In our recent blog titled “Coin Hoarders – A New Class of Investors“, we advocated that, “Unless individual metals can be economically and environmentally extracted from the coins, the best economic value is still the coins. No technologies exist right now to separate individual metals (such as copper from zinc in pennies, and copper from nickel in nickels) in coins. If the US Mint has to produce more coins due to a coin shortage, it could add costs to US Treasury’s budget; and we all know too well that we need to cut spending and not go over the fiscal cliff. Coins should be collected as a hobby and not hoarded as an investment.”
The US Treasury may be speculating that the US Mint will forge a platinum coin valued at “One Trillion Dollars — $1,000,000,000,000.00″ to avert the debt ceiling and subsequent credit downgrade debates in our politically super charged, destructively divisive and polarized environment in Washington. The supporting argument by some Washington insiders is: “If I were president, I’d use the 14th Amendment, which says that the debt of the United States will always be paid.”
We offer the following supporting links:
“Platinum coin petition signed by 6,000” – Politico.com
“Trillion dollar coin: Funny money or real solution?” – Politico.com
“White House won’t rule out $1 trillion coin” – Politico.com
“Video: Carney ask about trillion dollar coin option” – Politico.com
“Reid to Obama: OK to skip Congress on debt ceiling” – Politico.com
“A Trillion-Dollar Coin Brings a Jackpot of Jests” – NYTimes.com
Obama, Federal Reserve and US Treasury
The Obama administration actually took it seriously — the idea of minting a $1 trillion platinum coin to avoid a debt-ceiling crisis. But it would only have worked if the Federal Reserve, where it would be deposited, agreed to recognize its worth. And the Fed, an independent agency, was not on board.
So the Treasury officially shot down the idea this past Saturday, and put the onus back on Congress to increase the debt limit. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” Anthony Coley, a spokesman for the Treasury Department, said in a statement to POLITICO.
The White House, which, last week, declined to rule out the idea, said on Saturday that it agrees. Minting the coin — had the Fed recognized its worth — would have allowed the government to spend another $1 trillion before reaching its debt limit and having to ask Congress to raise the limit. As it is, the nation is set to reach the limit within weeks, setting up the showdown with Congress over an increase.
The first question is what metal or element should be used for “the trillion dollar coin”. One suggestion is to use the metal “unobtainium” from planet “Pandora” as depicted in the movie Avatar. The second question is how many coins? The US Mint could forge 16 coins from one pound of “unobtainium”, each an ounce in weight and one trillion dollars in value, to take care of the US’s debt worth of $16 trillion.
If this unlikely (but not impossible) One Trillion Dollar Platinum Coin ever gets minted, our advice is to hoard this coin for ever or until you get a better deal. The real question is how to store and guard it safely, which may be subject of another James Bond movie. If that ever happens, just remember folks: you heard it here first.
Developed and Written by Dr. Subodh Das and Tara Mahadevan
January 11, 2013
Copyright 2013. All rights Reserved by Phinix, LLC.
Trillion dollar coin: Funny money or real solution?