Can trillion-dollar platinum coins solve the U.S. debt ceiling problem? – by Dorothy Kosich ( – December 10, 2012)

As the U.S. government struggles through another fiscal crisis, pundits are resurrecting a theory that the minting of a handful of trillion dollar platinum coins could resolve U.S. debt woes.

RENO (MINEWEB) – As wrangling continues between President Barack Obama and House Republicans about exactly how to avoid the fiscal cliff, the U.S. Treasury Department will hit its $16.4 trillion debt ceiling In February.

Analyst Chris Krueger at Guggenheim Securities’ Washington Research Group recently suggested that to avoid a default sometime in February, the Proof Platinum Coin Seigniorage (PPCS) might be considered.

PPCS involves minting proof platinum coins with arbitrarily high face values, depositing them at the Fed, receiving electronic credits equal to the face value of the coins from the Fed, and then having Treasury sweep the profits in the Treasury General Account, where they could be used to redeem debt held by the Fed, debt held by Trust Funds and government agencies, and debt held by the non-government sector including domestic investors and foreign government and investments.

In an article published on the website, author Joseph M. Firestone, writes, “It is important to emphasize that the capability to use PPCS, and to pay off the national debt, lies with the Executive Branch.”

Yale Law School Professor Jack Balkin, who raised the concept in a 2011 CNN News report, arguing “jumbo coin” strategies would work “because modern central banks don’t have to print bills or float debt to create new money; they just add money to their customers’ checking accounts.”

“The theory goes that the U.S. Mint would create a handful of trillion dollar (or more) platinum coins. The President would then order the coins deposited at the Fed, who would then put the coin(s) in the Treasury who can now pay all their bills and a default is removed from the equation,” according to Krueger.

However, Krueger acknowledged,” The effects on the currency market and inflation are unclear, to say the least. You would also likely trigger a wave of lawsuits similar to the Constitution Option and create two tranches of treasuries.”

“Both this option and the Constitutional Option are VERY low probability options,” Krueger stressed. The Constitutional Option would allow President Obama to invoke the 14th Amendment of the U.S. Constitution and unilaterally raise the debt ceiling.

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