The platinum coin solution

This is too far out there for Obama to ever use, and I presume there’s gotta be some macro-economic downsides, but that aside, I love this idea.  Via Yglesias:

I keep hesitating to write about this because it sounds insane, but Jack Balkin’s a professor at Yale Law School so I’ll let him say it:

Sovereign governments such as the United States can print new money. However, there’s a statutory limit to the amount of paper currency that can be in circulation at any one time. Ironically, there’s no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.

It actually seems to me that there’s a colorable argument that President Obama is legally obliged to order Secretary Geithner to order the mint to start creating large denomination platinum coins. The debt ceiling is legally binding. We can’t borrow any more money. But at the same time, the Social Security Act is still valid. There are appropriations bills that extend through September. The assumption is that starting August 2, the Treasury will start “prioritizing” payments. But whence the legal authority to do that. By contrast, the legal authority to mint platinum coins is right there in the statute. This would, I assume, lead to a downgrading of American sovereign debt.

Oh right, there’s the downside.  Those pesky ratings of our debt.  The whole trouble we (i.e., everybody but nutty Republicans) are trying to avoid.  Still, seems better than some of the other options.

 

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

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