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This post records the history of platinum coin seigniorage in the blogosphere through the debt ceiling agreement on August 2, 2011. Its purpose is to correct errors in the record about the history of this idea appearing on mainstream blog posts by Joe Wiesenthal, John Carney, and Brad Plumer, during the past week. The idea of using coin seigniorage, the profits made from minting proof platinum coins,  depositing them at the Fed, and receiving electronic credits in return, to remove the need for issuing debt, and so to always stay under the debt ceiling is due to a  commenter (and occasional blogger) on economics and politics blogs whose screen name is beowulf (Carlos Mucha). Beowulf''s first comment on Platinum Coin Seigniorage (PCS) was on Brad Delong's site on July 6, 2010 (h/t Cullen Roche, 01/05/13). But, the first comment of his I noticed on PCS was at New Deal 2.0. Unfortunately, when The Roosevelt Institute redid its New Deal 2.0 site, it wiped out the record of beo's comment. However, I quoted his ND 2.0 proposal in a post on November 12, 2010 discussing a possible Government shutdown due to the debt ceiling. I cross-posted this at Correntewire too where beowulf commented further on the platinum coin option.

Beowulf continued his work on the coin seigniorage proposal as the weeks went by in various comments made at blog posts such as this one at FDL, and this one, also at FDL. Then on 12/15/2010 there was an exchange between beo and I about platinum coin seigniorage.

Following that beo wrote me, and we corresponded by e-mail from 12/15/10, roughly until the Christmas break, exchanging views about PPCS, with me urging beo to blog it, and telling him that I would blog in support of him soon after he did. On January 3, 2011, he posted  the seminal blog on coin seigniorage. I followed two days later, raising the question of whether President Obama would use it to forestall an attempt to use the debt ceiling to extract cuts in the social safety net or not.

These posts were noticed by Warren Mosler, one of the originators of the Modern Monetary Theory (MMT) approach to economics, who sponsored what turned out to be a wide-ranging and very high quality discussion of the coin seigniorage option at his site. Beowulf contributed extensively and very creatively to this discussion, which remains one of the most important resources on the coin seigniorage option.

Throughout the next six months, I pushed platinum coin seigniorage in blog posts at Correntewire, FDL, and DailyKos from time-to-time and in comments at various sites. Then, in late June and July a spate of posts on platinum coin seigniorage appeared, beginning, I think, with wigwam's at FDL and DailyKos.  

He's followed up since with a number of other posts including this one with a variation on how coin seigniorage might be applied by buying $2 Trillion in debt from the Fed to create “head room” relative to the debt limit.

Other important posts appeared in the first two weeks of July 2011 by Mahilena, DC Blogger, ubetchaiam, Cullen Roche, and Scott Fullwiler.

Accompanying the last two are extensive discussions of coin seigniorage and constitutionality of the debt ceiling with contributions from beowulf.  Scott's post also received extensive discussion with beowulf contributing at Cullen's site. Trader's Crucible, presented a post on the unconstitutionality of the debt ceiling. Its comment thread however, focused very much on platinum coin seigniorage with beowulf and myself making contributions.

In addition, I added a couple of my own posts, one on constitutionality of the debt ceiling and coin seigniorage (06/29/2011), and another on the President's obligation, if  no agreement on the debt ceiling is forthcoming (07/11/11).

At this point, the platinum coin seigniorage debate began to hit the mainstream blogosphere. Felix Salmon at Reuters provided the opening blog post (07/14/11) and he was followed a day later by Matty Yglesias at Think Progress. I replied to Salmon and Yglesias in this post, presenting a fairly comprehensive view of platinum coin seigniorage up to that time, with critiques of their posts (07/17/11).

