The Guy Behind “Mint the Coin” To End The Debt Ceiling: The Trillion Dollar Scheme, Explained By Its Inventor

U.S. Treasury Secretary Janet Yellen finally said it on Tuesday: She has no plans to mint a $ 1,000 billion platinum coin to pay for government spending American.

If you are unfamiliar with the idea of ​​the Platinum Coin, or the hashtag #MintTheCoin, or the small army of Coinistas who have become a vocal part of economic and financial circles since the early 2010s, you you might be wondering: what the hell are you talking about? In regards to?

The (sort of) short answer is that later this month the United States will exceed the legal limit on how much debt the federal government can hold – the debt ceiling. Senate Republicans have agreed to allow an extension until December, but that only sets up another showdown in a few months. To avoid the global economic catastrophe that could ensue if the United States exceeds the debt limit, some observers have approached some really absurd ideas.

Enter #MintTheCoin.

A 1997 law intended to help the Mint make money from coin collectors gave the Secretary of the Treasury the power to mint platinum coins of any denomination, for whatever reason. When commentators discovered this law during the debt ceiling battles in 2011 and 2013, they realized that this power could offer a way around the legal limit imposed by Congress on federal government borrowing.

Instead of issuing new debt and breaking the debt ceiling, the Treasury Secretary could simply fund the government by minting platinum coins. In 2013, even former US Mint director Philip Diehl agreed it would work, and over the years influential voices like financial journalist Joe Weisenthal and New York Times columnist Paul Krugman have also promoted the idea.

But not all of these people just stumbled upon this law. It was brought to their attention by Beowulf, a blog commentator and “responder” better known as Atlanta-area lawyer Carlos Mucha. Mucha conceived the idea in a short comment on financier Warren Mosler’s blog posted on May 24, 2010 at 8:29 p.m.:

Oddly enough, Congress has already delegated to Tsy [Treasury] all the authority of lordship power it needs to mint a $ 1 trillion coin (even numismatic coins are legal tender at face value and must be accepted by the Federal Reserve) – the catch is that it must be platinum (ditto the balls of any president who has tried). So for a 1 oz. coin, Tsy would only bring in $ 999.998 billion: o)

From that modest post, a trillion dollar idea sprouted, an idea that eventually swayed fiscal policy discussions in the United States at the highest level.

I contacted Carlos Mucha on his natural battlefields, Twitter, and we spoke a bit via direct message about how it sparked the #MintTheCoin craze, how it caught the attention of policymakers, and how to get out of the current debt ceiling crisis. Our DM conversation, edited for length and clarity, follows.

Dylan matthews

Tell me the basic story behind the idea of ​​the trillion dollar coin. How did you go from posting in a blog comment thread to something the president and his advisers are talking about?

Carlos Mucha

The idea developed on the forum of Warren Mosler’s website in 2010. Warren is [a] founder of modern monetary theory, which is very popular among progressives today. [Modern Monetary Theory, or MMT, is a heterodox school of economics that argues that concerns about the national debt are often overblown.] Anyway, the crowd was thinking about how to avoid default if Congress didn’t raise the debt ceiling and I came across subsection (k) of the platinum coin (k) of the currency law.

I blogged a bit about it at the time and it was picked up by other bloggers and then by reporters and snowballed from there.

that of Naomi Klein Shock Doctrine book describes how conservatives at home and abroad are using a crisis – natural disasters and other unexpected calamities – to push through policies that would never gain legislative support. What happened is that in the Obama administration, his Republican opponents realized that they could actually plan for a crisis by refusing to raise the debt ceiling and then use the shock doctrine to do so. adopt the desired policy (spending cuts and, if they can get away with it, tax cuts too).

Here is the thing. Republicans know that on the whole Dick Cheney was right: deficits don’t matter; Reagan taught us that. It is possible that Reagan did not teach Cheney this, but rather [Cheney’s] best friend in the DC circle, Don Rumsfeld.

And where did Rumsfeld learn this? Warren Mosler. [Mosler has said he devised MMT after a discussion with Rumsfeld in the steam room of the Racquet Club in Chicago.]

So Republicans know that deficit and debt fears are overblown, Democrats don’t. So we see Carter, Clinton and Obama cleaning up the balance sheet and allowing Reagan, Bush and Trump to come and cut taxes. Progressives have [now] Caught at play, which is why the trillion dollar coin (and Bernie Sanders and AOC’s big spending plans) resonate with the Democratic base. Anyway, that’s what I think is happening.

Dylan matthews

How did you get interested in Warren Mosler and his forum? What made it a favorite place for you to post?

Carlos Mucha

I don’t even remember how I ended up on Warren’s site, but he’s a really cool guy and always ready to engage with the readers of his forum.

It helped that he was simpatico with two economists I was already a fan of: William Vickrey (who introduced Warren to other post-Keynesian economists, Bill Mitchell and Randy Wray, who helped develop MMT), and Jamie Galbraith , who wrote the foreword to one of Warren’s books and who would later quietly communicate the idea of ​​a trillion dollar coin to other economists. I suspect that Jamie is the immediate cause of Paul Krugman’s approval.

Dylan matthews

And from there, it was a pretty short walk for people like Rep Jerry Nadler (D-NY) promoting it and the White House having to officially comment. It’s a mainstream idea now. What was it like to see the idea take off like that? Confusing ? Embarrassing? Fully positive?

Carlos Mucha

Completely positive. I’ve had clients who sought me out and hired me because of it, so it’s been nice to be able to, well, monetize the idea. The best part was getting an email from Phil Diehl, the former director of the Mint who drafted the Platinum Coins Act passed by Congress in 1997. Back to school. He has a Kurt Vonnegut paper due, so naturally he hires Kurt Vonnegut to write it.

It’s hilarious, it was basically an intellectual exercise – like a website where people are looking to find out who was the best third baseman of all time or whatever – and it just took off.

Dylan matthews

Have politicians or Treasury / Fed officials contacted you with questions about the coin?

Carlos Mucha

Of course, sometimes someone in administration, Congress, or the Fed will leave me a message asking for my opinion on one problem or another. If you had asked me yesterday, I would have said it was because of the story of the trillion dollar coin, but after receiving this text yesterday …

… I’m not so sure anymore. Perhaps officials are secretly soliciting all types of responses from Twitter for political advice. Who knows.

Dylan matthews

Treasury Secretary Janet Yellen recently appeared to shut the door on the coin, telling CNBC: “I oppose it and I don’t think we should seriously consider it. It really is a gimmick.… This compromises the independence of the Fed, confusing monetary and fiscal policy. She also argued that this would not reassure the markets, creating risks similar to those of exceeding the debt ceiling. comments?

Carlos Mucha

She is, on the whole, very good at her job and is in all respects a good person, but on this point she is wrong, not only on the law but on the policy.

Dylan matthews

The executive has a few other options for getting around the debt ceiling.

What do you think of these? Is this a coin or a bust for you, or are there solutions without a coin?

Carlos Mucha

As I started to dwell on platinum coins, I also found and wrote about two other loopholes:

1. The Treasury can issue perpetual consols [debts that never mature and continue paying interest forever until the government buys them back]. Since there is no guarantee to repay the principal, it does not add up to the public debt (which measures the amount of principal guaranteed).
2. The Fed can simply donate the Treasury securities it holds to the Treasury.

Of the tree [the above two and the coin], the console show is probably the least disruptive. The Treasury may announce that it is issuing Treasury bonds “payable at the option of the United States” instead of a fixed term and may hold an auction later that same day. So that’s what I would expect to see if the treasury runs out of money.