As reported on Wired.
BY RYAN TATE
Photo: Kurtis Garbutt/Flickr
More than six months later, during a wonky online discussion about the debt ceiling, Beowulf thought of the article and, egged on by fellow monetary-system obsessives, came up with his own clever plan to exploit the powers of the U.S. Mint. His idea to issue a single trillion-dollar coin to the U.S. Treasury, thus letting it avoid borrowing and bypass the debt ceiling, is now much discussed among Washington elites, including at the White House, where a spokesman Wednesday wouldn’t rule out the scheme.
It’s been a remarkable journey. The path of the trillion-dollar coin, as Beowulf described it to Wired, began with a “silly question” in a “pointless … online bull session” in the comments section of financier Warren Mosler’s blog. Anonymous supporters helped spread the concept to the comments of other economics blogs and ultimately into posts on such sites. The idea soon attracted attention from more prominent liberal economists like James Galbraith and Paul Krugman, and then from writers like Matthew Yglesias and Ezra Klein. From there it was a short hop into the center mainstream. NBC’s Chuck Todd hammered a White House spokesman about the coin possibility on Wednesday.
If the president uses such a coin to bypass intransigent Republicans who refuse to raise the debt ceiling, or even if he merely uses the possibility of such as leverage in negotiations, it will underline how ad-hoc online communities, like the anonymous international band of commenters to which Beowulf belonged, are increasingly able to move their ideas from the fringes into the middle of political debate. It’s one thing for bloggers to help bring down a Mississippi senator or toembarrass a presidential frontrunner, as they have in years past; it’s quite another for commenters to re-engineer the funding of the entire federal budget.
Their initial ambitions weren’t nearly so grand, to hear Beowulf tell it. (Though Beowulf’s real name is relatively easy to discover online, he spoke to Wired on the condition that we leave it out of this story.)
“It was really a pointless conversation,” Beowulf says, referring to the discussion that unfolded underneath a post on Mosler’s blog about government debt and the differences between the U.S. and Greek monetary systems. “I think it’s funny something we were chatting about a few years ago is now in the news.”
“It was almost a contingency plan, a silly question… What would happen if the government couldn’t get the debt ceiling raised?”
Ever the lawyer, Beowulf dived into Title 31 of the U.S. Code: “Money and Finance.” That Journalarticle was still rattling around in his head. He was also inspired by ideas from attorney-turned-finance-author Ellen Brown, who in her 2008 book Web of Debt quoted a 1980s-era director of Treasury’s Bureau of Engraving and Printing as saying the government could solve its debt problems by printing large coins. He wasn’t talking about circumventing the debt ceiling, which hadn’t yet become a political football, but he may have been on to something.
A comment thread begun nine days after the original post focused on the relationship between the Federal Reserve and the U.S. Treasury and on whether the Fed can legally help the Treasury circumvent the debt ceiling by, for example, overdrafting its account with the Fed.
But Beowulf added a new wrinkle: Why not seize upon the peculiar power of the U.S. Mint to issue platinum coins at the discretion of the Treasury Secretary, an unanticipated side effect of legislation intended to provide for a miniscule trade in commemorative coins?
Beowulf, a leading contributor to the blog Monetary Realism, explained his thinking to us this way: “If you go through the Federal Reserve, you’re borrowing money. If you go through the Mint, you’re making money.” (He hastens to add that the latter is actually more expensive for the government at the moment, but it does have the virtue of getting around a debt ceiling.)
Some of Beowulf’s buddies on Mosler’s blog, whose prodding had helped him come up with the trillion dollar coin idea in the first place, then fanned out to promote the idea. For example, a commenter who goes by Ramanam – Beowulf believes he’s from India – posted the idea within a week to Bill Mitcell’s “billy blog” on Modern Monetary Theory. Another supporter, management consultant Joe Firestone,also wrote widely about the coin idea, crediting Beowulf.
“[Joe] and Cullen Roche were out there banging the drum for it,” Beowulf says. “You say it was my idea, [but] it was a group of people – it was really a group thing… It’s fascinating that I can have a bull session with people all over the country.”
After one of Firestone’s blog posts about the coin, Beowulf says, left-leaning economist James K. Galraith messaged Firestone about the idea, and shortly thereafter other prominent liberal economists began discussing the coin.
Interestingly, although the coin has been embraced by liberals as a useful political hack and rejected by Republicans as absurd and dangerous, the man who came up with it voted for Mitt Romney. Beowulf says he would have advised the 2012 Republican presidential candidate to use the same trick had he been elected president.
“We’re not real political,” he says of his circle of online pals, who he likens to players in a fantasy football league, but for the monetary system. “It’s like 4chan says – we’re just in it for the – what is it? LOLs? – lulz, lulz.”
Though, when Beowulf stops laughing, he finds the whole notion absurd. “It’s more a disappointment than anything,” he says. “There’s really no reason for a trillion dollar coin, it’s kind of sad that it’s gone this far.”
It may have started as a game, but Beowulf and his pals are poised to inject an important new tactic into oversight of the government’s monetary institutions.
The coin hack even surprised and impressed former U.S. Mint director Philip Diehl, who co-authored the law that enabled the platinum loophole in the first place.
“When I first heard about the idea to mint a trillion-dollar coin, I was very surprised,” says Diehl. “But because I know that law backwards and forwards, I knew immediately that the guy who came up with the idea was right.
“It’s an ingenious use of the law to avoid a ridiculous and irresponsible situation, in which the country would be driven to default.”
(For more from Diehl, see Why Stealing a $1 Trillion Coin Isn’t Worth the Price of a Getaway Van.)
Clever though it may be, the trillion-dollar coin may not be Beowulf’s last monetary parlor trick. He described to us a borrowing scheme involving the Treasury and the Federal Deposit Insurance Corporation, which could potentially allow ready access to funds totaling “90 percent of infinity.” Congress, you may have met your match.