiling as unconstitutional, if other ways of resolving the crisis by avoiding the debt ceiling rather than relying on the 14th, were available or remained untested.

So, my view is that there is a temporal priority here, and a constitutional challenge based on the 14th amendment isn’t even appropriate, unless alternatives like consols, the platinum coin, and other expedients are tried first and tested for constitutionality. For this reason, I’ll restrict my discussion here to consideration of Wallach’s critique of a platinum coin-based solution. Readers who are interested in a broad consideration of all the main alternatives can consult my book.

Wallach continues with this statement which he applies to all alternatives proposed to get around the debt ceiling law including using platinum coins:

This thinking is almost comically blind to the potential downsides of such a declaration, however. Congress, which has always worked to resolve debt ceiling confrontations in the past, would rightly see the executive branch (or judiciary) as attempting to usurp its constitutional borrowing power, now and forever after. There would be no way to de-escalate what would quickly become one of the most significant interbranch conflicts in American history, and it seems hard to imagine that Congress would have any other recourse than impeachment. As this epic battle played out, U.S. debt repayments would look less certain than ever and the country’s international reputation would (justifiably) plummet.

This is another political judgment of questionable value from Wallach, because it would be a highly partisan Congress that would provide such an interpretation of the use of an extraordinary measure to lessen or eliminate the leverage in negotiation they gain from using the debt ceiling law in the way they have. The American people are very unlikely to back their view that a counter move to free the government from Republican hostage-taking was a usurpation of power by the Executive, since it is probably the majority view now that using the debt ceiling to extract cuts in Medicare, Social Security, and other entitlements is a usurpation of power by a Congress, which was unwilling to get this done through its control of appropriations, and was now coming back to take a second, illegitimate bite at the apple, in spite of the opposition of a substantial majority of people to such cuts as measured in poll after poll.

How the legitimacy question would play itself out, however, surely depends on the particular alternative solution that the Administration decided to push. For example, if the President gave orders for consols to be issued by the Treasury department, I think it is very unlikely that the Republicans in Congress would be able to whip up a great deal of rage in the country to oppose this, since there is no basis at all in law for saying that the Administration’s debt issuance functions exclude issuing debt that is not subject to the limit, because its principal never has to be re-paid.

So, I think that all the public is likely to conclude from such a move is that just as the Republicans were pulling a fast one, and using a mere technicality, to get cuts in popular discretionary and safety net programs, the President was replying with a perfectly legal fast one of his own, using a technicality to avoid a government shutdown. Very likely, a majority of people would conclude that turnabout is fair play if consols were involved.

And it’s very unlikely that Congress would contest such a move in Court, since the case would be very weak, and the Courts would likely either refuse to intervene in such a dispute or decide that Congress as a whole has an authoritative remedy, namely specifically, prohibiting the practice of issuing consols. So, where is the “constitutional crisis” in all this. Not every instance of disagreement between the Executive and the Congress is a “constitutional crisis” is it?

Wallach raises the issue of impeachment regarding the President’s using an extraordinary measure to get around the debt ceiling law. Well, the Republican Congress can certainly try to impeach this President beginning one year before the next presidential election. But what are the chances of their doing that?

Their doing so, would certainly be seen as a partisan effort in response to a government shutdown crisis, precipitated by a highly partisan Republican Congress. By the time they got to the impeachment details, proceedings would have to be held in 2016, and the Republicans would be getting pilloried once again as the do-nothing party that doesn’t do anything but investigate Democrats, waste time in Congress, cause government shutdowns, and generally refuse to do the job of governing they were elected to do. What would that do to their chances of winning the presidency and holding the White House in 2016? What would that do to their chances of holding the Senate? What would that do even to their chances of continuing to hold the House? And what would happen in the 2016 elections to the Republicans who were the ringleaders in the impeachment proceedings?

In short, an impeachment move in retaliation for the President using a “trick” of some kind to save cuts to popular programs would be political suicide that whoever is the new Speaker of the House will not allow the Republicans to commit. And surely, Mitch McConnell would not be so politically stupid to give up whatever chance he may still have to sit once more in the Majority Leader’s Chair, just to chase the Republican’s white whale one more time, before a new President takes office.

