In 2013, Heritage Auctions asked the public to suggest names and and designs for the mythical $1 trillion coin. This was one of the proposals.

This time, the scheme was cooked up by Rep. Rashida Tlaib (D-MI), a freshman member of Congress. Apparently, Tlaib read that the Federal Reserve has more than a $2 trillion surplus. Rather than allow the Fed to use it to sure up financial systems in a crisis, she wants to transfer the money out of the semi-autonomous agency and put it in the general treasury to fund her version of a stimulus.

It is not the first time in the last ten years this idea came up. Back in late 2012, conservative pundits pushed Congress to do the same thing. The drumbeat for this idea became so loud that cooler heads finally prevailed, and the jokes about how to design such a coin quickly faded into history.

Tlaib is trying to learn from history by proposing that not only should the coins be struck but transferred to the Federal Reserve. By removing the $2 trillion liability from the Treasury Department’s books, it places the debt on the Federal Reserve.

If we were to ignore the law (31 U.S.C. §5136) will require the U.S. Mint to deposit the money int into the United States Mint Public Enterprise Fund, the costs of striking these coins including the design and administration is required to be deducted from the $2 trillion. It is a small percentage of the total, but it counts.

Then there is the question of operating capital. What will the Federal Reserve do if it needs the money to keep banks open during this crisis? By taking its operating capital, the Federal Reserve will have to raise money on a market that will become more restrictive when the United States central bank cannot perform. One analyst said it would be like tying the Fed’s arms and throwing them into the deep end of the pool. Everyone will panic, jump in to save them, and will drown.

To make the ensuing chaos even worse, to prevent the bank failures and to prop up the bank-related insurance programs, like the Federal Deposit Insurance Corporation (FDIC), Treasury will have to get very creative to fund the insurance program. Like they did in the late 1980s during the Savings and Loan fiasco, the Treasury had to sell bonds and bills to make the depositors whole. Back then, the economy was better, and there were willing buyers. Today, if the coronavirus crisis continues and worldwide investors become spooked because the Fed failed to help, the costs of that paper (interest rate) will skyrocket.

When the government borrows money on the open market at high interest rates, the payment for just the interest (servicing the debt) becomes part of the national debt.

Take two platinum coins and give them a face value of $1 trillion each. Make the Federal Reserve buy these coins. The result will be a ripple of actions disrupting everything, like when a stone is thrown in the middle of a calm lake.

There was a time when freshman members of Congress were pushed to the background and told to shut up and learn. It was to allow them to learn from more senior members and to prevent them from saying and doing stupid things. Maybe Congress should go back to that practice.

And now the news…

 March 23, 2020

Two styles of silver coins at the Perth Mint. Photographer: Carla Gottgens/Bloomberg  → Read more at bloomberg.com

 March 24, 2020

The fifth auction of coins from the legendary D. Brent Pogue Collection skyrocketed to a total of more than $15 million at Stack’s Bowers Galleries in Santa Ana last week.  → Read more at news.justcollecting.com

 March 25, 2020

Stock market crash safety sought by concerned investors is coming in the form of shiny precious metals that include gleaming gold and silver coins. Even though stock market drops usually coincide with a price hike in gold and silver, both equities and precious metals soared on March 24 when the Dow Jones Industrial Average jumped 11.37%, or 2,112.98 points, to reach 20,685.04 for its biggest percentage gain since March 1933 and its largest point rise ever.  → Read more at stockinvestor.com

 March 27, 2020

— A proposal to land the Apollo lunar module on the reverse side of a new $1 coin has been waved off by the committees reviewing the design.

The historic moon lander was among the three subjects considered for New York's dollar in the U.S.  → Read more at collectspace.com

 March 27, 2020

Sales of retail gold coins are revealing just how desperate investors are to find a safe haven. People have always been willing to shell out more for retail coins than gold sold in the spot market. But that premium has more than doubled — and at times quadrupled — over the past two weeks as investors seek a safe place to park their cash in the face of global market turmoil.  → Read more at bloomberg.com

 March 28, 2020

The frenzy to buy physical gold is driving demand for well-known coins like the Krugerrand, Maple Leaf, or American Eagle. A Swiss-issued coin is one of the few still to be had.  The market for physical gold has dried up after four Swiss refineries were forced to shut due to the coronavirus, as finews.com reported on Tuesday.   → Read more at finews.com