To get an indication of how much some in the pundit class are dreading the looming fight over the debt ceiling, consider the latest daft idea to get around the nation’s borrowing limit. A great swathe of the on-line world is abuzz with the notion of the Treasury Department “minting” a trillion dollar platinum coin, walking it over to the Fed to deposit in the government’s account and go on merrily to borrow another trillion dollars. No negotiations, no cuts and no vote by Congress.
This scenario is possible because, while US law limits Treasury’s ability to print currency and mint coins, the law is silent about coins minted from platinum. So, while the law prescribes the manner by which Treasury can mint coins made out of gold, silver and, it doesn’t contain any provisions for coins made from platinum.
This wasn’t, mind you, because the drafters of the law felt the government needed some explicit exemption to coin platinum, but rather because almost no one has ever used platinum to make coins. The only country that ever issued platinum coins as part of its currency was Imperial Russia, in the mid-19th Century. That effort was short-lived, however, because the metal is hard to work with and closely resembles less expensive metals.
The law doesn’t explicitly mention platinum only because no one actually thought someone would seriously think about minting the metal as actual currency. The law is equally silent about glass or tree bark being used to make coins, so, presumably the Treasury could also issue a $1 Trillion tree bark coin.
If one actually wanted to issue a coin back by $1 Trillion worth of platinum, one would need roughly 20,000 tons of the stuff, based on today’s prices. The total annual US production of platinum is about 3 tons. That obviously isn’t possible, so the move to “mint” a coin amounts to little more than simply declaring there is an extra trillion or so in the government’s accounts. It’s an understatement to say such a move could be inflationary.
It’s hard to see how this entire proposal isn’t some elaborate satire, reminiscent of Jonathan Swift. The debt ceiling isn’t simply a logistical hurdle we need to find creative ways around. It’s a statutory limit passed by Congress to preserve some check on government spending. That it arguably hasn’t worked to check spending is a failure of Congress and the White House, rather than the ceiling itself.
There is a very real debt ceiling looming, however. That is the appetite of investors and governments to continue to loan the US money. Once the market decides that risks of loaning us money outweigh the benefits, no loophole or trick will save us.