Moving to the the platinum coin option specifically, Wallach says:

Very similar problems would attend any attempt to exploit legal technicalities as a way out of the debt ceiling bind. The most popular of these has been the platinum coin option, in which the Treasury would use a legal provision designed to allow it to create platinum coins of any denomination to mint coins with $1 trillion (or more) in face value, which could then be credited to Treasury’s accounts and allow timely payments to be made without raising any over-the-limit debt. Proponents of the idea concede that Congress never meant to give the Treasury such an unbounded power, but point out that it was put in place to generate seigniorage income (government profit reaped through issuing currency). And they argue that exploiting this loophole has policy consequences less egregious than playing out repeated debt ceiling confrontations. . . .

One person’s “legal technicality” is another person’s plain language in the law. The language clearly says that the Secretary has the discretion to specify the face value of any platinum coin he mandates be minted. That is not a “technicality” it is what the law says.

It is of no moment that no individual Congressman intended to give the Executive such broad authority. The fact is that Congress as a collective voted to give that authority to the Executive and then the President signed the bill into law. So, it is the law! Now the question is whether the President will use his authority or not. It is not whether he has that authority.

Once again this ignores the way in which a small chance of debt ceiling negotiation breakdown is replaced with an absolute certainty that Congress would feel that the president had inappropriately usurped powers that belong with the people’s branch. Once again de-escalation apart from complete congressional acceptance would be very difficult (though at least in this case statutory changes could clearly prohibit the maneuver in the future), and impeachment would be very likely.

This statement doesn’t take into account either the dynamics of the debt ceiling negotiation process, or the mechanics associated with the particular measure the Treasury might use. If the President were to use the platinum coin option, then this could be done within a few days of the Treasury running out of “head room” and being forced into auctions where it might lose control over the price of the debt instruments it sells. So there would be ample time for negotiations to be successful before then.

The President could also provide repeated warnings to the Congress that time was running out and that he would be constrained to take extraordinary measures to fulfill his constitutional duties to spend duly appropriated Congressional mandate. He could leave them guessing about exactly what he would do, and he could hold the exact measure he would take very, very close.

If the platinum coin were used, then no one need know that until the coin hit the Mint’s account at the New York Fed, and the seigniorage was then swept into the Treasury General Account (TGA). Only then, would what the President had done become public, and only then might negotiations break down.

And even then, negotiations would not have to break down, because the President could talk to the nation about why he was forced to mint the coin, offering his pledge to the people and to Congress, that he would not use the seigniorage in the TGA to either pay debt or cover deficit spending, provided Congress lifts the debt ceiling, and gives its pledge that it will respect the Constitution and obey the 14th amendment, Section 4’s stricture against questioning the debt of the United States, during the remainder of his term.

And, if the President is wise, then he will have the Treasury Secretary cause the minting of a platinum coin having a face value that is large enough to give Congress no incentive to remove the platinum coin seigniorage authority from the Executive branch, say a coin with a face value of $100 Trillion. That money could then sit in the TGA as a guarantee that debt ceiling political hostage-taking will be gone from the American political system for a long time to come.

A good rule of thumb for executives in troubled times: if you can help it, don’t do anything that can plausibly be characterized as a coup. Both strategies just discussed fail this test. For all of the certainty summoned by the champions of the “solutions” that they are legally in the right, they err in thinking that legal correctness is the crux of the matter. Such high stakes constitutional law is always to a large degree constitutional politics, and the maneuvers they propose would unquestionably escalate hostilities in our already troubled polity. The Obama administration’s explicit rejection of these options thus shows real prudence. . . .

I am not of the opinion that the President’s actions in the 2011 and 2013 debt ceiling crises have shown “prudence” and I think, that is yet one more mere opinion from Philip Wallach, solemnly intoned, but not shown to have any substance. Instead, I think that the President’s actions risked what has now become a series of hostage-takings that have cost the American people dearly and still have not ended debt ceiling politics. Nor have they avoided an escalation of hostilities with the Republicans, who have continued emitting extreme hostility toward the President, since he took office, and only intensified that hostility once they took over the House after the election of 2010, and then again, after he won in 2012.

