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

Let us now praise Beowulf, perhaps the most influential blog commenter of all time.

A visualization of what a $1 trillion coin could look like. DonkeyHotey via Flickr
Dylan Matthews is a senior correspondent and head writer for Vox's Future Perfect section and has worked at Vox since 2014. He is particularly interested in global health and pandemic prevention, anti-poverty efforts, economic policy and theory, and conflicts about the right way to do philanthropy.

On Tuesday, the Treasury secretary of the United States, Janet Yellen, finally said it: She does not intend to mint a platinum coin worth $1 trillion to pay for the US government’s expenses.

If you are not familiar with the platinum coin idea, or the hashtag #MintTheCoin, or the small army of Coinistas who have become a vocal part of economics and finance circles since the early 2010s, you may be asking: What the hell are you talking about?

The (sorta) short answer is that later this month, the US will exceed the legal limit on how much outstanding debt the federal government can hold — the debt ceiling. Senate Republicans have agreed to allow an extension through December, but that just sets up another confrontation in a few months. To avert the global economic catastrophe that might ensue if the US exceeds the debt limit, some observers have broached some truly absurd ideas.

Enter #MintTheCoin.

A 1997 law intended to help the Mint make money off of coin collectors gives the Treasury secretary the power to mint platinum coins of any denomination, for any reason. When commentators discovered this law during the 2011 and 2013 debt ceiling battles, they realized that this power could offer a way to sidestep the legal cap Congress places on the federal government’s borrowing.

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:

Curiously enough Congress has already delegated to Tsy [Treasury] all the seignorage power authority it needs to mint a $1 trillion coin (even numismatic coins are legal tender at their face value and must be accepted by the Federal Reserve)– the catch is, its gotta be made of platinum (ditto the balls of any President who tried this). So for a 1 oz. coin, Tsy would net only $999.998 Billion :o)

From this modest post, a trillion-dollar idea sprouted, one that has come to influence fiscal policy discussions in the US at the highest levels.

I reached out to Carlos Mucha on his natural sparring grounds, Twitter, and we talked a bit via direct message 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. Our DM conversation, edited for length and clarity, follows.

Dylan Matthews

Tell me the basic story of the trillion-dollar coin idea. How did it go from you posting in a blog comment thread to being something the president and his advisers talk about?

Carlos Mucha

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 it a bit back then and it was picked up by other bloggers and then journalists and just snowballed from there.

Naomi Klein’s Shock Doctrine book describes how conservatives in this country and abroad use a crisis — natural disasters and other unexpected calamities — to push through policies that would never win legislative support. What happened was, in the Obama administration, his Republican adversaries realized they could actually plan a crisis by refusing to increase the debt ceiling and then use the shock doctrine to push through their desired policy (spending cuts and, if they can get away with it, tax cuts too).

Here’s the thing. Republicans know that by and large Dick Cheney was right: Deficits don’t matter; Reagan taught us that. It’s possible that Reagan didn’t teach Cheney that but rather [Cheney’s] best friend in the DC power circle, Don Rumsfeld.

And where did Rumsfeld learn this? Warren Mosler. [Mosler has said he devised MMT after a discussion with Rumsfeld in the steam room of the Racquet Club in Chicago.]

So Republicans know deficit and debt fears are overblown, but Democrats do not. So we see Carter, Clinton, and Obama clean up the balance sheet and enable Reagan, Bush, and Trump to come in and cut taxes. Progressives have [now] caught on to the game, which is why the trillion-dollar coin (and big spending plans of Bernie Sanders and AOC) resonate with the Democratic base. Anyway, that’s what I think is going on.

Dylan Matthews

How did you get interested in Warren Mosler and his forum? What made that a preferred place for you to post?

Carlos Mucha

I don’t even remember how I landed at Warren’s site, but he’s a genuinely cool guy and is always ready to engage with readers on his board.

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

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 comment. It’s a mainstream idea now. What was it like to watch the idea take off like this? Bewildering? Embarrassing? Entirely positive?

Carlos Mucha

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 School. He has a Kurt Vonnegut paper due, so naturally he hires Kurt Vonnegut to write it.

It’s hilarious, it was basically an intellectual exercise — like a website where people hash out who the greatest third basemen of all time was or whatever — and it just took off.

Dylan Matthews

Have you had any politicians or Treasury/Fed officials reach out to ask you about the coin?

Carlos Mucha

Sure, sometimes someone in the admin, Congress, or the Fed will drop me a line asking for my take on some problem or another. If you had asked me yesterday, I would have said that was because of the trillion-dollar coin story, but after receiving this text yesterday ...

Mucha says he has received messages from an official joking about “creative legal solutions.”
Carlos Mucha

... I’m not so sure anymore. Maybe public officials secretly canvass all the Twitter reply guys for policy advice. Who knows.

Dylan Matthews

Treasury Secretary Janet Yellen recently seemed to close the door on the coin, telling CNBC, “I’m opposed to it and I don’t think we should consider it seriously. It’s really a gimmick. … It compromises the independence of the Fed, conflating monetary and fiscal policy.” She also argued it would fail to reassure markets, thereby creating some risks akin to those of a debt ceiling breach. What do you make of her comments?

Carlos Mucha

She is, by and large, very good at her job and is by all accounts a nice person, but on this she’s wrong, not just on the law but on policy.

Dylan Matthews

There are a few other options for the executive to get around the debt ceiling — I wrote about a couple here, like declaring that continuing to pay the government’s bills is the “least unconstitutional option” compared to failing to spend what Congress authorized.

What do you make of these? Is it coin or bust for you, or are there non-coin ways out?

Carlos Mucha

At the same time as I started noodling around on platinum coinage, I found and wrote about two other loopholes too:

  1. Treasury can issue perpetual consols [debts that never mature and continue paying interest forever until the government buys them back]. Since there’s no guarantee to repay the principal, it doesn’t add to public debt (which measures amount of guaranteed principal).
  2. The Fed can just donate the Treasury securities it holds back to Treasury.

Of the three [the above two and the coin], issuing consols is probably the least disruptive. Treasury can announce it is issuing T-bonds “payable at the pleasure of the United States” instead of a fixed term and can hold an auction later the same day. So that’s what I’d expect to see if Treasury runs out of money.