Odd Lots - This Is How They Could Literally Mint a Trillion Dollar Coin

Episode Date: November 1, 2021

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Unfortunately, my colleague Tracy Alloway is off today, and I say it's unfortunate because A, it's always unfortunate when she's off, but B, today we are going to be speaking about her favorite topic, which is minting a trillion dollar coin. I'm being a little facetious about that. I'm not 100% it is her favorite. favorite topic. But that being said, a few weeks ago, we interviewed Rowan Gray, an assistant professor at Willamette Law School, and she definitely came away from this topic. I would say more coin

curious, coin-pilled, open to the trillion-dollar coin idea than she had been. For anyone listening today, I would definitely suggest listening to that conversation first. And it's about this idea that were we to get into a debt ceiling impasse that there is a statute in a 1996 law that says that in theory, the Treasury, Secretary of the Treasury can mint proof platinum coinage. And people have argued, including Rowan, that this would allow the government to continue financing, even in the event that it isn't allowed to take on more debt. So again, I would encourage everyone to listen to this. But it's a big topic.

And so in the meantime, the debt ceiling question, has been punted to December. They got 10 Republican votes to essentially go for about two more months, so the question isn't going away. In the meantime, since then, we've also heard Secretary of the Treasury, Janet Yellen go on national TV and dismiss the coin idea again as a gimmick. So there is opposition to it. Nonetheless, it is still important,

and I think we are going to get to a point in December, where I'm not predicting the coin will be minted, but I do think we will come up against another deadline again, and the question will not go away. It will again be tight of how this is going to get raised and how the U.S. will avoid a possible default. So I am very excited to do a follow-up because we have two guests today.

So we have Rowan is back. Rowan Gray, assistant professor at Lamet Law School, the foremost legal authority or is written extensively on the coin. and extremely excited that, you know, we have, as our guest, Philip Deal, who is the 35th head of the U.S. Mint, and he ran the U.S. Mint from 1994 to 2000 and was one of the drafters essentially of the 1996 legislation that allowed for the platinum coin. He is currently the president of the U.S. Money Reserve. So we don't have to speculate on what the intention of the thinking of the creators of this law were intending because we have the actual one of the creators here right now on odd lots. Very excited to bring both those guests.

Rowan and Philip, thank you so much for joining us. Thank you for having me. My pleasure. Philip, this is a real treat because, you know, I feel like often, you know, whether we're talking about some Constitution, or something, we are like forced to wonder what was going on in the mind of a person who is involved in the drafting of this thing that's become very controversial. So it was a real treat to have you, obviously, multiple people may have been involved in writing this 1996 law, but it is a real treat to have you on. But before we do that, before we really get back into the law

itself, I want to just talk about mechanics for a second. Let's imagine, some world, Yellen is forced to mint the coin, the trillion dollar coin. So what happens? Speaking as the former director of the U.S. Mint, if you get the call, we have to mint the trillion dollar coin to avoid a debt ceiling fiasco. Why do you look walk us through? Like, what would happen operationally at that point? Well, almost certainly what would happen is there'd be preparation before the order came down and the order would come from the Secretary of the Treasury And of course, that will have been discussed with the president, probably with the chairman of the Federal Reserve, and it all be set up. So before the order came down, there would be preparation in order to make sure that the coin was struck at the last minute and could be transported to the Federal Reserve and arrive on time before the debt limit was hit.

So the way that would happen is a decision would have to be made on what the coin design would be, because a mold will have to be produced, and then that mold will be converted to another mold, and then a dye that will be used to strike the coin will be produced. And so there's a number of steps that have to be done. Now, undoubtedly, they'd want a short-sort. circuit this process as much as possible. And already, in fact, created by this legislation is the platinum American Eagle. And they would take the one ounce coin design. And all they'd have to do is replace one trillion dollars, trillion spelled out, not with all the zeros, and replace

$100 on the obverse of the coin. And that would be a very simple and straightforward alteration in the current design of the coin. And then those molds would be created and the dye would be carved. And then everything would be prepared. Once the order came down, a blank, a platinum blank, one ounce blank, would be taken off the shelf in West Point where the platinum eagle is struck. and it would be struck multiple times. And that coin at that point will be minted.

