Trillion Dollar Platinum Coin

December 9th, 2012
econ, money, politics
Congress passes laws that have the effect of bringing in money and sending it out. Where there's a shortfall the government borrows money, going deeper in debt. Except there's a maximum amount of money congress allows the government to borrow, the "debt ceiling", and if the government reaches that point we get a crisis.

Last time this came up people pointed out that the president could just ask the mint to make some trillion dollar platinum coins. Apparently borrowing money requires congressional approval, but minting it does not. [1] Normally printing money is a bad way to finance government operations because it causes inflation: it's basically forcing the people who already have money to give the government a nominally zero-interest loan. Interest rates are practically zero, however, so is there any downside to forcing the government to fund itself through seigniorage instead of bonds?


[1] The law has huge numbers of restrictions on most coins, including their values and how many can be minted, but the law for platinum coins is wide open:

The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.
This is a strange loophole; why is it there? I can't find when it was added. Is there some sort of blame command for the law where you can look up when a particular bit of text was added, and from there look into why it might have been put there?

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