Cullen has a real blog where he apparently gets some traffic and interest. Who knew!
Paul Krugman routinely links to him (it’s happened enough to be routine anymore) and now the former head of the U.S. mint has left a comment on Pragmatic Capitalism.
Mr. Deihl validates how both our own beowulf and JKH are 100% correct in their assessment of how the coin would work:
I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.
* In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).
* What is unusual about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations. [Mike here: beowulf has shown this again and again.]
* Moreover, the accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar. [Both JKH and beowulf have demonstrated the accounting here at MR.]
* Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is 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. [Mike Comments: JKH and his analysis the coin would be “Platinum Coin easing” where the coin is spending without public bond issuance results in accounting which is the same as quantitative easing are validated in this passage.]
* This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.
* This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.
* Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.
* Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.
Philip N. Diehl
United States Mint
The coin is real. It can be done.
(Update: Mr. Diehl has left a comment here at MR saying reiterating his stance on the legality and accounting treatment of the coin.