From West Point, it could be flown by a helicopter to the Federal Reserve Bank in New York. And the moment that coin is accepted at the Federal Reserve, it registers as a trillion dollars in what is called seniorage. Your sense of the timing, okay, So as you establish, they have the blanks. The only thing they really, they don't even have to put all the zeros on the coin. They literally would just have to write it on one thing.

What is in your sense, I think I saw you give a brief interview with Axios, you think this could all be done in the span of a few hours? Yes. Well, assuming that all of the preparation, the changing of the design, very simple, the molds, and then the carving of the dye is done several days beforehand. And that might take a few days of preparation. At that point, once the order comes down, that blank goes into the press, it struck and transported to the New York Federal Reserve.

And yes, that's a few hours. It's absolutely extraordinary the idea that, like, money, you know, could be created like this. And I think one of the things, and, you know, talking to both of you, Rowan and Philip, is coins exist.

We still use them. We use quarters a fair amount. Sometimes people will find them annoying. Sometimes people talk about things like phasing out the penny, etc. It feels like in the modern discussion about money, there is just very little talk about, you know,

we talk about the Fed printing money, or we talk about QE or these theoretical concept. But in the modern discussion of money, there is just not a whole lot of discussion about, A, the role of coinage at all, and B, certainly not the operational aspects of producing coinage. Yes, that's right. And so much of it is just taken for granted. We're very utilitarian in the United States. This is one thing I really discovered when I was director of the Mint. I really didn't know that much about coinage. I was not a collector. when I was growing up or afterwards.

And because we're so utilitarian about coinage, we really just think of them as round disk of metal. And that we exchange in commerce. Thomas Jefferson and the founders understood that coinage is an expression of the sovereignty of a people. So about the same time Jefferson was writing the Declaration of Independence, he was laying the conceptual foundation for American coinage that would come to fruition with the creation of the United States men.

I think it may have been one of the first agencies that was created under the new constitution and then the production of a coinage. And that symbolism of the sovereignty, who and what we celebrate on the face of a coin, you know, that has been recognized as tremendous symbolic value going back 4,000 years. Can I ask a question, Philip? You mentioned, you know, it would take a few days to set up the new dyes and things, and then only a few hours to strike the coin.

But when it comes to the platinum statute, it seems to me, and we don't sort of spend that much time talking about this because we're usually focused on the fact that the statute provides for almost unlimited discretion on the denomination. But it also specifies pretty much unlimited discretion on the design and specifications of the coin. So if a call came down and said, you know, we need this out in three hours from now, is there actually anything legally preventing using the existing $100 die as it is and then, you know, crossing it out in Sharpie pen or something? I know it's a bit uncouth and doesn't really kind of have the gravitas of the symbolism that we might like.

In a pinch, is there anything actually that legally requires the number on the coin to be the number that we kind of call it with, you know, for legal purposes? Or if we really had to, is that another fiction we could just indulge in along with, you know, the nominal value itself being something that's declared by law by Fiat that we could simply declare its face value. you, even if it was a smooth, flat disk with no inscription on it? Well, there's no precedent for that. And on something that is this high profile, you want to definitely ground your policy and your action on the policy on not only the law, but 200 years, 230 years of precedent. Right. And in that, we really have two ways of...

