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Posted by Ezra Klein
January 12, 2013 at 3:32 pm

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “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,” he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

The idea of minting a platinum coin to invalidate the debt ceiling comes from a few key sentences tacked onto the 1997 Omnibus Consolidated Appropriations Act. “Notwithstanding any other provision of law,” it reads, “the Secretary of the Treasury may mint and issue platinum coins in such quantity and of such variety as the Secretary determines to be appropriate.”

The author of those sentences was Mike Castle, a Republican congressman from Delaware. The intent was to help coin collectors who wanted the Treasury Department to mint cheaper platinum coins. “People couldn’t afford the $600 investment, so they wanted the flexibility to put in smaller coinage so that people could collect them,” Castle told Wonkblog this month. But in giving the Treasury Department the flexibility to mint platinum coins of little value, Castle accidentally gave them the flexibility to mint platinum coins of unlimited value. “That was never the intent of anything that I drafted or that anyone who worked with me drafted,” Castle continued.

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