Saturday, June 23, 2012

beowulf sleuths a numistmatic option in addition to the platinum coin

From the comments on the platinum coin:
... there's another way Tsy could mint its way around the debt ceiling. I've read in a coin collector publication that the Mint has long had wide open coinage power ("general numismatic authority") under 31 USC 5111(a)(3) (signed into law October 1973; good 'ol Dick Nixon, Johnny on the spot once again):
"The Secretary of the Treasury— may prepare and distribute numismatic items..." 
Section 5134 defines numismatic item as:
"any medal, proof coin, uncirculated coin, bullion coin, or other coin specifically designated by statute as a numismatic item..."
 That definition is from 1992, but it seems clear that "may prepare and distribute numismatic items" includes the authority to mint coins, which is as they say, the ball game because the legal tender act (section 5103, on the books since at least 1965) says "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender..."
beowulf, June 23, 2012 2:02 AM

Clonal cites the statute:
The links to the Sections pointed out by Carlos (Beowulf) above

31 USC § 5103 - Legal tender

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.

31 USC § 5111 - Minting and issuing coins, medals, and numismatic items

(1) shall mint and issue coins described in section 5112 of this title in amounts the Secretary decides are necessary to meet the needs of the United States; 

(b) The Department of the Treasury has a coinage metal fund and a coinage profit fund. The Secretary may use the coinage metal fund to buy metal to mint coins. The Secretary shall credit the coinage profit fund with the amount by which the nominal value of the coins minted from the metal exceeds the cost of the metal. The Secretary shall charge the coinage profit fund with waste incurred in minting coins and the cost of distributing the coins, including the cost of coin bags and pallets. The Secretary shall deposit in the Treasury as miscellaneous receipts excess amounts in the coinage profit fund. 

Section 5112 I have linked to in my previous post - That is where the Secretary of Treasury has the discretion about the nominal value of the platinum coins. It should also be noted that coins are not covered by the debt ceiling law only paper money is.

(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.

31 USC § 5134 - Numismatic Public Enterprise Fund

Here, the Fed becomes a "coin collector" not much different than collecting stuff that the TBTF banks want to dispose off!
Clonal, June 23, 2012 10:36 AM 
Thank, guys. See what you are missing if you are not reading the comments.

OK, let the legal beagles have at. 


Clonal said...

The problem comes from a juxtaposition of two gold standard era laws. One - The Legal Tender Act from the Civil War era when Lincoln issued greenbacks, and the second from just before the US entry into WW-I the Second Liberty Bonds Act.

Lincolns greenbacks and all US Notes could be exchanged for gold until 1933. The US Congress fearing that the US would not be able fulfill the exchange to gold, put a limit of $250,000,000 on the amount of greenbacks that could be issued (this was later raised to $450,000,000.)

For similar reasons, the US Congress put a Debt Ceiling in place in 1917 - again to avoid problems with the convertibility to gold. The need for these laws went away for most purposes in 1933, and for all purposes in 1971.

The US Notes were not really needed once Federal Reserve notes came into existence. However the Fed Notes required a nominal borrowing of the Treasury from the Fed. This became subject to the 1917 Debt Limit. THe only way to get around the debt limit was the issuance of coins - an expensive solution with the existing coin denominations - It was much easier just to raise the debt ceiling -- which was done as a matter of routine, until somebody decided to use that law as a political football.

Fortunately a way was crafted in 1996 with the Platinum Coin Act to escape this blackmail of the US people.

beowulf said...

Well, to the point of the numismatic option, here's the coin collector site that clued me in (perhaps related to Clonal's point about the gold standard ending in 1971, the "general numismatic authority" dates to 1973).

"All collectible proof and uncirculated gold and silver American Eagles are produced under the Mint’s general numismatic authority at 31 U.S.C. § 5111(a)(3). Over the years Congress has supplemented this general authority with additional specific authority to produce proof gold coins having specifications that are different than the 22-karat American Eagle gold coins (31 U.S.C. § 5112 [i][4][C]) and proof platinum coins (31 U.S.C. § 5112 [k])."

In theory Tsy could mint platinum (or some other metal) coin of any denomination based on that general authority. However, politically its much more difficult to explain than 5112(k)'s specific reference to the Secretary's discretion over platinum coins' "specifications, designs, varieties, quantities, denominations, and inscriptions".