evaluating the value of coin. One is the face value, which is unrelated to any intrinsic value of the coin. Once we say as a government, it is worth $100, it's worth $100. That's the nature of fiat currency. The other way with bullion coins, and this is what we do with the Platinum Eagle bullion coin, is it's, price based on the spot price of platinum at the time of sale. And those are the two primary ways in which the widely recognized traded coins in the United States are priced. There's also these collectible coins and commemorative coins that have more discretion. But I have really, one of the points I've wanted to make, because so many of the opponents of the coins and others, who've sort of bought into the mythology of the reading of that statute

is that the coin that is authorized by this legislation is a niche collectible that only, you know, a small portion of the American public would have any interest in. That simply is not true. And as a matter of fact, I know this is unusual for the head of an agency to write the legislation, but I wrote that legislation. And I mean, it didn't take rocket science. It's very short, and I knew exactly what I wanted and what my people wanted to do with this. And that is to authorize a bullion coin that we could take into the world and compete worldwide. And the reference to proof does not negate that, but it also opened the door for us as a byproduct of the bullion

coin to produce a collectible coin. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new on-demand news report delivered right to your podcast feed. Bloomberg News Now is a short five-minute audio report on the day's top stories. episodes are published throughout the day with the latest information and data

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Now. And we don't wait an hour to publish breaking news. When news breaks, we'll have an episode up in your podcast feed within minutes, so you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. So everywhere else in coinage law seems to be highly prescribed.

And there's like very clear, clear designs on the quarter and the dime and the nickel, et cetera. And even within the 1996 amendment, there are restrictions. elsewhere. And when the mint, as you were involved in, and maybe we'll get into this, does something new with coinage, such as the collectible 50 state quarters endeavor, you know, there's very strict rollout rules, et cetera, and again, all very clearly prescribed how it's going to work. And so I guess that is why the platinum coin section K in this, that's why it even stands out, because it's so explicit in its lack of rules, which is unusual for coins.

So can you just talk us through why platinum and why specifically this one subsection of the law you made it a point in your drafting of it to create maximum flexibility? I was doing a complete transformation of the United States meant. It was a race car up on blocks in somebody's back. when I came in in 94. And I saw the potential of the U.S. meant. At that point, I told the Secretary of Treasury, Lloyd Benson, who I had worked for in the Senate, and I had been his first chief of staff at Treasury, I told him, yes, I'd like to have

that presidential appointment because I think I can do something. And over the next two years, we made some major transformation. of the men that led me to believe that we were prepared to compete in international markets in a way that the U.S. men had never done before. And part of that was because we had already built an international distribution network for a World Cup commemorative coin when the U.S. hosted the World Cup in 94, and then for the 95 and 96 Olympic coin programs. And those three years, those two programs over three years, had tremendous international sales potential.

And we went out and built the most extensive international numismatic sales network ever, anywhere in the world. And we had six continents covered. I told my director of marketing, what's wrong with Antarctica? Why can't we have a sales contract there? And he went to the National Atmospheric and Oceanic Commission and actually got a distribution contract with them. And that year's annual report had a photograph of a scientist holding up our coins at the South Pole. So we were very intent on making this a very wide distribution.

And we had great success with that program, and I wanted to build on that success, but move out of the collectible market into the bullion market, which is a worldwide, highly competitive market with about six or seven mince, national mints that compete in that market. And the two big markets that I had targeted were Japan in the United States, and I felt like we could go in. And, of course, in the U.S., we immediately seized that market away from our competitors. But within six months, we had taken about 65% of the Japanese market as well. And that was real important to me, not just for bragging rights. I'm a native Texan, and that has value. But also because I was already setting my sights on the next program, which was the 50 states' quarters program. And I felt like if we demonstrated that we were capable of competing in international markets,

we'd be building confidence in Congress to get that enacted. And was there a point where anybody said, do you stop? You're making too many coins. You're earning too much signage. You're returning too much profit on a net basis to the treasury. You know, we're not able to borrow as many treasury securities because you're making it unnecessary for us to issue? Nobody ever told me to stop making profits.

And that was a real bragging point for us. In fact, one of the things is I was able to work with the chairman of my subcommittee to pass the 50 state quarters act over Adam in opposition by Treasury, at the highest levels of Treasury. And one of the way I sold it to him, Michael Castle, and we sold it to other people on the Hill, was that conservatively we had projected that the 50 state quarters program over 10 years would create $2.6 billion in seniorage profit. you know, producing coins for the purpose of provide seniorage to the Treasury Department over and above what the baseline would be dates back, you know, to that 50 state quarters program. And so the fact that we would do it with a trillion dollar coin in principle is no different whatsoever. I mean, sure, it has a couple more zeros behind it.