My post appeared in an abbreviated form at Naked Capitalism, and was also cross-posted at MyFDL, New Economic Perspectives and Global Economic Intersection. It appeared amidst an explosion of blogosphere posts on the subject, including posts on the subject by many mainstream bloggers and others including: Tom Hickey: “Coin Seignorage Breaks into Mainstream,” (07/18/11) Scott Sumner: “Is coin seignorage Obama's magic bullet?” (07/19/11) Joshua Holland: “There's a Solution to the Debt Fight That Could Avert Catastrophe -- Why Is Everyone Ignoring It?” (07/20/11) Darrell Delamaide: ”Smoke and mirrors with the federal deficit,” (07/20/11) Mark Kleiman: "Phony problem, phony solution," (07/20/11) wigwam: "Mark Kleiman calls Coin Seigniorage a phony solution; to a phony problem," (07/23/11) Yves Smith: "We Discuss the manufactured UD Debt Crisis at the Real News Network." (07/25/11)

These posts were an immediate wave, so to speak, of responses to the Salmon and Yglesias posts. But there was more to come in July. I posted again, presenting a variety of platinum coin seigniorage face value options, along with differing political and inflation implications of the options (07/20/11).

Then I followed with an open letter to Congress and the President on getting around the debt ceiling (07/25/11), and a post on the President's apparent views on the debt ceiling. (07/26/11)

Meanwhile, Jack Balkin, a Constitutional Law Professor at Yale, had blogged about coin seigniorage telling a good story in an important post (07/18/11).

And Balkin next did a post at CNN, where he reviewed a number of options for getting around the debt ceiling (07/28/11). And, in doing so, brought the platinum coin seigniorage idea into the mainstream discussion.

Balkin's efforts seemed to fuel another wave of the July 2011 platinum coin seigniorage explosion. These include:

”Capt. Fogg: Billion Dollar Coins and Exploding Options -- oh my!”  (07/28/11)

Logan Penza: “(Platinum) Pennies From Heaven (UPDATED);” (07/28/11)

Jonathan Chait: “The Coin That Will Save The World;” (07/28/11)

Matthew Yglesias: “The Platinum Coin Option;” (07/28/11)

Brad DeLong: ”The President's Obligation to Take Care That the Laws Be Faithfully Executed Requires Him to Start Minting Large Denomination Platinum Coins” (07/28/11)

upyernoz: “platinum, baby, platinum” (07/28/11)

Master of Interesting Links: “The meme that will not die!”; (07/28/11)

Tyler Cowen: “Crank up the mint for the platinum coin!” (07/28/11)

Edward Harrison: “The #trilliondollarcoin meme”; (07/28/11)

The Economist: “The trillion dollar coin solution;” (07/29/11)

Eric Hayden: “A $1 Trillion Coin Seems Like a Nice Idea” (07/29/11)

Paul Krugman: “Lawyers, Coins, and Money” (07/29/11)

Annie Lowery: “The $5 Trillion Coin” (07/29/11)

Johnsonville: “Debt Watch/Coin Trick: the Trillion Dollar Coin” (07/29/11)

Seneca Doane: “Cut the Gordian Knot with the Platinum Sword;” (07/30/11) This Post was a particularly important because it recognized the key political implications of PCS, and also was enormously popular at DailyKos and elicited 569 comments there.

Laurence Lewis: "The Debt Ceiling Dance and the Trilion Dollar Coin." (07/31/11)

David Weigel: “The Platinum Coin Hysteria of 2011;” (07/31/11)

So, that was the second wave of responses by mainstream bloggers, and others, to the Platinum Coin Seigniorage idea. In addition, I added two posts on 07/31/11:

Progessives In Congress: Vote for The President To Do It!” (07/31/11)

Also, the last notable post on Platinum Coin Seigniorage (08/01/11) before the debt ceiling settlement of 08/02/11 was Scott Fullwiler's Coin Seigniorage and Inflation. It's still the most comprehensive and rigorous discussion available of the relationship between the two.

But then, and lastly, there was Beowulf responds to Dave Weigel of Slate.” (07/31/11) I think this reply is worth quoting, because, in a way, Weigel's reaction is pretty typical of most mainstream posts, reacting to the idea in what only can be described as a superficial way, part brush-off; part poking fun, almost as if mainstream bloggers were afraid of discussing the idea without an obligatory heaping slice of skepticism accompanying their mention of it. Obviously beo's reply doesn't apply to everyone, so I don't want to over-generalize it. But if you read all the posts, I think you'll see that Weigel's reaction is pretty common, so beo's reply is pretty broadly applicable.

