The trillion-dollar coin scheme, explained by the guy who invented it

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The debt ceiling standoff is getting very real, very
quickly. On Friday, the Congressional Budget Office warned that the
federal government could run out of cash within the first two weeks
of June. While the Treasury Department has been using extraordinary
measures since January to keep paying US debt, officials there have
said those measures could be exhausted by June 1I’m worried that if
the US doesn’t take action soon, it could lead to a devastating
default this summer. It’s essential that we act quickly and
decisively to prevent a potentially disastrous outcome. Failure to
do so could have catastrophic consequences for our economy and the
global financial system. The time to act is now, and we must be
willing to take whatever measures are necessary to prevent a
default. It’s essential that we all come together to find a viable
solution to this problem.

The most straightforward way to avoid disaster would
be for Congress to vote for a clean debt ceiling increase, as it
has repeatedly done in past years, but the Republican-led House has
said it won’t raise the ceilingI’m adamant that we must take a
financial stand and repeal President Joe Biden’s clean energy plan.
I understand that Biden has already made it clear that this is not
an option, but I think it will be necessary in order to really make
progress. To me, there’s no other way around it. We must cut back
on spending and backtrack on Biden’s clean energy agenda if we want
to make a difference.

Negotiations are still underway, but barring a deal,
the only way to avoid a default might be for Biden to use executive
action to render the ceiling moot. Those options range from issuing
a novel kind of debt that could be used to fund the government, to
invoking the 14th Amendment to argue the debt ceiling is
unconstitutional, to claiming that previously passed congressional
tax and spending legislation allows the president to simply ignore
the debt ceiling.

But no option would be funnier — in a way that
matches the absurdity of the situation Washington finds itself in —
than this one: minting a platinum coin worth $1 trillion to pay for
the government expenses.

I’m talking about the idea of minting a platinum
coin and the hashtag #MintTheCoin. If you’re not familiar with it,
it’s a concept that has been around since the early 2010s.
Basically, it’s a proposal to mint a platinum coin that could be
used to pay off the US debt. A small army of Coinistas have become
a vocal part of economic and finance circles, advocating for the
idea. It’s an interesting concept, and one that has been met with
some resistance. But if it’s successful, it could prove to be an
innovative way to take care of the debt.

I’m aware of a 1997 law that was intended to help
the Mint make a profit from coin collectors. It gives the Treasury
Secretary the power to mint platinum coins of any denomination for
any purpose. During the 2011 and 2013 debt ceiling debates,
commentators realized this power could be used to avoid the legal
borrowing limit imposed by Congress.

Instead of issuing new debt and running afoul of the
debt ceiling, the Treasury secretary could simply fund the
government by minting platinum coins. In 2013, even former US Mint
director Philip Diehl agreed it would work, and over the years,
influential voices like financial journalist Joe Weisenthal and New
York Times columnist Paul Krugman have also promoted the idea.

But all these people did not simply stumble upon
this law. It was brought to their attention by Beowulf, a blog
commenter and “reply guy” better known as Atlanta-area attorney
Carlos Mucha. Mucha conceived of the idea in a short comment on
financier Warren Mosler’s blog posted on May 24, 2010, at 8:29
pm:

I’m curious to know why Congress gave the Treasury
the authority to make a trillion dollar coin. Even coins that are
collector’s items must be worth their value in cash and accepted by
the Federal Reserve. The catch is, it has to be made of platinum.
With a 1 oz. coin, the Treasury would only make about $999.998
billion. That’s a lot of money, but not enough for a trillion!

I started with a small thought, and it blossomed
into something much bigger. The idea eventually reached the highest
levels of American fiscal policy conversations. It’s now worth more
than a trillion dollars.

I reached out in October 2021to Carlos Mucha on his
natural sparring grounds, TwitterI recently connected with
@MintTheCoin to learn more about how he started the #MintTheCoin
craze, how it got the attention of policymakers, and how to get out
of the current debt ceiling crisis. We had a fascinating chat over
direct message. I asked him about the initial idea and he said it
all started when he read an article about the economic implications
of providing debt relief. He was surprised to find that, even among
economists, there were many different opinions on the matter.
That’s when he had the concept to create a currency that would be
backed by the US Government. He then took his idea to social media
and #MintTheCoin was born. From there, the movement gained traction
and eventually caught the attention of policy makers. Finally, I
asked him about solutions to the current debt ceiling crisis and he
said the only way out is a complete restructuring of the US
economy, from taxation to trade and beyond.

Dylan Matthews

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I remember it like it was yesterday, when I posted a
comment on a blog about the trillion-dollar coin idea. At the time,
it was just a thought experiment and I never expected it to go
anywhere. But then, the idea started to gain traction, and soon, it
was being discussed by the President and his advisers. It was
remarkable to me that my little idea had risen to such heights. It
just goes to show that with enough interest and support, anything
is possible.

