Written by CPEG’s Ron Baiman
Though Congressional Republicans have apparently backed off of their plan to immediately take the federal government hostage by temporarily extending the federal debt limit, the threat remains.
As many of you probably have heard by now a blogger with the screen name of Beowulf has come up with a unique and apparently perfectly legal method for the Treasury to do an end-run around (questionably legal) Congressional debt limit extortionism.1 Beowulf proposes to take advantage of a 1995 act that apparently gives the U.S. Mint the ability to assign any value to platinum coins that it mints and transfer these coins, or more to the point, their value, to a U.S. Treasury account at the Federal Reserve. The Treasury could then use these funds to pay its bills. Readers will recognize that this is effectively a form of “coin seigniorage,” that is a creation of money by fiat using platinum coins.2 Beowulf proposes that the Treasury mint a few platinum coins and value them at $ 1 trillion dollars each.3