Without wanting to tread on my colleague Matthew Yglesias’s turf, I must note that the great Platinum Coin war has divided the former directors of the U.S. Mint. Brother against brother, with Joe Weisenthal’s Twitter feed playing the role of Fort Sumter.
On the pro-coin team: Philip Diehl, director of the Mint in the Clinton years.
Once the debt limit is raised, the Fed could ship the coin back to the Mint where the accounting treatment would be reversed and the coin melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.
There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.
On team Stop the Coin: Edward C. Moy.
The current law does allow the Mint to make a platinum proof coin and does not specify whether this applies to a bullion coin or a circulating coin. A proof coin refers to a mirror-like finish and is made for coin collectors. However, a proof coin must be accepted at face value. Some have argued that the law can be stretched to allow for a platinum circulating coin, but this would not be consistent with the intent of the original legislation.
Diehl is much more convincing, isn’t he? Moy doesn’t say that the coin can’t be struck, only that it wouldn’t be consistent with the intent of the frivolous state coin legislation. Well, no one’s saying it’s consistent. Demanding cuts for every dollar of debt limit increase isn’t consistent with that statute, either.