SYLVIE DOUGLIS, BYLINE: NPR.
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WAILIN WONG, HOST:
We are in the thick of another debt ceiling season. The U.S. legally can't borrow any more money, and politicians are digging in for another round of brinkmanship over whether to raise the debt limit.
DARIAN WOODS, HOST:
Yeah, and we covered this on yesterday's episode. And in the meantime, U.S. Treasury Secretary Janet Yellen has implemented what she calls extraordinary measures to make sure that the government can keep paying its bills.
WONG: But some folks in economic and legal circles are proposing measures that you might describe as even more extraordinary than what's already in place. And one of those proposals involves making a platinum coin with a face value of $1 trillion.
WOODS: One coin to rule them all.
WONG: That's right. This is an idea that first popped up over a decade ago and has attracted a lot of buzz in the current news cycle. It even has a hashtag, #MintTheCoin, which might lead you to think, surely this is some kind of economics inside joke, but it is very much not a joke, and don't call me Shirley. This is THE INDICATOR FROM PLANET MONEY. I'm Wailin Wong.
WOODS: And I'm Darian Woods. Today on the show, we will explain the origins of this trillion-dollar coin idea, and we try to figure out, is this trillion-dollar coin just this wacky gimmick, or is it the American economy's best hope for avoiding catastrophe?
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WONG: The notion of a trillion-dollar platinum coin traces back to a now-defunct blog focused on modern monetary theory. This is a branch of economics that argues that governments that control their own currency and borrow in that currency can just create the money they want to spend. And because they have this ability, they can always pay their debts. The only real limit to this ability is inflation.
WOODS: Rohan Grey is an assistant professor of law at Willamette University, where he specializes in contracts and financial institutions and the regulation of money. Over a decade ago, he was a regular reader of this modern monetary theory website.
ROHAN GREY: One of the reasons I had been on those MMT blogs is because MMT was trying to point out to people that the government is the issuer of the currency; it makes the money. And so in that respect, it has always had, what I call nowadays, a big infinity sign in its bank account.
WOODS: A big infinity sign because the government makes its money. And so back in 2010, a commenter on this blog came up with a provocative idea - the government could actually fund its operations without raising the debt ceiling, without needing to borrow at all. It could just create the money as it needed.
WONG: And the way it would create this money would be by minting a $1 trillion platinum coin. The authority to mint this coin would come from a 1996 law that says, basically...
GREY: The Treasury secretary may, in their discretion, mint and issue platinum coins of whatever denomination, quantities, specifications, designs as the Treasury secretary may choose.
WONG: This law was designed for the U.S. Mint to sell platinum coins to people who like to invest in precious metals. It's like a little extra revenue stream for the agency.
WOODS: A little side hustle.
WONG: Yeah, a little side hustle. And to be clear, this law was not intended to have anything to do with the funding of the overall government.
WOODS: But the commenter pointed out this could be a tantalizing loophole because the law doesn't put any limits on the face value of this platinum coin. It can be any denomination, any quantity, any design, even; it just has to be platinum.
WONG: So here's how the coin would work - the U.S. Mint, which is part of the Treasury Department, would create a platinum coin with a face value of $1 trillion. The Treasury would take this coin to the Federal Reserve, and the Fed would accept it as a deposit. Now the government has $1 trillion in its bank account and can use that money to pay government salaries and Social Security benefits and whatever else.
WOODS: Rohan says the government has always had the authority to coin money, but it's kind of like everybody forgets about this until the country enters another debt ceiling crisis.
GREY: So what the coin represented was - it's almost like Pandora's box was opened just a tiny crack - you know? - and a little bit of the knowledge of good and evil managed to slip out. That's what the coin is to me - it's a symbol of the money power we've always had but forgotten.
WONG: I mean, it's a symbol, but it's also something that you are advocating for as a real policy option.
GREY: Yes, because the policy option that we're facing right now is that we are about to drive off a cliff.
WOODS: Now, Rohan says this platinum coin doesn't have to be a single trillion-dollar coin; it could really be any number of platinum coins in any denomination. The mechanics would work the same, though - the coins would get created, the Fed would accept them, and the money is credited to the Treasury's account.
