Can Coin Collectors Help with the National Debt Default?

Can Coin Collectors Help Us Get Past The Looming Debt Default?

When you go shopping you see signs asking for exact change because the pandemic continues to impact the coin shortage in the United States. But that seems to have filtered out of the current news cycle. Today's crisis is averting the looming debt default. Could a simple action like creating a commemorative coin help us overcome this pending financial disaster?

In an interesting article released by the intelligencer, "How Biden Could End the Debt-Ceiling Crisis by 'Minting the Coin'", there is a very interesting fact-based exploration on just how this could help. 

Here is an excerpt from the article:

Back in 1995, America’s coin collectors successfully lobbied Congress for legislation that would empower the Treasury Department to mint collectible platinum coins in a greater variety of sizes. The idea was to facilitate the creation of smaller, cheaper coins to help less affluent coin collectors get in on the sweet platinum action.

In writing this legislation, however, Congress accidentally — and yet quite explicitly! — gave the Treasury secretary extraordinary money-creation powers. Here’s the relevant provision:

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.

In 2011, the blogger Carlos Mucha, writing under his commenter name “Beowulf,” noted that this law seemed to provide a debt-ceiling work-around: If the Treasury secretary has the power to mint platinum coins of any denomination, then he or she could (1) mint a $1 trillion platinum coin and then (2) take it to the Federal Reserve and use it to repurchase $1 trillion in Fed-held U.S. Treasury debt. Just like that, the U.S. debt level would be brought well below the statutory ceiling, and the government could carry on paying interest on its debt while meeting all its statutory spending obligations.

Notably, such an action would not be inflationary “money printing.” The supply of money circulating in the real economy would not change. One branch of the government would simply deposit a coin in the account of another branch of government, thereby erasing $1 trillion from the national debt. Nothing would change except accounting figures that Congress has fetishized. This is part of what makes the “mint the coin” option so appealing to critics of Beltway deficit politics in general, and proponents of Modern Monetary Theory in particular: It helps expose the absurdity of fixating on national-debt totals that are already influenced by factors nearly as arbitrary as the platinum-coin gambit, while spotlighting our government’s absolute sovereignty over money creation.