It seems at this point that there is no clear decision being made on the fiscal cliff, not on the debt ceiling. In fact, we are basically where we were a couple of years ago and that is, in the words of House Speaker John Boehner “no progress being made.” While Nancy Pelosi, Timothy Geithner and Barack Obama himself have said that the President should have “unilateral control” over the debt ceiling. But now, a plan of sorts has been floated by the Washington Post just days after meeting with Obama, along with MSNBC hosts and members of the Daily Kos. The plan would be to mint platinum coins valued at $2 trillion.
Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.
Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
There are several questions that arise from this scenario. Is it legal? Does the federal government have $2 trillion in platinum? If there is plenty of platinum, why not coin as much as possible and pay down as much debt as possible? What about the Constitution?
First, the question of legality. The loophold that Plumer speaks of is contained in the U.S. legal code: “The Secretary may 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.”
That would seem to be a simple thing. However, there are two things at issue. One is though this is part of U.S. legal code, the argument can be made that the original law was made in order to provide rules for commemorative coins, not to finance the operations of the federal government.
Second, there is the clear wording of the U.S. Constitution, which gives the authority of coining to Congress, not the Treasury Department. I suggest a reading of my previous article on money in the Constitution.
Article I, Section 8, Clause 5
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Additionally we are told in the Constitution what the money is to be. It is to be silver and gold as that is the only money the states were to be allowed to receive as payment.
Article I Section 10
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Additionally, the coins proposed at $2 trillion would have to be numerous, since they would be worth less than gold ones. Some have suggested minting just two coins valued at $1 trillion each. Platinum’s price is currently running about $100 an ounce lower. So we are talking many, many coins that would have to be minted.
This doesn’t seem to be a viable alternative, since it would most likely be met with fierce legal action and political blowback.
Then there is the issue of whether or not the federal government has enough platinum to mint $2 trillion of coins to pay against the debt. If they did and this was legal, then why haven’t they done this before now? In fact, if that is the case and we have it, why are they not simply doing away with all of our debt?
While some are suggesting that Obama might declare the debt ceiling unconstitutional under the 14th amendment and I wouldn’t put it past him, the Congress could also point out that they are to have a budget too.
Some have suggested, as I have that the Republicans simply hold their ground and let Obama start shutting down parts of the government. After all, that is what we want anyways. We sure use the rhetoric of smaller government. Then, once we get to a place where a significant portion is shut down, we make it part of the deal to eliminate wasteful agencies that have been shut down and keep only what is needed. Yeah, I know that is just too simple, but the reality is that it works in the real world. It should work in Washington.Don't forget to Like Freedom Outpost on Facebook and Twitter, and follow our friends at RepublicanLegion.com.
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