In the many years I’ve spent scrutinizing monetary policy, I had
never devoted more than a thought to coins. In the scheme of all
things monetary, they seemed, well, pocket change. Needless to
say, the prospect of the Treasury issuing a $1 trillion platinum
coin to circumvent the debt ceiling changes that. I won’t repeat
the details; you can get up to speed by reading Matthew O’Brien
of The Atlantic here and my colleague here. If nothing else,
unpicking the consequences is a fun exercise. I’ve concluded the
economics are more complicated and more benign than appreciated,
but the political consequences are graver. (This is going to get
rather abstruse, so bear with me.) Let’s start with the role of
coins in the money supply. Long before there was a Federal
Reserve, the United States government minted coins, often of
silver and gold (specie). Private banks used these coins to back
their own, private bank notes. The Fed took over issuance of
bank notes in 1913, but coins remain the purview of the
Treasury. Since