But it's the same thing. So this is something I'm really struck by and kind of fascinated by, which is this sort of, I guess it would be agency entrepreneurialism. Like you had this vision for the 50 state quarters project, but you also had this idea of like to build up to that you needed to execute on something before that, to build up credibility so that Mike Castle and others would want to even like, you know, think about further coinage legislation, put me. effort into it. Can you talk a little bit about that mentality of like building up goodwill within Congress and the idea of like, let's execute on something straightforward, expanding our share in the platinum bullion market with the idea of then gaining additional powers for the mint. And like, you're sort of like, I guess I would say working the inside game of expanding the discretion and

power of the mint. So I was sworn in, I went into the United States. United States men in September of 93. And my Republican predecessor, David Ryder, gave me a great orientation. We overlap for about three or four months. He gave me a great orientation. We have remained friends over all these years. And so I went into the mint months before I was even nominated, formally nominated. And then in June and 94, I was sworn. in after a Senate confirmation, I was sworn in by Secretary Benson. So immediately, one of the first acts I took because of the analysis that I had done with David was we saw that the mint was balkanized by too many political appointees.

The head of each mint was headed by a presidential appointee. These are the regional mitts you're talking about. Oh, yes. San Francisco, Denver. Kind of like the regional feds. Yes, that's right. San Francisco, Denver, Philadelphia, New York. And of course, those people got their job, not from the director of the men, not from the Secretary of the Treasury, not even, I mean, they were formally nominated by the president,

but they got their jobs from the senior senator of the president's party in each state. they certainly didn't feel like the director of the MET was their boss. So these are little fiefdoms. And one of the first things I came to realize was that's a huge problem in the management of the MET. And it was the source of multiple problems that we saw. So one of the first things I did is I went over Treasury and said, I want to eliminate nine political appointees. And there are several people.

Of course, the secretary, I didn't go to him first, but there were several people who laughed at me and said, there's no way you'll be able to get the White House to agree to this because they're prime patronage positions. People don't even need to go to Washington and just stay home and do those jobs. But the secretary weighed in. I made the case to him that, you know, if we're going to turn this place around, this is going to be one of the first things we do. And he agreed, in the White House, lo and behold, agreed not to fill those positions. Now, that's temporary.

That could be changed at any moment. I went over to Steny Hoyer, who had constituents who worked at the men. And he said, yes, you know, and I found a sponsor for the bill. And we were able to move legislation that eliminated. permanently those positions. Well, November 94, of course, is the Gingrich Revolution. And when I go in to meet with my new Republican chairman in the House, I walk in the door with the credential of depoliticizing the U.S. meant. By that time, I'm sure they were the only nine political positions that had been eliminated by the administration. So I walked down the door with

tremendous credibility on the Republican side that I meant business. The reality is that I've been a Democrat all my life from being a young teenager, but I built this rapport and this level of trust. I was very fortunate when I had two committee, subcommittee chairs who I immediately made a connection with and they were willing to carry a series of reform legislation. You know, one thing that's really striking to me, and you know, you talked about for the beginning of coinage for sure, but also just going back to Thomas Jefferson, this idea of coinage as this sort of like expression of the state. And we talk about fiat money and Rowan, you know, coming from the MMT perspective, obviously, you know, we talk about money as a sort of inherent state phenomenon. You know, even though I sort of in the early on talked about we don't really think about coins very much in the modern day, generally speaking. It is one of the few times in which people are regularly interfacing with something clearly created by the government. I mean, the government, obviously, permeates many aspects of our lives, the regulation and laws. But there aren't many times... Throughout the day, I guess the other one of the bills or maybe postage stamps,

although those are used less and less, in which we're literally interfacing and using an express creation of something that the government made in a very straightforward way, where there's no ambiguity about who created it. How much did you... Was that something that you thought about as this idea of like delivering a service to the public that was clearly recognizable as something that like we want kind of like constituent service, customer service.

