the money game

The Man Who Invented the Trillion-Dollar Coin

An Atlanta lawyer was just spitballing on a financial blog. He didn’t expect Washington to listen.

No, Joe Biden didn’t invent the trillion dollar coin. Atlanta lawyer Carlos Mucha did. Photo-Illustration: Intelligencer; Photos from Getty
No, Joe Biden didn’t invent the trillion dollar coin. Atlanta lawyer Carlos Mucha did. Photo-Illustration: Intelligencer; Photos from Getty

About a dozen years ago, a pseudonymous commenter on a financial website, writing under the name Beowulf, presented an unusual solution for a debt-ceiling standoff: If the federal government was at risk of default, and Congress couldn’t agree to either cut spending or raise the borrowing limit cleanly, couldn’t it simply mint a trillion-dollar coin?

Beowulf had come across a 1997 law that, in response to requests from coin collectors, gave the Treasury the power to mint platinum coins of any denomination. (Collectors had complained that even coins available at the time with the smallest face values were still too expensive to afford.) The law started as a way to make collectible coins cheaper, but unlike every other law regulating new coins, this one did not establish a specific face value or limit the number of coins produced.

“Congress screwed up,” Beowulf wrote. By passing the law, it had given the president the authority to direct the secretary of the Treasury to mint a coin of any value — say, $1 trillion — and deposit it in the Federal Reserve, which would be legally obligated to accept it. Ultimately, the coin’s deposit would result in $1 trillion in government revenue or, with a coin of a different denomination, however much was needed to continue to pay its bills and avoid a default. “The catch is, it’s gotta be made of platinum,” Beowulf wrote. “Ditto the balls of any president who tried this.”

In the time since, the idea has gained an unexpected acceptance among policymakers and economists. In 2013, Representative Jerry Nadler said that the idea “sounds silly, but it’s absolutely legal.” Shortly after, Paul Krugman asked himself in the New York Times if the president should be willing to mint the coin to avoid default. His response? “Yes, absolutely.”  Phillip Diehl, a former director of the Mint and Treasury chief of staff who co-wrote the 1997 law, allowed that a coin with a specific denomination of $1 trillion was “an unintended consequence” but maintained that the possibility was always conceivable. “In principle, there is nothing new,” he has said. “Any court challenge is likely to be quickly dismissed.” In 2020, Representative Rashida Tlaib sponsored a plan to mint two coins to fund pandemic aid, and this year both Treasury Secretary Janet Yellen and Federal Reserve chair Jerome Powell have faced questions about using the coin to end the standoff. Each registered objections, but neither would rule it out.

As it turns out, Beowulf is not an economist or a professional policy wonk. He’s a Georgia lawyer named Carlos Mucha. “Criminal defense, shareholder disputes, a little of everything,” he told me recently. He’s a tinkerer — “Jack of all trades, master of none,” he says — and his frequent visits to the comments sections of a set of financial websites were a kind of hobby.

“What got me thinking about it was that I was reading that people were using their credit cards to buy tens of thousands of U.S. dollar coins from the Mint just to get the credit-card points,” he said. “At the time, the Mint had free shipping and handling, and since it’s from the government, the coins are tax free.” They would charge $10,000, get ten thousand one-dollar coins, and use the coins to pay off their card. This really happened — one such dollar coiner told The Wall Street Journal that he took 15,000 coins straight from the delivery truck to the trunk of his car, to more easily drive them to the bank. “You don’t have to do that too many times to get a free first-class ticket,” Mucha said.

A few savvy points hounds found a way to create free flights out of thin air. But Mucha was more fascinated by the other side of the transaction. “The more interesting point is that after all the expenses and the shipping and handling, the Mint’s profit on every dollar coin was 80 cents,” he said. The path of a coin from the Mint to your pocket goes like this: The Mint creates a dollar coin, then sells it to the Federal Reserve at its face value, which, in turn, sells it to a bank, where it enters the broader economy. In these transactions, the bank and the Fed spend a dollar to get a dollar. But the Mint receives a dollar for a coin that cost only about 20 cents to make. The difference between the face value of the coin and the cost of producing it, known as seigniorage, is 80 cents — revenue that would appear on the Mint’s books and could be sent to the Treasury to pay down the deficit.

This is sometimes called making money by making money. Mucha’s coin would work on the same principle. “You don’t think about it, but one of the powers of the government is to create money by the stroke of a pen, minting coins,” he said.

Mucha felt especially vindicated by the responses from Yellen and Powell earlier this year when asked about the possibility of minting a trillion dollar coin. Yellen simply said it was up to the Federal Reserve. “It truly is not by any means to be taken as a given that the Fed would do it,” she said. “It’s up to them.” A few days later, a reporter followed up with Powell to ask if the Fed would do “whatever the Treasury directs” to resolve a crisis, or if it would perform its own analysis first.

“All he said about it was that ‘we are Treasury’s fiscal agent, and I’ll leave it at that,’” Mucha said. “That’s a very lawyerly answer. An agent works for a principal. So basically, he was saying, ‘If they deposit money, we gotta take it.’” It was an extremely diplomatic game of passing the buck, but the subtext was clear: The chairman of the Federal Reserve, the most powerful monetary official in the world, had been asked to reject an idea hatched by a pseudonymous blogger in 2010, and his sense of professional duty wouldn’t let him do it.

An idea like the coin gets momentum in Washington only when the people who really run the government from the inside start to take it seriously. “Initially, people think in terms of norms, and they think the norms are actually the rules,” said a former Treasury official who worked on the debt-ceiling standoff in 2013 and requested anonymity to speak candidly. “The first time you hear of something new, you’re like, No, you can’t do itit wouldn’t work.” You start to go through the reasons, he said: Is there a legal constraint? Is there an operational one? Would it actually work the way it’s being described? The coin doesn’t come to Washington unless Washington comes to the coin.

