'Mint the coin': why the platinum coin campaign doesn't even work as satire

http://www.guardian.co.uk/business/2013/jan/04/minting-platinum-coin-option-treasury

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Twitter is a great news source and a hotbed of idea generation. But one of its major downsides is that it allows cranks and trolls to quickly and efficiently coalesce around ridiculous ideas. The latest bored-financial-nerd meme is this: the minting of a trillion-dollar platinum coin to save the US economy from the dithering of Congress. 

There is a Twitter hashtag – #mintthecoin – and a wan, spindly White House petition created on January 3 that needs around 25,000 signatures and currently has just under 2,000, which makes it resemble the winsomely pathetic Charlie Brown Christmas tree. 

Here is the background behind this inane, yet media-consuming, project. 

The US is coming up to its debt-ceiling limit soon. The debt ceiling is the amount the US Treasury is allowed to – and has already – spent. Raising the debt ceiling means allowing the US Treasury to pay its bills; if the debt ceiling is not raised, the US will default on its financial commitments and put at risk its credibility as well as the health of the bond and stock markets. The US already went through a bruising debt-ceiling fight in 2011, which resulted in a downgrade. Members of Congress, mostly led by the hapless and disorganized Tea Party, are preparing to do exactly that: hold the debt-ceiling vote hostage and refuse to raise the debt ceiling until they get a giant package of spending cuts. 

This is a real problem, and in a couple of months – when we hit the debt ceiling – every American will be so sick of the insane discussion that we may all collectively vomit. But the fact remains: how to get out? What to do? 

A small but relentless group of impish bloggers and columnists – including Joe Weisenthal of Business Insider and Josh Barro of Bloomberg, as well as hapless Congressman Jerry Nadler – have created a large-scale trolling project that is meant to pressure the US Treasury into creating a trillion-dollar platinum coin to solve this problem. (The former head of the US mint, Philip Diehl, says it is legal, but legal, of course, doesn't mean something is a good idea. It just means no one in legislative circles anticipated this particular idiocy.) 

Their reasoning is this: the US Treasury has the power to create platinum coins of any size and denomination. It could easily print one with a face value of $1tn and deposit it at the Federal Reserve, thus immediately adding $1tn to the Treasury's bank account and giving it breathing room to avoid the debt ceiling fight. 

This is an elegant solution – if you are a cartoon villain given to sitting in a vast underground bunker and innovating plans for world domination while petting a white cat. It makes less sense for real mortals. In fact, it has all the aspects of a group of well-financed mad scientists plotting to create a giant slingshot to avert an asteroid hurtling towards the earth.

The #mintthecoin project is not meant, of course, to be completely serious, although they may play at it on TV. In the minds of its creators, is supposed to be a kind of Swiftian Modest Proposal that highlights the ridiculousness of the recurring debt ceiling hostage-taking by offering an equally ridiculous solution. 

Even as satire, it does not work. Leave aside the strange hashtag and the stringy petition. Leave aside the somewhat science-fiction-like idea of a magic coin, as if the US economy is a video game.   

Here is one big problem: the US Treasury spends approximately $100bn per month. A trillion-dollar coin would buy the Treasury only about 10 months of breathing room. It is dubious at best that a Congress full of reckless legislators will surely come to their senses in only 10 months, given that they haven't for the past 18 months since the same last debacle. Delaying the Debt Ceiling Reunion Tour will not achieve the primary goal here, which is ending it. 

Another problem with the trillion-dollar coin is that the US mint probably doesn't have the capacity to create one out of real bullion, which will likely be required for something with such a historical importance. The US mint no longer produces platinum coins, except in collector's editions that retail for $1,892 at the moment. A real platinum coin – the American Eagle – that was produced as recently as 2009 contains 31.12 grams of platinum and has a face value of $100. There is not enough platinum in the US in a year's supply to create that. The US produces all of 3,700 kilograms of platinum a year. 

The mint could, on the direction of Treasury, just make a platinum-finished coin that bears the face value of $1tn, but that would just create a nonsensical level of inflation in the value of the US dollar. 

Another point, perhaps, is that it's no worse for the Treasury to print a trillion-dollar gold coin than it is for the Federal Reserve to buy trillions in mortgage securities to save banks and the bond market. There is more meat to this – the US government is not nearly done meddling in the world of the economy and the markets, and minting a new coin is very much in the interventionist mold of the past four years. But the Fed's programs don't require scouring the US reserves for platinum and creating some unnatural currency beast. It can at least masquerade as an intellectual exercise. 

The most insulting thing about the campaign to mint the trillion-dollar platinum coin is this: there are some – a few! – in the financial world who do not have the memory capacity of goldfish. Those people who can think as far back as 2011 remember that we went through the drill on the platinum coin back then – all the commentary, the punditry, the absurd speculation about it was first created at the time of the last debt-ceiling fight. Then, as now, it attracted the efforts of bored bloggers, chattering among themselves. And guess what? It didn't impress upon Congress the recklessness of their approach. The US came within hours of default anyway. If anything, we have a more unreasonable and humorless Congress, even less likely to be swayed by satire or ridicule. The platinum joke, played once last year, is played out now. 

But the biggest disadvantage of the platinum coin campaign is that it is frivolous, when there is a serious failure of US governance at stake. Allowing the "mint the coin" campaign to take over the news cycle may be good for the media exposure of the bloggers involved, but it does nothing to dissuade stubborn lawmakers from a silly path they chose once and are likely to choose again.

A Congress like this doesn't need to be reminded of how ridiculous it is; it already knows that. It needs to be reminded of the nobility and dignity and importance of the offices they agreed to hold, and which they are now dragging through the mud.