Like how much of that framework did you take to the job? Oh, that was crucial. In fact, it was the first major project that I took on. United States Mint sells these commemorative and collectible coins to a pretty large population of collectors, mostly in the United States. So we'd take these orders and we'd deliver the product within six to nine months is how long it took to deliver a product. And, of course, unless you have a monopoly on a product, you have very committed customers. Nobody puts up with that.

So one of the things we did immediately was to make a commitment and we ended up making a series of commitments to the point in which we were delivering. about 95% of all products within one week. That was the camel's nose under the tent for me. For beginning to reform the men was to, and I made a commitment before I had gotten an endorsement from my people because I wanted to hold our feet to the fire. And I also wanted them to know, you set a stretch objectives,

and even if you don't meet them, if you make major progress and then renew the effort, people begin to believe you. And I also felt that one of the things that's really crucial in federal government agencies, they become so insulated from their publics and from their customers or clients because they have been dehumanized really for 40 years, where those Washington bureaucrats are always the enemy of the people, and their funding is cut, and oftentimes their political appointees are hostile to the mission.

So I was very much supportive of public employees and also believed in the mission of the organization was committed to it. So in that case, to break the old habits, I believed it was necessary to strip the insulation off the organization, to put people either figuratively or literally face to face with their customers, whether the customer was an external customer or an internal customer in which someone was supporting somebody's else activity in the agency. So that was crucial to me.

Now, Joe, there are two pieces. You've talked about one piece, and that is how many people produce a product that is touched by every American. It was a unique aspect to the United States meant. But then there's the other side of it, and that is, coins are works of art. And sometimes the art isn't very good,

and sometimes the art is spectacular. And those works of art are likely, some of them are going to be in museums 2,000 years from now. So what other job can you work at that has those two counterbalanced values and where you trace the history and the legacy back to Jefferson and Hamilton? So all of that was crucial to me really energizing an agency that had become very demoralized. I think there's also another layer there, which is that for a long time, you know, minting coins and, for example, issuing bonds, meant something very different in the monetary regime, where bond issuance meant maybe you are targeting international money markets, maybe you don't have to have any pressure on your metal reserves if you're under a gold standard. But nowadays, of course, the coins that we issue are not sort of tied closely to underlying market fluctuations in the metal value unless you're selling to bullion investors. And of course, the coin itself can become, you know, with any denomination, much more something like the high value money that it might have been in the early republic again, but without any linkage to underlying metal content.

But the other part of it is that coins are very private, even more private than notes with barcodes. And in this world now where there's a sort of war on cash and there are these increasing questions about, you know, digital privacy and digital data collection, what the mint represents is not just small value or, you know, hearkening back to a different era where metal was more important in money, but also a different design principle compared to, central banks with their balance sheets and their account-based framework. And your story of kind of the entrepreneurial mint getting larger is one that to me, you can fit into a larger story of institutions rising and falling. There was a period where before the Federal Reserve, there was an independent treasury that had its own set of accounts, the Federal Reserve coming into existence, the Postal Service offering banking at one point, and they're not offering it.

Now people are talking about it coming back. But you could imagine a moment, you know, maybe in the 90s when you were presently thinking about these questions of digital money, or now today with the debates over the issuance of a digital dollar where the mint, you know, comes into a higher degree of prominence and what may be considered, you know, a rounding error in the federal budget now in Signridge becomes a much more central way that we design the accounting for how new money gets issued and spent. So I was just wondering if you got any thoughts about that, just that idea that kind of the Mint might be considered a very junior partner with the Fed today. But that over time, those dynamics change and involve and they're not fixed right now. The kind of dynamic we have today isn't the only one that could ever exist again in the future. No, that's very true. From my experience, when I went in the door the first day of the Clinton administration in January, 1993, the very first briefing I got was on the counterfeiting of the $100 bill.