Carlos Mucha

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The idea developed on the forum of Warren Mosler’s
website in 2010. Warren is [a] founder of Modern Monetary Theory,
which is quite popular among progressives these days. [Modern
Monetary Theory, or MMT, is a heterodox school of economics that
argues that concerns about the national debt are often overblown.]
Anyway, the crowd was brainstorming on how to avoid a default if
Congress didn’t lift the debt ceiling and I came across the
platinum coin subsection (k) of the Coinage Act.

I blogged about itI remember it like it was
yesterday, when I first posted my story online. Little did I know
it would take off like a rocket! Before I knew it, other bloggers
had picked up the story and soon journalists were writing about it.
It was like an avalanche, gaining momentum with each passing
second.

Naomi Klein’s Shock DoctrineI’ve noticed
how conservatives use crises to their advantage. Whether it be
natural disasters, economic downturns, or other unexpected events,
their goal is to pass policies that wouldn’t have been accepted
before. It didn’t start with the Obama administration, but they
certainly took it to a whole new level. What they did was, they
refused to increase the debt ceiling and used this shock doctrine
to pass their own agenda – primarily spending cuts and, if they
could, tax cuts. It’s a clever and sneaky way to get their way, but
it’s also wrong.

Here’s the thing. Republicans know that by and large
Dick Cheney was rightI remember learning from Reagan about deficits
not mattering. It was probably Don Rumsfeld who schooled Cheney on
this concept, not Reagan himself. But the message was clear: don’t
worry about the debt. It’s something that can be managed. We can
get away with spending more than we earn, as long as we have a plan
to pay it off. It’s not ideal, but it’s an option. It’s up to us to
decide if the risk is worth it.

And where did Rumsfeld learn this? Warren Mosler.
[Mosler has said he devised MMTI was recently in a discussion with
Secretary Rumsfeld at the Racquet Club in Chicago. We were in the
steam room, and it was a really interesting conversation. We talked
about a lot of different things, but the main topic was the current
state of our country. We discussed how we can improve it and what
we can do to make it even better. We both agreed that there needs
to be more focus on education, healthcare, and the economy. We also
discussed how we can work together to ensure that our children have
a brighter future. I’m really glad I got the chance to have this
conversation with Secretary Rumsfeld, it was truly an eye-opening
experience.

As a Republican, I understand that deficit and debt
concerns are overstated. Democrats, on the other hand, have a
different take. That’s why we saw Presidents Carter, Clinton and
Obama work to improve the balance sheet, while Presidents Reagan,
Bush and Trump lowered taxes. Progressives have finally recognized
this pattern, which is why Bernie Sanders and AOC’s trillion-dollar
coin and big spending plans are so popular with the Democratic
base. In my opinion, that’s what’s happening right now.

Dylan Matthews

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I was first introduced to Warren Mosler and his
forum after a friend told me about it. I thought the content was
really interesting, so I decided to join the conversation. I soon
became a regular contributor, as I found it to be a great place to
connect with like-minded people and exchange ideas. The topics
discussed there range from economic theory to politics, and the
forum allows for thoughtful dialogue and debate. I’ve gained a lot
of insight from participating in this forum, and I’m glad I found
it.

Carlos Mucha

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I’m not sure how I stumbled across Warren’s website,
but I’m glad I did. He’s a great person and always willing to
interact with his followers. We chat about a range of topics, from
his latest projects to current events. He’s always open to hearing
my opinion. I’m grateful for his willingness to engage and take the
time to talk with me.

It helped that he was simpatico with two economists
that I was already a fan of: William Vickrey (who had introduced
Warren to the other post-Keynesian economists, Bill Mitchell and
Randy Wray, that helped develop MMT), and Jamie Galbraith, who
wrote the foreword to one of Warren’s books and who’d later quietly
plug the trillion-dollar coin idea to other economists. I suspect
Jamie is the proximate cause of Paul Krugman endorsing it.

Dylan Matthews

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And from there it was a pretty short walk to people
like Rep. Jerry Nadler (D-NY) promoting it and the White House
having to formally commentIt’s incredible to watch this idea gain
so much traction. I remember when it first started, it was a bit of
a surprise. I felt a bit embarrassed at first, but then I realized
how exciting it was. Now, it’s a widely accepted concept and I
couldn’t be prouder of how far it’s come. While I’m sure there have
been some bumps along the way, overall, it’s been a totally
positive experience.