In other words, I think he gained nothing with his “prudence” when it comes to de-fusing the hostilities. What he gained however, was a good many opportunities to perform ritual dances with the Republicans to reduce deficit spending at the expense of the poor and the middle class, while blaming those same Republicans alone for his dedicated efforts to reduce the deficit in a display of faux fiscal responsibility, which he now celebrates at every opportunity, whenever he beats CBO’s projections about how rapidly the deficit will shrink.

Instead of negotiating with the Republicans, the President should have used the coin in the Summer of 2011 when the coin proposals first surfaced. By not doing so, he played a critical part in the sequester, the fiscal cliff, and the spending cuts that damaged the economy seriously, slowed the recovery and delivered austerity to many.

It would have been much more “prudent“ to have acted quickly and decisively in the Summer of 2011 to fill the public purse so that Congress could no longer cry “we’re running out of money,” to rationalize their cruel and fiscally irresponsible budget cutting. And yes, the President would have risked impeachment by the Republicans going into the elections of 2012, if he had done that. But I think the risk would have been worth it, and that it was the President’s duty to take it because that is what would have been best for the country.

Constitutional Politics

I do agree with Wallach that the solutions to debt ceiling crises are not just a matter of law, but also a matter of constitutional politics. But, I also think that the constitutional politics would have worked out much in favor of the President, especially if he had minted a coin with the kind of face value I proposed here. Had he done that, then a $100 T initial balance in the TGA, followed by very rapid payoff of the Intra-governmental debt, and the debt owned by the Federal Reserve would have sent two clear messages to the people. First, the idea that the Federal Government can run out of money is a fiscal myth (see my newest book); and second, the Federal Government now had enough money in its spending to both pay off “the debt” entirely, over a period of years, as it fell due, and also to cover any conceivable deficit spending on the part of the Congress for many years in the future.

The first message would have removed the debt issue from the political table for a very long time and perhaps for good, if the Treasury retained the authority to mint platinum coins for good. And the second, would have removed any possible claim that the Government of the United States, could not afford a proposed fiscal policy, because the money wasn’t there.

Austerity advocates would in those circumstances have been able to argue against spending proposals on grounds of their undesirable effects; but the filter of deficit neutrality repressing fiscal policy for so long would also have been removed from American politics, and that would have been a great legacy for this President whether or not it would have cost him impeachment — a possibility which I strongly believe would never have come about because of the great popularity he would likely have gained by sending these two clear messages and disarming the Republican fiscal myths blocking full economic recovery.

Finally, The overall impression I received from this Brookings effort of debt ceiling issues is that its orientation was profoundly conservative in the foundational sense that it assumes that change in institutional practices and procedures even when authorized by law is dangerous, disturbing and almost always worse than letting real problems fester over a period of years in such a way that people who are not among the wealthy suffer a deterioration in their conditions amidst an exacerbation of inequality over a period of years. Wallach is more worried about the consequences of a disagreement between the Executive and the Congress, and more worried about maintaining fiscal conservatism than he is about that. In this he shows the growing Brookings bias belying its long-standing reputation as an “objective” think tank that represents a “liberal” or “progressive” point of view.

When Wallach says:

A good rule of thumb for executives in troubled times: if you can help it, don’t do anything that can plausibly be characterized as a coup. Both strategies just discussed fail this test

I don’t think that Wallach is giving us a test for “progressive” executives. Rather, I think that is a traditional (not a tea party) conservative’s test. Progressives are more likely to think that today’s Republican party is always claiming that the President is guilty of a coup, and is acting beyond his constitutional authority. So, what’s new?