And I won't go into the details on it, but what was absolutely clear, so this is 1993. And the counterfeiting of the $100 bill went back over a decade in which the Secret Service, at that time, part of the Treasury Department, knew that this super 100 note that was virtually indistinguishable from the real thing was a problem. And at the end of the briefing, I said, why hasn't this been dealt with before? And they didn't have an answer for me.

And before long, I understood. Nobody at the Treasury wanted to tackle that. And currency and coinage, people go to the Treasury Department to make big policy. And they don't want to be weighed down by little stuff like, you know, massive counterfeiting of the $100 bill. And I, and it really helped me to understand that point of view from Treasury when I went over

to become Director of the Men, because it told me something very important. And that was in terms of my reform strategy. And that is fly below the radar as long as you can because the way Treasury sees it, is coinage, currency, all that has trouble on it. And that was really kind of a hangover from the Susan B. Anthony disaster from 13 years earlier. Can you actually talk about, you have a blog, and I read a few of the posts. What was the Susan B. Anthony disaster? And this was something that came well before you were the head of the U.S. Men. But when you refer to that, so there is the Susan B. Anthony, I think it's a dollar. What was the?

What happened with that endeavor? Well, there are two levels in which it was a disaster. One was as a product. It was a little bit larger than a quarter, and it was the same color, the same silver color as a quarter. And so people initially confused them. And it was the sort of thing. And if you reached in your pocket, you'd pull out one of the, one of the Susan B. Anthony's thinking it was a quarter or whatever.

In reality, if you carry them around in your pocket very long, then you can tell the difference by size. And also by the reading or the lack of it on the edge. But it was a disaster because Americans didn't want to carry a heavier coin. There was that resistance. Second, there was a lot of criticism of the design of Susan B. Anthony itself. There was a claim that it wasn't an attractive design. I mean, you know, it was petty.

But it was subject to criticism in that respect. But at the political level, the coin was launched in 1979. And so there was this rumbling of dissatisfaction about it. But in the 1980 presidential election in which Jimmy Carter was running for re-election, inflation had spiked. And Ronald Reagan, of course, was running against him. Small government, government can't work. It's, you know, the big government is the enemy.

It came to be called the Carter Quarter, really emphasizing the inflation and the confusion between the Susan B. Anthony and the quarter. And it was a shock at the United States meant. Like you said, I didn't come in until 13 years later, but it was as though it had happened yesterday there. And as a matter of fact, right after the Gingrich Revolution in January came around, the Republican leadership proposed a new dollar coin. And my attitude was, sure, let's talk about it. But let's don't make the same mistakes. and legislation was filed completely replicating that mistake, this whole series of mistakes.

And so I ended up doing a campaign, public campaign, and testifying in Congress opposing the new dollar coin. And after we defeated that, a few years later, we came forward with the plan for the Sacagawea coin, which did not suffer those kinds of weakly. Because that one is actually a different, that one's gold color. That's right. That's right. And it's viewed as being a failure because ultimately it was a failure in that it didn't replace the dollar bill.

But it was an enormous success when we issued it. The Federal Reserve doesn't like coins. And without a mint director, and I left in 2000, we launched a few months before my term was over. And without a director who would take on the Federal Reserve to ensure its success, then it died on the vine, basically. You know, you just talked then about the Fed not liking coins and the idea that sort of the meat often works best when it's under the radar. It seems to me that there is a bit of kind of interagency strovinism in the way the coin is discussed. When we talk, talk about kind of budget gimmicks, you know, rating the Social Security Trust Fund or something

is the Treasury Secretary did in the 80s. That's an acceptable budget gimmick. The use of Section 133 Authority in 2009, all these special purpose vehicles and lending facilities the Fed does where the Treasury provides the underlying capital, so the first losses are born by the Treasury, but it's leveraged by the Fed. Those are acceptable accounting gimmicks, because they sound complex. They sound like the kinds of things that you would do in a a Wall Street trading firm or something. But this gimmick, it almost defends the sensibilities of the kind of high finance, high-minded types, because it's sort of giving power to this loyally agency to save the day when all of the big boys couldn't do it. Do you experience any of that?

