The coin would be deposited at the Federal Reserve. It would improve the government's account thereby. The government could borrow another one trillion dollars. The government would avoid the fiscal cliff or debt limit.
Why one trillion? It is a nice number. It is still manageable in a sentence. It does not have too many zeros. Some say it should be two trillion dollars. As the situation is, it might well come to be.
One trillion … How many 1 oz platinum coins would that be? In the U.S., a trillion is 1,000,000,000,000. One troy ounce (1 oz tr) equals 31,1035 g. The government would need 32 billion (32,150,722,587.5) 1 oz platinum coins.
The American Platinum Eagle is the official platinum bullion coin of the United States. It is 2.39 mm thick. A stack made up of these coins would be 76,840 km tall. Felix Baumgartner jumped off his capsule at 36,576 m.
Alternative scenario: The face value of the American Platinum Eagle is USD 100. Ten billion coins make up the trillion. This stack would be 23,900 km tall. 28,802 times the Burj Khalifa in Dubai, the tallest man-made structure (829.8 m) in the world.
Alternative scenario: Based on the spot price of platinum. It was USD 1624/oz on 10 Jan 2013. Makes 615,763,547 coins. The stack would be 1471.67 km tall. The International Space Station (ISS) circles the globe at an altitude of 350 km.
19,152.40 Tons
Minted into one piece, the trillion-dollar platinum coin would weigh 19,152.40 tons. It would take 100 years at the current annual mining rate (192 t) to get the platinum out of the ground.
The USA just recently avoided the fall off of the fiscal cliff in the last minute. Now another financial catastrophe is threatening to arise: The statutory debt limit of 16.4 billion dollars is going to be reached by the end of February 2013.
The trillion-dollar coin is was supposed to prevent this. The Treasury Department could order the minting of the coin and could deposit the coin into the account of the U.S government at the Federal Reserve.
In this way, the USA would not have to make new debt for the time being. The democrats of president Barack Obama would not have to compromise with the republicans to buy their consent to raise the debt limit.
On 12 Jan 2013, the Treasury Department declared: "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."
To include the Federal Reserve is key. For the idea to work, the Federal Reserve would have to treat the creation of the coin as a legal way for the Treasury Department to create currency; otherwise the coin had no worth.
90.16 m Diameter
The density of platinum is 21.45 g·cm-3. From 19,152.40 t, we would get a cube of 9.63 m edge length. In my opinion, that would make an imposing monument in front of the Eccles Building in Washington, D.C.
What if it was ONE coin? At a height of three meters, it had a diameter of 90.16 m. It could not lie in front of the Eccles Building without blocking Constitution Avenue Northwest. What would Federal Reserve chairman Ben Bernanke say?
How about Palladium? On 17 Jan 2013, one ounce of Palladium cost USD 725 (Platinum USD 1684). The trillion-dollar palladium coin would be as large as the UFO that was destroying Washington D.C. in Roland Emmerich's 1996 movie Independence Day.
If the government wanted to diminish the face value of the trillion-dollar coin as much as that of the American Platinum Eagle (USD 100 face value, USD 1624 worth), it stamps 10,000,000,000 (ten billion) on the reverse of the coin …
And let USD 990,000,000,000 evaporate through the rim of the coin at the same time. Please spare me calculation of the thermodynamics of that annihilation of value.
Motif Ideas
- The Californian Vulture
- The platinum cube in front of the Federal Reserve
- Felix Baumgartner jumping off the stack of coins
- Earth, the stack, the ISS
- Waving astronauts
- Barack Obama
- Ben Bernanke
- Both
The trick would have become possible through a loophole in the law: The U.S. government is not allowed to simply make new money through the issuance of bills and coins, that is the task of the Federal Reserve.
There is an exception: The Treasury Department is allowed to mint platinum coins, and also determine their look and face value. This passage is normally made for commemorative coins - it could have been of use to the democrats in the debt negotiations.
The most prominent support of the idea is Paul Krugman, the Nobel laureate in economics. He declared his support for the platinum coin in his New York Times blog and thereby triggered the discussion.
Opponents are accusing the coin supporters of abusing the law. The fear of an inflation is also circulating. But that is largely without any reason, or so economist Krugman claims.
After all, the money would not even reach the economic cycle considering the weak economy. And if times should change, then the Federal Reserve would still have enough possibilities to react and keep the inflation within a limit.
Federal borrowing has officially reached the USD 16.394 trillion debt ceiling. The U.S. will default on its debts unless Congress acts. I have no clue what happens next. What I do know is how I can protect my money if inflation prevails. I pack my stack