I noted the word “plausibly” in that quote, well enough. But, a progressive will wonder what that means in the context of minting the platinum coin. Yes, it is a new procedure for ensuring Treasury liquidity, but it is authorized by Law, and, in addition, it leaves intact the constitutional prerogative of the Congress to control the purse strings. Even with a $100 T coin, the Executive still cannot spend anything Congress doesn’t appropriate. The Congress still retains the purse strings, even if they are the strings to a full purse. Where is the coup in all this? I don’t see it, and I doubt that many other Americans will see it either.

22 responses to “The Platinum Coin Returns

  1. Finally. Perhaps we can look forward to a day when resources, not dollars, are correctly identified as the limitation of our economic activities. We have denominated it in dollars too long. It is time to face reality. Dollars are not the issue, resources are. Thanks, Joe Firestone.

  2. would this be the same Brookings that`

  3. would this be the same Brookings whose minimum corporate donations of at least $50,000 increased from 5 percent of minimum donations in 2003 to 22 percent in 2013. Similarly, minimum donations of at least $50,000 from foreign entities increased from 3 percent of minimum donations in 2003 to 18 percent in 2013.`or allied with “Qatar, the small but wealthy Middle East nation, whom agreed last year to make a $14.8 million, four-year donation.
    For instance, records compiled by the Foundation Center, which tracks philanthropic giving, show that the Rockefeller Foundation contributed $10 million to Brookings in 2010. Brookings’s annual report lists Rockefeller in the category that year of giving at least $1 million. The Robert Wood Johnson Foundation was listed in the same category by Brookings in 2007, while the Foundation Center reports its contribution that year to be $8.7 million.
    Most often the trail of cash going for influence peddleing is obscured (legally and purposely). There have been efforts to place the pieces together. Also Brookings declined to provide specific contribution data to inquiring publishers.

    • Joe Firestone

      Yes, they sold out. The fingerprints of Alice Rivlin and Pete Peterson are all over their transformation.

  4. I don’t see the “$1 trillion platinum coin” as a sensible suggestion, in that Congress obviously did not intend the Treasury to mint platinum coins in such amounts by its platinum coin provision. Coins in such amounts would be functionally no different from issuing United States notes, and as such are subject to the $300 million limit of 31 U.S.C. § 5115(b)(1).

    On the other hand, I agree that the 14th amendment provides a constitutional override of this statute. The 1868 mandate that the “validity of the public debt shall not be questioned” was to enable the Treasury to unilaterally pay the public debt, if and as required to prevent default. In the debate, Benjamin Wade (pro tem of the senate) urged that the national debt would be more secure if it was “withdrawn from the power of Congress to repudiate it.” The fear was that a future Congress might refuse to honor reconstruction dues. This provision therefore could authorize, if not mandate, the unilateral executive minting or printing of sufficient currency to pay off the public debt as it came due, should Congress not lift a debt ceiling.

    In sum, I think what you are saying should be simplified. Just say that the President should issue Treasury (US) currency (notes or coins) in such amounts as necessary to avoid default. The “$1 trillion” amount is overkill, and the “platinum” element is a silver herring.

    • I happen to disagree with Clifford Johnson and whole heartedly agree with Joe on this. Seigniorage has a long and distinguished tradition in funding government, although the scale has never been of the proposed magnitude. The fact that no one in Congress foresaw the potential for Seigniorage to resolve the “debt crisis” and literally blow away the fiscal ceiling in no way detracts from or negates the clear and direct language of the 1996 law. Congress passed the law, the President signed it, now let the President use it. A President with some backbone would welcome a fight with the troglodyte wing of the Republican party over an issue that is so clearly worded and would be immensely popular when explained to the American people. Bring it on, Paul.

  5. whereby one trillion is a start (which needs to come with a authentic explanation about the power of fiat currency and debt denominated in said currency). Should one look a bit deeper within the context of a sovereign currency issuer you may even find 29 trillion as a not to distant past lender of last resort (LOLR).
    If the Treasury were to strike a 60 trillion dollar Platinum Coin, deposit it in the General Account, you wouldn’t even need to spend it to end the silly political gamesmanship that continues extract parasitically off of democracy, while engorging the few.