I know you were actually kind of high about the Treasury and you were in the legislature before that. But do you experience any of that kind of chauvinism with your agency interactions? something like that. We certainly experienced it with the Sacajawea dollar coin. We did extensive market research on what is it going to take for this coin to be accepted enthusiastically by the American public. We also did market research in depth with the banks because the banks are our channel to get the coin. into the hands of the public, our channel first through the Federal Reserve and then through the banks. So we had several meetings with banks, bankers, and the Federal Reserve was there. And basically they laid out this catch-22 for us. And that was, we will order the new dollar coin as soon as we know that the American public will accept it. Our response was, how are we supposed to do that if we can't get it into the hands of? And we showed them the market research

that showed that there was a really good chance that when we launched this coin, there'd be big demand for it. And the Federal Reserve just didn't weigh in, despite the congressional mandate to produce and circulate this coin. And at the time, I've always been suspicious of concentrated economic power in particular, political power too, but concentrated economic power. And I've seen over and over and over again over the years through my career, both outside the government, inside the government, how agencies are captured by the people they regulate or, you know, the institutions they serve. and what I saw there was the Federal Reserve acting as an advocate for the banks that they were supposed to regulate.

And what my thought about that was a lot of people said, well, you know, that's Penny Annie, that's Penny Annie, no pun intended. And what my thought was, if on something that is so small that has so little impact on the banks that the Fed will be their representative within the government, what is the chance that the Fed won't do that on the things that are really crucial to the health of the banks? So in order to overcome that problem, I went to the new lobbyist for Walmart who had been a distributor of our land. Olympic coins in 95 and 96 and said, I'd like to launch this coin through 3,000 locations across the country in your stores all on the same day, January 2000. And they said, sure. And it was a huge success within a matter of hours or days, the stores exhausted their supply. So when their customers said, oh, well, we didn't get the dollar coin. What do they do? They call the bank.

Banks don't have them. So, because they didn't order them and they resisted it. So who do they call? Well, the Fed. And who does the Fed call the Secretary of the Treasury? So I, you know, I hear from the Secretary of Treasury, but my job was to fade the heat. This is Tom Keane, inviting you to join us for the Bloomberg Surveillance podcast. It's about making you smarter every business day. I'm Paul Sweeney. We bring you complete coverage of the U.S. market open. We cover stocks, bonds, commodities, even crypto, all the information you need to excel. And I'm Alexis Christophers. Bloomberg Surveillance also brings you the analysis behind the headlines. We do that through conversations with the smartest names in economics, finance, investment,

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I love that, I mean, it's funny how many of these conversations seem to come full circle. And, of course, even today, there are recurrent. conversations about a company like Walmart getting into retail banking and fierce opposition. And so it's interesting to hear that in that example. But also, I want to go back to like the point also that Rowan is making about like it's kind of like what gets called a gimmick or not is very strange because and we heard from Secretary Yellen recently and she called the trillion dollar coin very dismissively a gimmick. But as Rowan has pointed out, you know, other things that are like extraordinary measures are okay and weird things where the Treasury

provides financing for the Fed or the Fed provides leverage, you know, those don't get called gimmicks. It seems to me that there is nothing less gimmicky than a coin, that on some sense, coins have existed for over 3,000 years. Paying for things with coinage is about one of the oldest traditions there is, putting a number on a coin and saying, as you establish, that that is the value of that coin. It almost is like, of all the things we talk about in financing, there's almost, to me, it's a sense of like creating a coin might be the least gimmicky form of public fundraising there is. Yeah, well, that's exactly right. The concept of seniorage that we talked about earlier is an ancient concept.

