Unleash the coins!
The liberal blogosphere is currently debating the feasibility of the treasury minting a $1 trillion platinum coin in order to stave off the debt limit. The Treasury Secretary has the authority to mint platinum coins in any denomination:
(k) 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.
This is intented for commemorative purposes, but since any denomination is allowed by law, it provides a giant loophole for the Treasury to create more money (instead of the Federal Reserve). The former director of the US Mint provides some details about how it would work.
Paul Krugman and Atrios believe it should be a negotiating position to (ideally) eliminate the debt ceiling. Kevin Drum and Felix Salmon consider it a childish, unlawful idea because the law is clearly aimed at commemorative purposes.
I think the idea just needs a little tweaking.
No one can afford a $1 trillion coin. But According to Wikipedia, there are 1226 billionaires in the world. And what does the billionaire who has everything want? How about a $1,000,000,000 commemorative coin?
Instead of minting a single $1 trillion coin, the Treasury should mint 1,000 $1 billion coins, then put them up for sale on the mint’s website. In the meanwhile, of course, they would need to be deposited at the Fed for safe keeping. Should Congress raise the debt limit cleanly, the coins can be bought back by the Treasury and melted down.
There you have it: the addition of $1 trillion to the government’s balance sheet, and it follows both the letter and the intent of the law.
On a similar (and slightly more practical) note, Steve Waldman suggests minting a million $1 million coins:
The Treasury won’t and shouldn’t mint a single, one-trillion-dollar platinum coin and deposit it with the Federal Reserve. That’s fun to talk about but dumb to do. It just sounds too crazy. But the Treasury might still plan for coin seigniorage. The Treasury Secretary would announce that he is obliged by law to make certain payments, but that the debt ceiling prevents him from borrowing to meet those obligations…. Following a review of the matter, the Secretary would tell us, Treasury lawyers have determined that once the capacity to make expenditures by conventional means has been exhausted, issuing currency will be the only way Treasury can reconcile its legal obligation simultaneously to make payments and respect the debt ceiling. Therefore, Treasury will reluctantly issue currency in large denominations (as it has in the past) in order to pay its bills. In practice, that would mean million-, not trillion-, dollar coins, which would be produced on an “as-needed” basis to meet the government’s expenses until borrowing authority has been restored….
That would be it. There would be no farcical march by the Secretary to the central bank. The coins would actually circulate (collectors’ items for billionaires!), but most of them would find their way back to the Fed via the private banking system.