  6. I don’t agree. Doesn’t matter whether the executive minting is functionally the same as the executive printing because, as you cited yourself, there’s a legal limit on what the Executive can “print,” but right now in the language of the 1996 law there is no legal limit on what the Treasury can “mint.” Also, what is “obvious” to you or I or anyone else doesn’t count for very much against the specific language of the law. If anyone of us had a dollar for every time a law passed by Congress had some consequence beyond what Congressman and Senators, and the President intended when they passed a bill into law then that person would be very rich. Still further, the intent of one or another legislator or even all of them as individuals is not dispositive in this situation. Congress acted as a collective and the President signed the 1996 bill with its current text into law. What they signed is the law now, not their “obvious intent” according to our subjective interpretations.

    Finally, the 14th amendment challenge should not work for the President, as a matter of law, until he or she has proven that none of the various options he can use to avoid breaching the debt ceiling law while still performing mandated spending including repayment of debt, will work. There are various options he can use. The 14th and the coin are only two. So, even if the coin was ruled out of order, he would still have other options he could try without turning to the 14th.

  7. Below is an article which suggests that the President could ask the Federal Reserve Bank to just forgive enough debt to reduce the government’s debt below the current debt ceiling. The Treasury could then sell more bonds. If this works, we should just do this every time the debt ceiling is approached.

    A Modest Proposal: Why Doesn’t the Fed Forgive the Debt?

    • The Fed is prohibited by law from extending credit to the Treasury. Debt forgiveness may very well be looked upon as extending credit, even though it goes beyond that.

      • Joe,

        You wrote: “The Fed is prohibited by law from extending credit to the Treasury.”

        From what I’ve been able to gather, the Fed is specifically prohibited from direct purchases of Treasury debt from the Treasury. Instead it must purchase its debt in the ‘open market’. I haven’t seen any statue that proscribes the Fed from forgivingTreasury debt or any other type of debt.

        Short of the advice of legal experts, the following links to the applicable current Federal Reserve Act are a useful starting place for the layman to understand the law in this regard:

        Direct Purchases of U.S. Treasury Securities by Federal Reserve Banks

        Here is another link which advocates Fed Treasury debt forgivenes:
        The Fed Could Simply CANCEL $2 Trillion of Government Debt

        • IIRC the Federal Reserve cannot allow the Treasury to run a negative balance in its Fed account for any appreciable period of time, in addition to the prohibition against the Fed directly purchasing Treasury debt. Buying Treasury debt from the private sector, when Treasury hits the debt ceiling, and then forgiving it may be construed by the Courts as functionally extending an limited line of credit to the Treasury. So, that’s why I doubt that this move would be successful.

          Another barrier is that forgiving the debt would affect the Fed’s balance sheet. Since the Fed Regional Banks have stockholders this impacts their balance sheets and opens the way to fiduciary law suits.

          • Thanks Joe. I would agree that maintaining an overdraft in the Treasury General Account is most likely a problem.

            With respect to
            “Buying Treasury debt from the private sector, when Treasury hits the debt ceiling, and then forgiving it may be construed by the Courts as functionally extending an limited line of credit to the Treasury”

            I would expect the Fed to first forgive the Treasury debt it already possesses thus enabling the amount of Treasury debt to fall below the current debt limit. Secondly, the Treasury would then legally borrow more money up to the current debt limit. Thirdly, as a normal course of business, the Fed would purchase some portion of this new borrowing. This cycle could conceivably go on for ever.

            Could this be construed as a limited line of credit from the Fed to the Treasury? Debt forgiveness is legal I believe. So is Treasury borrowing that doesn’t exceed the debt limit. So is the Fed purchase of debt on the open market. The sequence of forgiveness, debt issuance and debt purchase is not illegal nor does it have to be construed as a line of credit. The American people should construe it as a prudent way of avoiding default or the disruption and destruction of the economy.

            With respect to affecting the balance sheets of the Fed regional banks, the amount of debt held in the system would not change appreciatively. Regional Fed member banks would have thin grounds to sue. It would take a lot of money and time, all the while risking the increasing enmity of many.

