Policy: Economy

Collectors criticize trillion-dollar platinum coin as an 'accounting trick'

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Treasury,Debt Ceiling,PennAve,Joseph Lawler,Economy,Currency

As the U.S. government edges toward economic chaos brought on by the congressional standoff over raising the debt ceiling, an unlikely solution keeps presenting itself: The Treasury minting a $1 trillion platinum coin.

A provision in a law intended for making commemorative coins allows the Treasury to mint a platinum coin in any denomination. Some analysts have proposed that a platinum coin of a very high denomination could be used in an accounting maneuver to circumvent the debt ceiling: A trillion-dollar coin would be minted and then placed in the Treasury's account at the Federal Reserve, thereby giving the administration the funds to keep meeting its obligations.

Officials have insisted they won’t pursue this course of action.

Nevertheless, some coin collectors aren't enthusiastic about a law meant for their benefit being exploited to resolve a political impasse.

“This is an accounting trick that makes Enron look responsible,” said Michael Bugeja. He is an expert in numismatics and a member of the Citizens Coinage Advisory Committee, a tiny governmental body formed in 2003 to advise the Treasury on matters related to coinage. Bugeja, also a journalism ethics professor at Iowa State University, made sure to clarify that he was speaking only for himself, not for the CCAC, Treasury or U.S. Mint.

Bugeja and other numismatists say that the idea of the $1 trillion coin registered for them when New York Times columnist and economist Paul Krugman endorsed the scheme in a January column, during a previous debt limit showdown.

With a limited awareness of politics and monetary economics but a deep knowledge of historical currencies, numismatists say they couldn’t help but recognize in the idea shades of hyperinflationary bouts in the Weimar Republic and Zimbabwe, both of which featured bills with face values in the trillions.

Although the numismatists who are aware of the coin understand that it is a function of legislative conflict meeting a loophole in the law and is not related to commemorative coin policy, they view the coin as a distraction or a threat.

“It’s a numismatic sacrilege to even suggest it if you love coins,” Bugeja said.

Heidi Wastweet, an expert in coin design and sculpture affiliated with the CCAC, said that “collectors generally love rarity but paradoxically dislike issuance of things not available to be collected. I think it would materially be viewed as mostly a novelty,” noting that the coin would never enter circulation. “While a clever joke, in reality it lacks grace,” she said.

Gilles Bransbourg, a curator of Roman coins for the American Numismatic Society, explained that some collectors' antipathy for the idea is rooted in the historical understanding of the purpose of coins — a role that would be flouted by the platinum coin scheme.

Originally, Bransbourg said, “coinage started as full-value or almost full-value metal objects, stamped by the authority, first in Lydia in the 7th century BC, then it spread to the Greek world which, at that time, extended all around the Mediterranean Sea.”

Authorities used coins to “facilitate trade, public spending, tax levies and customs' controls,” and only secondarily for "seigniorage" — that is, profiting by assigning the coins a face value higher than the value of the material used to make them.

But in recent modern times, since the end of the Gold Standard and President Richard Nixon ending the direct convertibility of the U.S. dollar to gold in 1971, “precious metal coins are only issued for commemorative and numismatic purposes, as collectible objects that should normally not circulate, although they are perfect legal tenders," according to Bransbourg.

A $1 trillion platinum coin, Bransbourg noted, would be an irony: It would be the ultimate example of a post-commodity fiat currency, with a metal value infinitesimal compared with its face value. Yet it would have the physical characteristics of coins from old monetary systems — “pre-1933 gold coinages of full metal value” — because of a loophole in a law meant only for the benefit of people who appreciate that history.

Perhaps because of the historical unseemliness of the $1 trillion platinum coin, numismatists were reluctant to speculate as to what the coin would look like. Some characteristics are required by law. The coin must display: “United States of America;" "Liberty;" the year issued; "In God We Trust," the denomination either in numerals or spelled out; and "E Pluribus Unum." It couldn’t feature a living person, so President Obama could not be on it.

Beyond that, however, it could feature whatever the Mint decided.

Bugeja recoiled at the idea of putting the iconic phrase “In God We Trust” on “a trick coin to be placed on deposit with no intention of circulation.”

Instead, he suggested that a more appropriate inscription for the coin would be “how exactly do you make money?” — the question posed by journalist Bethany McLean to Enron that eventually brought down the corrupt firm.

One commenter in a numismatist chatroom had a clear design in mind: “I would like to see Mike Myers as Dr. Evil on the obverse ("ONE TRILLLLLLION DOLLARS!") and the Monopoly character with empty pockets on the reverse.”

The commenter “larsdog” noted that the coin wouldn’t feature 12 zeroes, instead the number would be written out, unlike on the Zimbabwe hundred-trillion dollar note he owns (“a sobering sight”).

A more common feeling among numismatists is the sense — shared by most of the public regarding the debt ceiling — that the platinum coin would be another instance of politics failing the people.

“That’s the real story here, is what coins represent and how this idea by Krugman, et al, is undermining our core values,” Bugeja said.

Others just hope the issue doesn’t intrude on normal coin-collecting affairs.

“IMHO just keep it civil and hope this coin never gets minted,” wrote commenter basebal21 in a Coin Community thread.

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