Platinum Coin Idea Started On A Blog

Give bloggers a place to stand and we will move the Earth:

The platinum coin dates back to May 2010 ... Its origin can be traced back to the comments section of a blog.

An American lawyer writing under the pseudonym Beowulf first explained the platinum coin concept in the comments section of a post titled “ Repeat After Me: The USA Does Not Have A ‘Greece Problem’,” written by Marshall Auerback and published on a blog called The Center of the Universe.

His comments caught the attention of other writers, including management consultant Joe Firestone (.pdf), who pressured him to expand on the idea.

“He eventually just broke down and wrote something on it,” said Stephanie Kelton, an economics professor at the University of Missouri, Kansas City, and an early evangelist of the platinum coin plan, in a telephone interview. Kelton is the creator and editor of a website on economic policy called New Economic Perspectives where Firestone and Auerback are both contributors.

“It’s a variation on a theme that many of us have been writing about for a long time,” Kelton said. “If you boil things down to who issues the currency, you can do it via the banks, or you can have the government do it. This goes way back in the academic literature. … Now it’s being referred to as the magic coin and a gimmick, and certainly it has that aspect to it — but this law basically says the U.S. currency can come from the U.S. government. That’s really all the coin is. It doesn’t do anything terribly scary from my perspective. It doesn’t have any danger economically.”

We reached out to Beowulf through a fellow writer at his blog Monetary Realism on Thursday, but did not receive a response in time for publication. But Beowulf did explain his epiphany to Wired Magazine.

The platinum coin idea occurred to him after reading a December 2009 Wall Street Journal article about a clever but shady form of arbitrage in which travelers would purchase commemorative coins being sold at face value by the U.S. Mint using frequent flier credit cards and, upon receipt of the coins, deposit them in their bank accounts, pay off their credit cards, and rack up miles.

Several months later, in May 2010, Beowulf and his fellow monetary enthusiasts were spitballing with each other about what would happen if Congress at some point failed to increase the debt limit, and it hit him. Rather than default, or jerry-rig an overdrafting system with the Federal Reserve, why couldn’t the Treasury mint a “commemorative” coin with, say, a $1 trillion denomination? Not for purchase, of course but to deposit at the Fed, and thus provide Treasury the funds it would need to meet its payment obligations.

The only catch, according to the law, is that the coin would have to be platinum.