  8. My broad interpretation of the scope of 31 U.S.C. § 5115(b)(1) (as applying to any form of currency except to coins minted to meet demand–i.e. in essence issued to pay government bills) would act as bar to all the executive alternatives I can think of, leaving nothing but reliance on the 14th amendment override.

    In statutory interpretation, rule 1 is that congressional intent governs, and rule 2 is that the plain meaning of statutory language is ordinarily conclusive as to what Congress intended by a statute.

    Therefore, your literal readings of the platinum coin statute, and of 31 U.S.C. § 5115(b)(1), are not merely credible but presumptively correct. Statutory interpretation looks first to plain meaning, which only particular showings as to contrary intent can overrule. Such showings often depend on the implications of related statutory schemes. I believe that this is a case where such an exceptional showing can be made.

    My first argument is rhetorical — why would Congress pass a statute strictly limiting the printing of US notes to make payments with, if it intended to allow essentially valueless (compared to face value) coins to be issued to perform the very same function? My second argument concerns the platinum coin statute–I think even you agree that the purpose (both as to amounts and usage) that you have in mind was not conceived of in the statute’s enactment. However, without 31 U.S.C. § 5115(b)(1), I think you might have a winning point.

    In any case, we can agree to disagree. The question is one of law, which the courts have not decided.

    • I agree we are agreeing to disagree. But . . .

      The limit on printing Treasury Notes is very, very old now, going back to 1874, pre-dating the coin law by many, many years. So, it’s perfectly possible that Congress, having given the Federal Reserve unlimited authority to create reserves might also grant a parallel unlimited authority to Treasury.

      Anyway, their earlier limit on Treasury Notes certainly doesn’t establish that in 1996 the Congress in 1996 did not intend to make such a change. Philip Diehl who was the Director of the US Mint at the time, and who collaborated with Mike Castle in writing the coin law has said that his own intent in co-drafting the law was give Treasury to specify whatever face value the Secretary thought was appropriate. It is the true that Mr. Diehl never thought of Trillion Dollar coins explicitly, but there is no requirement that Congress must think of every weird implication of a law to make that law valid.

      We have a current very good current example in the Patriot Act, whose authors swear up and down that they thought that the Act they wrote gave the President the authority that he has claimed under it. Nevertheless, the Courts have upheld that such authority is an implication of the law, and its authors, such as Congressman Sensenbrenner, are left to re-write the law if they don’t like that. In other words, they’re the Congress, if they think they’ve made a mistake, then they get a do over anytime, but they don’t often get the Courts deciding to re-write what a law says based on their own interpretation that it is “obvious” that Congress did not mean what it said.

      Actually, there are relatively few cases in which the Court takes it upon itself to argue intent against the plain language of a law. Given the context of a case in which Congress challenged the minting of that coin on grounds of “obvious” intent, I doubt that the Court would rule against the Executive, since doing so would bring the world economy to the brink of collapse if the Treasury suddenly found itself incapable of paying debts due to the debt ceiling. If the Court takes the case at all, I think the most it would do is to say that the actions of the Executive were invalid, but that the remedy is for the Executive Branch to stop the practice immediately, but I doubt it would take any other corrective action, telling Congress instead that it should write a better coin law and also remonstrate it to repeal the debt ceiling law because it obviously creates an unnecessary possibility of creating both financial and constitutional crises that would jeopardize the US economy. Indeed, it could clearly signal strongly that if all Executive Branch options to get around the debt ceiling law failed, and a constitutional crisis was upon us that then they would be forced to declare the debt ceiling law unconstitutional unless Congress provided other explicit authority to use an alternative method to pay all US obligations once the debt ceiling is reached.

      Also, why would your

      broad interpretation of the scope of 31 U.S.C. § 5115(b)(1) (as applying to any form of currency except to coins minted to meet demand–i.e. in essence issued to pay government bills) would act as bar to all the executive alternatives I can think of, leaving nothing but reliance on the 14th amendment override.

      prohibit consols. They are debt, just not debt-subject-to-the-limit?

