(Brief Write up, More Thoughts to Come).
I’ve been thinking about ways the President might use the platinum coin option without the repercussions that would follow.
These days the blogosphere is in a tizzy over the idea that the President/Secretary of the Treasury might be able to avoid the debt ceiling debacle by minting a $1 trillion platinum coin and depositing it in its account at the FED. Modern Monetary Theorists have even gone so far as to suggest that the secretary mint a $60-$80 trillion dollar coin to completely erase the false austerity narrative that has encapsulated the body politic.
The MMT guys assure us that such measures would not be inflationary so we need not worry. However, being that I am sympathetic two keynesian/MMT views that what ails the economy is not concerns about inflation or an attack by the bond vigilantes but the unconscionable tragedy of half a decade of drastically high unemployment and the huge loss to human potential and potential gdp that comes with it.
I yearn for another new deal…a new deal for a more perfect union that will restore full employment in the United States. Alas, with a divided congress fully captured by the deficit scolds and the austerity mindset (even on the democrat side of the aisle), a bank account at the FED with $60 trillion in it is of no use if Congress will not use its power of the purse to support aggregate demand until the private sector rebounds and we are restored to full employment.
As I’ve seen the MMT folks write, Congress controls the purse strings.
So, I began to think of a scenario in which the President/executive branch might be able to use the profits from the seignorage of a platinum coin without needing an appropriation from Congress.
As is common knowledge from high school social studies, in order for the President to spend money on something, as a general rule, the money to be spent for a certain purpose must be appropriated by Congress. As we’ve come to know, Congress has authorized open-ended types of appropriations and funds collections that are separate from the Treasury’s general fund from which congress may make appropriations. A good example of these might be Social Security.
Another such example is the Treasury Forfeiture Fund. The Treasury Forfeiture Fund is a “Special Fund” with permanent, indefinite authority. Contained within this fund are monies that federal law enforcement agencies such as the FBI seize in asset forfeitures. A good example might be money or property that was stolen from the United States government or penalties levied on banks who help warlords traffic drugs (UBS cough).
The monies in the fund are primarily meant to fund the asset forfeiture programs of the Federal Government. If those are successfully covered by the funds revenues, one unique aspect of the Treasury forfeiture fund is that the revenue received in the fund must then be allocated to federal agencies who participate in forfeiture operations i.e. the IRS, DHS, Customs, etc.
However, beyond that, Congress has provided that “Super Surplus” Funds in the Treasury Forfeiture Fund, may be used for, and I quote, any federal law enforcement purpose.
The Treasury Forfeiture Fund is considered to be in “Super Surplus” if it contains enough un-obligated monies to cover the budget for federal law enforcement agencies for the current year and then the following fiscal year. If there were $60 trillion in the Treasury Forfeiture Fund, I think it’s safe to say that the Fund would be in Super Surplus many times over!
“Any Federal Law Enforcement Purpose”
Now, if the Treasury Forfeiture Fund were in a $60 trillion Super Surplus, The President/Secretary has been officially authorized by Congress use those funds for any federal law enforcement purpose. What law might a president want to enforce if he/she were hoping to restore the nation to full employment?
Why…none other than the Full Employment and Balanced Growth Act of 1978 (Other wise known as the Humphrey-Hawkins Full Employment Act).
This Act amended the Employment Act of 1946 and authorizes the President to:
1. …to translate into practical reality the right of all Americans who are able, willing, and seeking to work to full opportunity for useful paid employment at fair rates of compensation;
2. to assert the responsibility of the Federal Government to use all practicable programs and policies to promote full employment, production, and real income, balanced growth, adequate productivity growth, proper attention to national priorities, and reasonable price stability;
Thus….from the Plain language of the enabling legislation of the Treasury Forfeiture Fund and the Full Employment and Balanced Growth Act of 1978, it appears to me, that if the President/Secretary of the Treasury were to find themselves in control of Super Surplus funds in the Treasury Forfeiture Fund, that the President/Secretary of the Treasury could use those funds to employ practical means to restore Full Employment in the United States in pursuit of enforcing the Humphrey-Hawkins Full Employment Act.
How Could the Platinum Coin Get Placed into the Treasury Forfeiture Fund — Forfeiting the Platinum Coin
As other platinum coin promoters have speculated, profits from the seignorage of the $60 trillion platinum coin would be swept into the Treasury’s general account and consequently would be under the control of Congress as they are within the “purse” and subject to congressional appropriations.
The Treasury Forfeiture Fund on the other hand is the receipt account for the deposit of all non-tax “forfeitures” made pursuant to laws enforced or administered by bureaus participating in the Treasury Forfeiture Fund.
Under 19 U.S.C. s 1607, the United States may administratively seize, without judicial involvement, any monetary instrument. This can also be done civilly, without criminal charges. So, after minting the platinum coin, on the triumphant trip to the New York Fed, the United States Deputy Treasury Secretary gets a bold feeling and attempts to convert the property into his own by trying to steal it.
Instead of depositing it at the New York Fed’s treasury account, he attempts to deposit it in his own account where he hopes to wire it to some foreign jurisdiction.
The treasury “intercepts” this attempted wire transfer and initiates an administrative forfeiture action and immediately transfers the coin to the Treasury Forfeiture Fund, which is now in Super Surplus and may be used to execute the Humphrey-Hawkins Full Employment Act thanks to Congress’ previous blessings.
Any thoughts on this? Fun to speculate about? In fact, perhaps something like this might be a way for the President to use the Platinum Coin Option covertly so as to avoid the “Banana Republic” howling that would follow the minting of a platinum coin???