Posted on September 23, 2021
By Paul Vanguard, for BullionMax.com
The U.S. Mint's recent gold eagle and Morgan silver dollar programs are great. Top-notch coins being issued and sold out immediately. The Mint even returns profits to the government. How could they possibly top this two-year homerun stretch?
A $1 trillion platinum coin might do it…
Why are we even talking about this? Well, in simple terms, the U.S. government has run out of spending money. Secretary of the Treasury Janet Yellen has been ringing the bells and begging for more cash, and Congress hasn't even really begun to discuss the issue. (Democrats are too busy horse-trading their "Green New Deal," and Republicans are mostly content to just wait for the Dems to come a-begging, hats in hand.) Everyone wants fiscal discipline, at least hypothetically. Nobody wants the U.S. government to go broke. Honestly it's never a convenient time to go broke, but this moment in particular is particularly embarrassing, considering they're still dickering over the next round of supermassive, unfunded spending.
The issue is, of course, the debt ceiling. (Think of it as your credit card limit -- if you bump into it, you can always call your bank and ask them to raise it. They'll ask you some uncomfortable questions and maybe give you more fake money to play with.) It's a self-inflicted problem, too. Congress give themselves permission to spend more money by promising themselves they'll stop spending, you know, eventually…
So here we are. Unless the is raised, the government is going to run out of money in October. And by "out of money," we mean bouncing checks to Social Security recipients, shutting down VA hospitals and defaulting on bond payments to everyone in the world who owns a U.S. government-issued IOU… Now, the thing about the debt ceiling is, it's most likely going to be raised (if not eliminated completely) as White House spokesperson Mike Gwin said. This whole melodramatic approach, "We said we wouldn't spend more but we want to! Alas, what shall we do?!?" has already happened 80 times now. That's right: 80 debt ceiling dramas, zero defaults.
You'd think they'd have their script down by now…
Janet Yellen definitely doesn't to oversee the first U.S. debt default since 1790. Turns out there's a secret Plan B…
All she has to do is order the U.S. Mint (which by the way is under her authority) to mint a very limited run of $1 trillion platinum coins, hand them to her, so she can deposit them at the Federal Reserve, and hey presto! The government isn't broke any more!
Sounds outrageous, doesn't it? Well, maybe so, but like many other outrageous laws (like the one in Arkansas that says it's illegal to put alligators in a bathtub ), this is real.
Specifically, subsection (k) of 31 USC 5112 , which governs Denominations, specifications, and design of coins says:
The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.
So, instead of raising the debt ceiling again, the U.S. would mint one or two platinum coins with a face value of, oh, say $1 trillion. Deposit at the Federal Reserve (presumably there's not a drive-through window, but that would make it even funnier).
You still don't believe it? Well, guess what? Obama himself was briefed on this secret Plan B way back in 2017:
We were having these conversations with Jack Lew [the treasury secretary at the time] and others about what options in fact were available, because it had never happened before. There were all kinds of wacky ideas about how potentially you could have this massive coin. It was some primitive ... it was out of the Stone Age.
Imagining a 15-foot coin being rolled down Pennsylvania Avenue escorted by two hundred armed guards, well, that's epic but is also a failure of the imagination. The point is, the coin itself doesn't need $1 trillion of platinum content. It just needs the words "$1 trillion" stamped on it. What would they even call it? A mega-eagle?
In essence, in order for the government of the U.S. to avoid even the slightest form of fiscal responsibility, all they have to do is turn platinum coins into a debased type of currency (you know, like dollars).
There's simply no more absurd symbol of how imaginary our financial system is than a single coin we all pretend is really worth $1 trillion.
There's two main takeaways here…
First, we are once again reminded our government's handling of money is akin to a child's management of their Halloween candy.
Second , and more interesting to bullion investors and hard-money advocates, this little farce shows just how deeply ingrained precious metals are in all things money.
Despite its efforts to move away from sound money backed by gold or silver and the subsequent 50-year Monopoly money experiment, it would absolutely be poetic justice if the wizards of Modern Monetary Theory were forced to dirty their hands with real, physical precious metals in order to execute their quantitative eagling strategy.
Paul Vanguard is a lifelong precious metals enthusiast and a proud member of the BullionMax team.