The former Treasury official began to see arguments about the coin in what he called a “broad public forum” — on blogs, at think tanks, among reporters and cable-news pundits, on Twitter. “Inevitably, current and former officials, they see that,” he said. “As a deeper dive takes place, you realize it’s mostly about norms as opposed to the actual operational rules. When you start seeing daylight between those two things, you begin to wonder when did a norm become a norm.”

What he and some of his colleagues have come to realize, he continued, is that “a lot of the norms came about during a very narrow time in history, and prior to that a lot of Treasury and Federal Reserve officials were rather creative and thoughtful and realized a lot of things they were attempting were being done for the first time anyway. So if there’s no operational constraint and you have a pretty good sense that there’s not a legal constraint, why are we flirting with this Armageddon of a default? As people become more comfortable with that, it becomes debated among policymakers.”

“Not publicly, but it’s debated,” the former official said. “Former officials with current officials, current officials with each other.”

A former policy adviser at the Federal Reserve sees the coin as the obvious answer to an artificial crisis. “The debt ceiling, there’s kind of no reason for it except that it might serve as a bargaining chip, as it’s doing now, to elicit certain types of government spending cuts,” he said. “I think Carlos is an underappreciated genius, actually.”

An economist at the University of Texas, James K. Galbraith, came across the idea of the coin around the time an endorsement by a professor at Yale Law appeared in the Washington Post in mid-2011. “I really am very hesitant with direct communication with people who have policy responsibilities,” he said. “If I’m going to say something, I generally try to write it, get it edited carefully, put it in the public sphere, and they can pick it up if they want.” In 2011, though, he sent a note to a White House economist he knew:

Have you been briefed or alerted to the implications of section 5112(k) of the coinage statutes? If not, and if you’re interested, I can brief you and an email would take no more than five minutes of your time.

The White House economist wrote back, “What’s the gist?”

Diehl, the former Mint director, has himself become an outspoken respondent to what he calls the “myths that have been spun” around the coin. “I wrote the bill that created the trillion-dollar coin,” he said flatly at a conference earlier this year. “Sometimes the question is brought up: Well how did you do that? You weren’t a member of Congress. The fact of the matter is, members of Congress don’t write bills. Bills are delivered to their office, sometimes by lobbyists, sometimes by agencies, sometimes by committee staff.”

As the head of the U.S. Mint, he said, “I had very specific objectives in mind. I was appointed by a Democratic president, Bill Clinton, and I worked with bipartisan committee chairs. This was a bipartisan effort, and together we passed that bill. And the fact that it can have a trillion-dollar denomination on it was absolutely part of the intent.”

The former Treasury official sees this statement of intent from the bill’s author as enormously important. “It is completely crazy that Diehl’s comments are not dominating Congress’s discussion,” he said. “This is a very serious man. Our predecessors at Treasury did this for a reason.”

Lately, Mucha has been tinkering with other solutions to impossible problems: a few non-coin debt-ceiling alternatives; a small, technical change to appropriations language that he argues would make Social Security and Medicare indefinitely solvent; legal precedents that have ruled the housing market to be interstate commerce, which means that local housing shortages could be resolved federally.

Stephanie Kelton, a former chief economist to the Senate Budget Committee and an economic adviser to Bernie Sanders and Chuck Schumer, as well as the now-famous populizer of modern monetary theory, has begun following Mucha’s work, discussing it with him, and touting it to public officials.

“I have DM’ed people in the Senate,” Kelton says. “I’ll just say, ‘I hope you are following this guy because he regularly puts out really smart content that could be useful to you.’”

Rohan Grey, a law professor at Willamette University, hadn’t even begun law school when Carlos first posted about the coin. He has since become another high-profile advocate for MMT, which offers a more capacious framework for government spending than traditional economic theory and is popular mostly in progressive circles. He and Mucha are an unlikely pair. “I know he’s not as progressive as the MMT economists,” Grey said. “Carlos is a Republican lawyer from Georgia who voted for Ron Paul. And I like him, we’re friends.” (Mucha declined to confirm or discuss his political affiliation.)

“In 2011, the coin was the furthest edge of the furthest edge of crazy,” Grey said. “And then we had multiple debt-ceiling debates, and then we had Trump, and then we had January 6, and then we had Dobbs. What we’re talking about is not letting twenty people in the Freedom Caucus pull the entire economy to shreds. At a certain point, you just have to sound less ridiculous than the other thing that’s on the table. The world has really met us halfway.”

Halfway may not be far enough. As the debt-ceiling standoff continues, President Biden has gestured at executive action but dismissed the coin. “I don’t think anyone has studied the minting-of-the-coin issue,” he said this month. Speaking at the G7 conference earlier this week, Biden reiterated that “the only way to move forward is with a bipartisan agreement.” Congressional Republicans opened the negotiation with proposals to trade a debt-ceiling increase for new work requirements for Medicaid and food stamps, a repeal of Biden’s student-debt-relief plan, reduced IRS funding, rollbacks to investments in sustainable energy, and other cuts to domestic programs. They also pushed to increase the military budget — an odd argument if the goal is to reduce spending.

The Treasury has been using so-called extraordinary measures to meet government debt obligations since January. A true default, Yellen has warned, may come no later than the first week of June. Minting the coin, in a strict sense, would cost a trillion dollars. What will be the cost, Mucha might argue, of not minting it?

The Man Who Invented the Trillion-Dollar Coin