A reader points out a very interesting loophole in the debt ceiling debate that would give the US Treasury the ability to tell the US Congress to take their fearmongering and shove it you know where. Reader “Beowulf” notes:
“No, Tsy isn’t authorized to just “print” money, the Federal Reserve Act gives that power to the Fed, However, the Coinage Act grants the Secretary of the Treasury rather broad coin seigniorage authority. Geithner could sidestep the debt ceiling this afternoon by ordering the West Point Mint to coin a 1 oz. $ 1 trillion coin. Tsy can then present the jumbo coins at the NY Fed to buy back $1 trillion in Fed-held debt (the Fed has to accept it, a creditor can’t refuse legal tender paid in to settle a debt):
(h) The coins issued under this title shall be legal tender… (k) 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.”
The simple threat of doing this would end this debate right here and right now. It’s time for Congress to stop playing Russian roulette with the US economy. If you want to take a stand on spending then do so before you pass legislation that causes us to run up into the debt ceiling. Don’t use some phony law to try to scare people into thinking that we are Greece (something that’s entirely impossible anyhow).
Update 1: I also think Beowulf’s presentation of the coin would be excellent (although I personally think a long and slow presentation on horse drawn carriage escorted by a marching band and a dozen or so M1 Abrams tanks would be the only thing sufficient enough to match the theater that is the Paul Ryan show):
“Dear Mary, congratulations on your nomination to Under Secretary. Platinum coinage is your license to print money. The West Point Mint has plenty of it in stock, though an ounce should be enough to stamp the words “$1 trillion” on. If you ask nicely, the Army will even fly it (and you if you wish, Blackhawks are pretty awesome) down the Hudson Valley to Manhattan to buy back as much debt as you wish… hmm, to make this as foolproof as possible, anyone know the closest helipad to the New York Fed?”
Update 2: See these pieces at the Montary Realism site for more info about the coin idea first created by MR’s Carlos Mucha:
Source: Cornell Law,
§ 5112. Denominations, specifications, and design of coins
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