GREY: The point of making it so big is to is to kind of break people's brains, right? You can make a thousand billion-dollar coins.
WONG: (Laughter) Right.
GREY: It would just waste more metal, and last I checked, we're in the middle of an ecological crisis; we shouldn't be mining more metal than we need to. One small coin seems reasonable.
WONG: OK, so one small platinum coin. And now, let's really break our brains. Here's how Rohan imagines the whole thing going down.
Have you thought about how big this coin would be - like, a pie plate or, like, a wagon wheel? Like, how...
GREY: Right, like something that's sort of 15 feet high and you roll it down the street like it's sort of, you know, something that could crush you if you're not careful. My suggested compromise is that we can make a huge paper-mache coin and we could roll it from the mint to the Fed, and we can have some kids there.
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GREY: We'd have a big ceremony where the Fed accepts the coin.
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JEROME POWELL: Good afternoon, everyone. Thanks for being here.
GREY: And when they accept it, we'll get some sticks out and we'll beat it like a pinata. And there'll be a lot of little chocolate coins inside for the kids. And there'll be one real coin in there the size of a regular coin. And when the children find it, they can hand it over, and then the coin can be put in the Smithsonian.
WONG: Sounds like a party, huh?
WOODS: This is a lot of detail that I love, but I do have a question. Why isn't President Biden asking Janet Yellen to fire up the platinum printing press?
WONG: Well, the White House has said it's not considering the coin. And there are reasons why economists and policymakers are not all just furiously tweeting #MintTheCoin.
LOUISE SHEINER: Gut instinct is that it is a gimmick.
WONG: Louise Sheiner is an economist at the Hutchins Center on Fiscal and Monetary Policy at The Brookings Institution, and Louise says the economics of the trillion-dollar coin, the theoretical mechanics of it, are completely sound. For example, she doesn't think it will lead to inflation.
SHEINER: It sounds like, well, isn't that inflationary? And, you know, the first thing to remember is the amount of spending that Treasury would be doing is no different than if the debt limit wouldn't bind. So it's not more spending; it's not like, oh, I'm going to just increase spending.
WOODS: In other words, it's not like the government goes on a spending spree and fire hoses a trillion dollars into the economy all at once. The coin wouldn't actually circulate in the economy. The government would use the trillion dollars to pay its bills, just like it would have, business as usual, if it was borrowing money normally.
WONG: So Louise doesn't object to the mechanics of the coin. It's the legal and political feasibility piece of this that really dooms the idea for her. For one thing, this law that authorizes the U.S. Mint to make a platinum coin of any denomination, remember, we mentioned it was about selling coins to platinum investors; it wasn't meant to be used as a way around the debt ceiling.
WOODS: Another potential legal obstacle is that even if the U.S. Mint makes the platinum coin, the Fed might not accept it. Janet Yellen raised this concern over the weekend when asked about the coin. Louise says that the Fed wants to stay out of it.
SHEINER: The Fed is supposed to be an independent agent. They don't want to get involved in this sort of battle between Congress and the administration because that is bad for the independence of the Fed.
WOODS: Louise also has concerns about how bond markets would react, especially if the coin touched off a legal firestorm. And in her mind, the coin wouldn't help financial markets avoid a debt ceiling-related meltdown; it would just be trading one kind of chaos for another.
SHEINER: There are so many murky questions about whether or not it's legal and would it be challenged, and who has standing to sue, and do you sue? Like, that's just a mess. Like, that is not what the Treasury market is known for, which is sort of regular, stable functioning. You wouldn't prevent the chaos in the debt market that we're all worried about from the debt ceiling breach.
WONG: But Louise and Rohan Grey do agree on one thing, and that is that the debt ceiling is a self-imposed artificial construct that leads to huge economic and political problems. Like, critics of the debt ceiling say, this limit is kind of absurd, so how is the coin idea any more ludicrous?
WOODS: That's a fair question.
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WONG: This episode was produced by Brittany Cronin, with engineering by Gilly Moon. It was fact-checked by Sierra Juarez. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.
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