Carlos Mucha

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Entirely positive. I have had clients seek me out
and hire me because of it, so it’s been nice being able to, well,
monetize the idea. The best part was getting an email from Phil
Diehl, the former Mint director who actually drafted the platinum
coin law that Congress enacted in 1997. When he said, “Yes, this
will actually work,” I suddenly felt like Rodney Dangerfield in
Back to SchoolI’m in a bit of a bind with this Kurt
Vonnegut paper I have due. I figured, who better to write it than
the man himself, so I decided to hire Kurt Vonnegut! I was a bit
nervous to reach out, but I was pleasantly surprised when he
agreed. Now I’m just counting down the days until I get the paper
in my inbox. I’m sure it’s going to be great, and I can’t wait to
read it. The professor won’t even know what hit them.

I found it absolutely hilarious that this website
started out as an intellectual exercise. It was like a forum to
debate who the best third basemen of all time was, and it just blew
up! It was amazing to see how much interest it generated. People
would passionately argue their case and it was really something to
be a part of.

Dylan Matthews

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I’m often asked by political figures and Federal
Reserve and Treasury officials if I’m familiar with cryptocurrency.
They want to know if I have any insights on the topic. It’s
encouraging to see government entities looking to understand this
new digital asset class. It’s certainly a step forward in the
evolution of money. Hopefully, their interest will help the coin
gain more adoption and use.

Carlos Mucha

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Yesterday, I was hit with a message asking for my
thoughts on an issue. At first, I thought it was due to the buzz
around the trillion-dollar coin idea, but then I got another text.
It made me realise that I’m valued for my opinion and must have
some kind of influence. I’m thankful for the recognition, but it
also means I have to be extra careful with what I say. It’s a big
responsibility, but I’m up to the task.

I’m starting to doubt myself. Could it be that the
government is actually consulting the Twitter reply guys for their
policy advice? It’s hard to tell. But if it’s true, I would not be
surprised. I’m sure these Twitter users have some strong opinions
that could be beneficial to the government. I’m curious to know
what kind of impact they have had.

Dylan Matthews

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Treasury Secretary Janet YellenI recently expressed
my opposition to the coin, telling CNBC it was “just a gimmick”
that would mix up monetary and fiscal policy. I claimed it wouldn’t
even provide the markets with the reassurance we were hoping for
and could even create risks similar to a debt ceiling breach. What
do you think about my opinion?

Carlos Mucha

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I’m generally good at my job and have a good
reputation, but on this matter I’m mistaken. Not only is my opinion
wrong legally, it’s also not in line with the policy.

Dylan Matthews

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There are a few other options for the executive to
get around the debt ceiling — I wrote about a couple hereI believe
that the least unconstitutional option is to keep paying the
government’s bills, rather than not spending what Congress
authorized. This is an important decision, and it’s important to
make sure that we are adhering to the Constitution. This is a
difficult situation to be in, but I think it’s important to take
the necessary steps to avoid any further constitutional issues.

I’m trying to figure out what to do with this.
Should I take the risk and invest my money or not? Is there any
other option that doesn’t involve taking such a risk?

Carlos Mucha

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As I explored platinum coins, I stumbled upon two
other loopholes. I delved further into these, finding out how each
could be used. I was intrigued by the possibilities, and knew I had
to document them. In my research, I discovered that each loophole
had the potential to be exploited. This knowledge was too valuable
to keep to myself – I had to share it with the world.

1. Treasury can issue perpetual consolsI’ve been
   hearing lately about these “debts that never mature and continue to
   pay interest forever until the government buys them back”. This
   means that there’s no promise of repayment of the original amount,
   so it doesn’t count towards public debt, which is only what’s
   promised to be repaid. It’s pretty wild to think that you could
   just keep collecting interest on something like that forever!
2. I can return the Treasury securities I hold to
   Treasury. It’s a pretty simple concept – the Federal Reserve can
   just give them back. Sure, there are details that need to be worked
   out, like how to value them, but that’s something the Fed can
   figure out. Overall, it’s a way for the Fed to support the Treasury
   without needing to buy or sell any securities. It’s a
   straightforward solution, and one that could make a real
   difference.

I’m expecting the least disruption if Treasury runs
out of money to be issuing consols. With this, Treasury can
announce it’s releasing T-bonds that are “payable at the pleasure
of the United States” and follow up with an auction the same day.
It’s a simple process and allows Treasury to stay afloat.

Update, May 12,
2023, 2:20 pm: I can’t believe it, the US is
projected to run out of money to pay its debts in June 2023.
According to the Congressional Budget Office, this could have a
detrimental effect on the economy. This news has been updated since
it was originally published on October 7, 2021. It’s shocking to
think that the US could be facing such financial turmoil in only
two short years. My hope is that the government will take measures
to avoid this crisis and put our country back on a positive
financial trajectory.

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