Posted Thursday, Jan. 10, 2013, at 9:32 AM
Something kicking around the platinum coin debate is the point that congress didn't subjectively "intend" the law to be used in this manner. That's true. But it's important to note, as Annie Lowrey does, that the law as written very much is designed to create seigniorage revenue for the federal government:
The idea was that a secretary might authorize the creation of a commemorative eagle coin, for instance, to be put on sale for collectors. But the law inadvertently gave the Treasury secretary the power to mint, say, a $1 trillion coin, or even a $5 trillion coin, or even a $1 quadrillion coin.
The idea, in other words, is that you might put $5 worth of platinum into a coin with a $10 face value, sell it for $10 and raise $5 for the federal government. This kind of operation isn't a major source of federal revenue, but the US Mint very much does sell commemorative coins and the revenue is very much part of the federal budget. Seigniorage sounds weird to people when you draw their attention to it, in other words, but that's not because it's some kind of kooky notion. You sometimes hear that we could save money by abolishing the penny, which is true because eliminating the anti-seigniorage of penny production would increase the overall seigniorage of American coins. You also sometimes hear that we could save money by eliminating $1 bills and making everyone use dollar coins, which is true because there's more seigniorage on dollar coins than on bills.
It's certainly true that this is all a little silly and that members of congress often seem to me to focus too much on accounting and not enough on economics when they write these bills. But the point is that it's false to say that seigniorage is outside the purpose of the 1997 platinum amendments. In fact, seigniorage is the essence of why it was written. What's different is the scale.