There’s nothing fanciful about it. The strange thing is that the USG is constrained by debt ceiling but a part of the USG (The Fed describes itself as “an independent government agency”) is unconstrained by a debt ceiling. Even more anomalously, Fed-held Treasuries are counted against the USG debt ceiling.

This isn’t about selling drilling rights on the moon but a practice almost as old as the Republic. The US Mint has used coin seigniorage continuously since the Coinage Act of 1792 (in a legal sense, a single $1 trillion platinum coin is the same as trillion $1 coins but with far less expense and effort). It violates no laws nor federal regulations nor prior obligations for the USG to transfer debts from the constrained whole to an unconstrained part (that is violates all logic is the fault of Congress).

The idea actually originated in a note I sent the Department of the Treasury on a collateral issue (as it happened, I had “buried the lede”). I posted about this on Firedoglake (and Correntewire) only after discussing the issue at Warren Mosler’s blog (Incidentally, I’m hardly a lefty. I voted for Romney in the 2008 GOP primaries, will probably do so again next year).

Writer Joe Firestone suggested to me that the platinum coin seigniorage issue was something worth posting a blog about and bugged me until I did (after which, Joe took the leading oar on developing the idea). I’d point out that Warren Mosler also picked up on the economic ramifications very early. But I trust that every reader here with an interest in economics has already read his book The Seven Deadly Innocent Frauds (you can download for free from his site if you haven’t), so that should come as no surprise.

http://moslereconomics.com/...

Of course, there is historical precedence for using coinage to pay the national debt, the Legal Tender Act of 1862 authorized the issuance of fiat currency, US Notes or “Greenbacks” (the predecessor of today’s Federal Reserve Notes) required that Tsy pay debt service only with US Mint-issued coins. Of course Nixon freeing us from the gold standard changed everything, but if our politicians understood that, we wouldn’t have a debt ceiling now would we?

And finally, I should note, that once the debt ceiling compromise was agreed to on 08/02/11, the sudden explosion of posts on platinum coin seigniorage quickly faded away, as I predicted it would then. I've blogged a lot about it, since, trying to develop the political context further and to make people aware of the policy variations available in the platinum coin seigniorage toolbox. But bloggers doing posts on it were few until just this past week.

Now people are starting to see that there may be a fiscal cliff settlement and immediately afterward a new debt ceiling crisis for us to cope with. So, suddenly the mainstream has taken up where it left off with platinum coin seigniorage in early August 2011. It's again in a frenzy about it, and it's again making errors in its analysis of it and in the information it's spreading about the history of the platinum coin seigniorage idea.

In future posts of mine, I'll look at the new wave of blog posts and discuss the issues they raise. But for now I want to correct one immediate thing. Joe Wiesenthal, Brad Plumer, and John Carney have been saying that the platinum coin seigniorage idea originates with Cullen Roche's blog post of 07/07/11 cited earlier with a commenter on that post. Plumer even says:

*Update: Cullen Roche appears to have been one of the first people to discuss the platinum coin idea in 2011 ― it came from one of his readers. See also here.
If Plumer had read the first of his references with the accompanying comment thread, he would have found a host of links to earlier work on PCS. And if he had read the 07/17/11 post of mine he references (also linked to in the review above), he would have found that the first statement of the PCS idea by beowulf, Cullen Roche's commenter, was on November 4, 2010, more than 8 months before Cullen's own post. As it turns out even this date is too late, since Cullen, himself, (h/t to Cullen Roche, 01/05/13) discovered an even earlier occurrence at Brad Delong's blog in another comment of beowulf's, a full 12 months earlier than Cullen's first post on PCS.

Also the first full blog post on PCS, as you can see from both Plumer's reference and the account above is on January 3, 2011. And after that, there are numerous blog posts on the subject before Cullen's post on 07/07/11. So, I think that Wiesenthal, Plumer, and Carney, all got it wrong. Probably because they relied on each other, rather than on reading their own links, or on using "the google."

(Cross-posted from New Economic Perspectives.)