      Finally, I disagree with your ordering of rules 1)and 2). I think the language is clearly rule 1) and I don’t even think that “intent” is rule 2. For example, what if based on language, the Court rules that a law is unconstitutional, ten the Court wouldn’t rule further that the law is still valid because the legislators didn’t intend what it said. Clearly, they would kick such a law back to Congress and tell them to re-write the unconstitutional law.

      • I read the antiquity of the limit on US Notes–which is roughly the same as the circa $400 million limit established when US notes were first issued, in the Civil War (1862)–as reflecting a cemented standoff in what I call “Ye Olde Seigniorage War.” Ever since, the possibility that the Treasury might issue its own notes has always had bankers freaking out. (For example, during the depression FDR was given statutory authority to issue $300 billion in US notes if the Fed refused to buy Treasuries, which it was resisting, and the Fed then complied. Meltzer, History of the Fed, Vol. I p. 428.) It’s this history that frames my perception of their being a firm and absolutely unexpired lock on US notes. Plus, Congress has not been inattentive in the matter, updating statutes allowing the Treasury to destroy US notes upon their return…I even contend there’s a controlling element of “Ye Olde Segniorage War” in suppressing the advantages of the dollar coin over the dollar bill-GAO reports for decades have refused to count the face-value seigniorage gains to the government–upon which your $1 trillion coin wholly relies. See “”How The One Dollar Coin Can Cure The Economy” at According to their arithmetic (which I dispute), your $1 trillion coin would be zeroed out by a $1 trillion liability.

        As for consols, I am unaware of any statutory authority for issuing them–can you cite one? If there is no such specific authority, then the power to issue them has not been delegated to the executive (Congress has the money powers), and so again only the 14th amendment could justify their unilateral issuance.

        Finally, as for your assessment of statutory interpretive law, the broad congressional intent of statutory schemes that must operate in harmony is the be all and end all. My leading recent example would be the affordable care act’s recent 6-3 holding against the literal interpretation of a clause that would have rendered the act wholly unworkable in resistant states (by disallowing federal tax credits therein).

        • According to their arithmetic (which I dispute), your $1 trillion coin would be zeroed out by a $1 trillion liability.

          Seigniorage gets counted today as miscellaneous receipts by GAO, not liabilities. However, the coin the Fed would get be accounted for as a $100 T asset of the Fed which would be retained in a vault. On the other the Treasury’s accounts would be credited with nearly $100 T in reserves.

          Second, notes, and reserves have nothing to do with Treasury’s prerogatives delegated by the Congress. Congress begins with all the authority. Now it gives to the Fed notes and reserves, and it gives to the Treasury coins. That’s the structure at present.

          Third, finally, I don’t know aht to make of your last point. The idea of harmony being the be all and end all sounds like a rationalization to me for Roberts wanting to save the ACA without going along with the Administration’s interpretation that it’s intent was clear in spite of the text which incompetently failed to include an important comma.

          That is, “harmony” something any Justice can use to rationalize almost any finding he or she wants to make.But in this case, if the Court really wanted to create “harmony” in the framework then what it would do is to decide that all the money issuance delegation of its authority belongs with the Executive Branch, since it is clearly an executive function, and therefore it finds that the Fed must be relocated with the Treasury to create harmony with the Constitution which only allows three branches of Government with a unitary executive, namely the President.

          Apart from such a finding however, it seems to me that the arrangement where the Fed has the currency and reserve authority, and the Treasury the coin minting authority to fill the public purpose with whatever it needs to spend its Congressional mandates is much more harmonious than an interpretation which concludes that the Treasury can create very little money, and therefore must rely on interest-bearing debt instruments to spend what Congress has mandated that it spend.

          This last situation which existed before the 1996 law was passed is insanely lacking in harmony and full of conflict as we’ve been seeing since 2011.

