Remember the debt-ceiling crisis the US government faced at the beginning of this year? It was a complex fiasco that nearly produced a $1 trillion platinum coin. Here’s why:
By hitting the debt ceiling, the US Treasury would no longer be able to legally borrow more money. Without being able to borrow money, the US wouldn’t be able to pay the debts it already owes – causing the nation to default. Simply raising the debt ceiling avoids this crisis, but not everyone in Congress was willing to allow it. The alternative solution would be to mint a large denomination platinum coin.
Why platinum? The choice of metal is necessary for using a loophole in US law which allows the Secretary of Treasury to “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 other words, the Secretary can mint a coin of any shape, size, design, and denomination – so long as it’s made of platinum.
With a face-value of $1 trillion, the coin can simply be deposited in the Federal Reserve. Just like that, the government now has $1 trillion to pay off its debts. Furthermore, the coin deposit wouldn’t increase the US money supply any more than raising the debt ceiling would – so it wouldn’t cause inflation. It’s a crazy idea, but you see why it got so popular.
Fun fact: $1 trillion worth of platinum at today’s prices would weigh around 18,000 tons – much more than has ever been mined in the history of the world. Likely, it’s even more than ever will be mined. Luckily, with a fiat currency, that doesn’t matter.