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Comment Preferences

  •  it started with Balkin, yes? (0+ / 0-)
    •  No it started (3+ / 0-)
      Recommended by:
      J M F, Mr Robert, dorkenergy

      With Beowulf posting a comment on an article in New Deal 2.0  However, the idea of a large denomination coin to "retire" the "National Debt" has been floating around in the "Halls of Congress" since at least the mid 1980's, as referred to by Ellen Brown in her book "The Web of Debt."

      The first mention in the "Mainstream Media" appears to have been Balkin's mention of the Platinum coin at CNN

  •  Okay, I read it. Are you sending this to the (1+ / 0-)
    Recommended by:
    PeterHug

    people who've got it wrong? They would be the ones who need to see it, no?


    The Internet is just the tail of the Corporate Media dog.

    by Jim P on Sat Dec 08, 2012 at 01:37:30 PM PST

  •  It is a gimmick. (0+ / 0-)

    It may appear to be legal, it may be in theory even a possibility. But it would be viewed as the ultimat form of legal chickanerry if ever implemented, and thus it never will be. So talk about it all you want, enjoy the conversation by all means. Just don't anybody actually start thinking that herein lies some solution in the real world.

  •  An Even Better Idea (0+ / 0-)

    Issue one brand new $100,000 dollar paper bill for every human currently residing in the country. Or coin. Or whatever. That would cure our economic ills and create an explosion of prosperity that would last decades. There are no drawbacks to this for 99% of the population.

    "I'll believe that corporations are people when I see Rick Perry execute one."

    by bink on Sat Dec 08, 2012 at 04:32:57 PM PST

    •  Can't do that! (4+ / 0-)
      Recommended by:
      dorkenergy, bink, psyched, sagesource

      Because the US Treasury is prohibited from issuing more than $450 million in paper bills. This limit has remained unchanged since the US Civil War. There is no such limit on coinage. There was a limit in that the Treasury could only issue pennies, dimes, quarters, half dollars, dollars and gold or silver coins in denominations up to $50. And this did limit the Treasury until the passage of the 1996 Platinum Coin Act. This specifically removed the limits to how much money could be issued as platinum coins.

      So yes, what you suggest can take place, but only via platinum coins. But what you suggest is not wise, as the solution as you frame it would be highly inflationary. There do happen to be physical resource limits that one has to contend with.

      The Congress could and should engage in counter cyclical spending and taxing. The platinum coin just enhances the Congress' ability to spend and tax wisely. Current on going popular myths about deficit and surplus spending can be put to rest.

      •  I guess the coins could be made (1+ / 0-)
        Recommended by:
        clonal antibody

        out of plastic too, or best of all, out of chocolate covered in (platinum) foil.

        :)

        IMO, the most likely use of this concept will be to force the Republicans to concede real defeat on the next Debt Ceiling negotiation, and raise the limit enough to last 4 - 5 years.  From a political perspective, having Boehner and McConnell lose that immediately after they lose on the income tax fight will be a very effective start to President Obama's new term.

        I would like to see a platinum foil-wrapped chocolate $1 trillion coin, though...

        •  Theoretically yes (1+ / 0-)
          Recommended by:
          PeterHug

          For the plastic coin, the Congress would have to pass a law to that effect. However the platinum foil covered chocolate could be open to legal interpretation ;)

          Since 31 USC § 5112(k) states

          (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 more I think about it, (0+ / 0-)

            the more I'm attracted to the platinum foil-covered chocolate model.

            We also could make similar coins in denominations of $100 million and $1 billion, available for purchase through Nieman Marcus for the billionaire for whom you can't think of an appropriate Christmas present.  Buy and eat - you just wiped $1 billion of the US deficit off the face of the Earth!  I can see the product placement opportunities on the Simpsons now...

            :)

  •  Here's some comments from that ND2.0 post (0+ / 0-)

    The wayback machine has a version of Marshall's ND 2.0 post at Obama Faces His Own “Teachable Moment”.

    Unfortunately it was only crawled once, and too early to catch Beowulf's comment in that thread, that you quoted at FDL. But I have an earlier comment in that thread, referring to the coin. As my old comment indicates, and as beowulf says above, the coin was discussed earlier at Warren's blog.

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