          • First, it’s the Treasury that counts face-value coin seigniorage (after deducting production/distribution costs/et al.) as a miscellaneous receipt. In its $1 coin reports, the GAO doesn’t count the face value of coins as seigniorage AT ALL. The GAO’s “net benefit to the government” arithmetic necessarily implies (without stating) an offsetting face-value liability. Philip Diehl told me (in private correspondence) that the Mint/Treasury counted face-value seigniorage ONLY for coins sold to collectors, circulating coins being issued against equal liabilities, to be canceled on their ultimate return. (He further suggested that the reasonably estimated percent of circulating coins that would in fact never be returned should also be counted as seigniorage.) Your $1 trillion coin would seem to be a forced permanent sale to the Fed, as though the Fed were a coin collector, which it certainly is not. Functionally, that is the same as making the Fed simply cancel that amount of Treasury debt. And so you run into the statutory bars that you’ve been pointing out to others in this thread. The 14th amendment override must be invoked.
            (All that said, I disputed and I still dispute Diehl’s liability accounting—he could give me no firm reference to substantiate it, other than his personal knowledge that everyone in the Mint knew that seigniorage was only counted for direct sales to collectors i.e. non-circulating coins; and even though the GAO reports imply such accounting, I don’t buy it. I accept your and the Treasury’s and the CBO’s official version.)

            Second, the Treasury IS allowed to maintain a circulation of $300 million in US notes. OK, I concede it’s a de minimus amount. But the issuance mechanism is on the statutory books. Unlike a consol mechanism?

            Third, we really have no more to discuss on the legal weight of the literal meaning of the pertinent statutes in a court of law. The courts have not ruled on the matter. You argue that the text conclusively controls, I argue that congressional purposes are at odds with the literal text (when stretched to cover $1 trillion), and that those purposes control. This is a convenient synopsis of the interpretation canons —
            You would argue that the primary Textual Canon controls, I would argue that your interpretation of $1 (let alone $100) trillion unboundedness is absurd and also barred by Textual Integrity canons (wholistic context; conflict with other statutory policies…)

  9. Jerry Hamrick

    I think that the people would be very receptive to the platinum coin idea–provided they could see something that would directly and immediately give them some kind of debt relief of their own. So, rather than using the coin to pay off the national debt, it should be used to give each US citizen a monthly, tax free stipend of $2,000. In addition student loans would be immediately paid off, the minimum wage would be increased to the living wage level, credit balances could be transferred to a new national credit card which would not charge interest, Medicare for all would be implemented, personal income taxes would be extinguished, and much more. These inducements would work and would quell all objections.

    These and other ideas are part of a new economic system that I have designed and which will appear in my new book, “Faction-Free Democracy, Finishing What the Founding Fathers Started.” I have presented these ideas to many people over the last twelve months and the response has been universally positive.

    The initial objections are, “Weimar, Weimar, Weimar,” “poor people can’t handle such largess,” and “poor people don’t deserve it.” But with a little explanation of the actual causes of “Weimar” all three of these objections vanish. The most positive response is from people with children and grandchildren. They quickly see the benefits to be gained for their descendants.

    Just to be clear, while I agree with the platinum coin approach, and while I wish so much that people had listened to you in the first place, I have opted to simply activate and distribute the money directly into the people’s bank accounts at the new banking system: Universal Bank of the United States (Uni).

    • Hi Jerry, I agree that when using the platinum coin, it would be best to spend some of the money to benefit people. But, the structure of authority here prevents that. In particular, the President can mint a $100 T coin and use the proceeds to repay debt as it falls due, but he cannot appropriate the funds to do what you want to do. he can urge Congress to do these and point out that the $100 T fund he created can both pay off the debt and fund measures like monetary grants to people and Medicare for All, but if these things are to happen then Congress must act.

      On the other hand, Congress has already acted to authorize the Treasury to create coins, and that means that the President is acting under the law is using that authority and in using the funds to pay down the debt.

      • Jerry Hamrick

        Joe: I absolutely agree. It seems to me is that the only way to get there from here is to change the law, and the only way to do that is to replace our system of government. Sounds impossible doesn’t it? However, as we all know, it has happened.