It goes back thousands of years, almost as old as coinage is itself. The concept of seniorage is real simple, and that is it is the difference between the cost of producing a coin, and its face value, and that margin represents a form of profit. It's not treated that way anymore, but it used to be a way of funding the crown. So there'd be this small difference between the gold in a coin and the face value on the coin, and that represented a profit that went to the king. And if you were a mint director who produced those coins, and you shaved a little bit of metal off that and debase, that's where the concept debasing coinage or your currency comes from, then if you were discovered, you were beheaded.

And fortunately, mint directors don't have to go through that anymore. But yes, that's a very old concept. It seems to paying for things with coins or the state paying for things with coins or the state saying that the coin is worth this much because we say it is and because we inscribed it into the blank, seems like a very old concept in a way feels very un gimmicky. That's right. To go back to the whole question about whether or not the trillion dollar coin is a gimmick, as we're talking about the concept of coinage, the concept of scenery,

I mean, it is so deeply embedded in human history. that it's hard to call that a gimmick. But I've said that the trillion dollar coin suffers a branding problem. And that is, it's too simple. I mean, quantitative easing, you know, that sounds really sophisticated. People say, oh, I can't conceive of that. But also what I'm discovering is that trillion dollar coin, that also has a brand advantage. and that is that people understand what that is.

And if we get in front of it and explain away all the mythology and misinformation and disinformation, then I think there's an opportunity for to overcome the negative aspects of the brand. Yeah, it seems to me a lot of people say, well, we should do this other alternative that would be functionally equivalent, but that would not. not, you know, suffer the simplicity that actually causes people to understand it. So in their view, you know, much more complicated gimmicks, things that, you know, involve seven layers of jargon

and all this kind of thing. It's a feature, not a bug, that they're so complicated because then people don't actually understand what's going on. Their eyes go cross-eyed. They sort of tune out before you finish describing all the steps. And that's a good thing for them. And, you know, whatever your views are about whether or not the public should be able to understand how money works. It seems like that's actually the real disagreement here. It's not the one's a gimmick and what isn't a gimmick. It's that do you want a gimmick designed to obscure or a gimmick designed to clarify in one sense, you know, if we're going to call the coin a gimmick at all? And it seems to me that we almost spend a lot of time stepping around that, that everybody

wants to frame it as though one is serious and one isn't or one is more sort of in line with the spirit of existing law and one isn't, when really it just boils down to whether or not we're trying to educate and enlighten or sort of obscure and pull the wool over in the process. Yeah, that's an excellent point. And if we've discovered anything in the last five years and a number of things we've discovered, one is that there is a deep suspect. of so-called expertise and real expertise.

Jargon, which is associated with certain kinds of expertise, are suspect in American culture. So quantitative easing, yeah. People say, I don't know what that is,

but I don't, you know, I suspect what it is. Trillion dollar coin, people get that. They understand it. And so, and really the concept behind it is not that difficult. So let me finish here with a, it's a kind of a hypothetical, or maybe it's an impossible question to answer, but the dead ceiling has always been this sort of political tripwire, but we've only really had extreme dead ceiling showdowns.

We talked about this with Rowan a couple of weeks ago on the show, really since, really is already getting very intense under the Obama era. 11 after the big Republican victory in 2010. And so, you know, some of these questions about this sort of like, wow, we might really default. We don't really know much about how past Treasury secretaries might have dealt with this. But it is a hardball move, right? So like there is this norm that it's like, okay, obviously Yellen or whoever else would be Treasury Secretary would like to just raise the dead ceiling in the conventional manner and then ideally forget about it in a few years. But to invoke the question,

or to say, you know what, we're not going to play games. We're not going to let you hold the economy hostage, whatever. Is a hardball political move, you know, it's outside the norm. It's not the norm of how these things typically go down. Do you think there are like Treasury secretaries of the past who may have had more of an appetite for the hardball of this option? I mean, obviously, from a legal standpoint, it's only been open since 1996. with the amendment to the Coinage Act that you got passed. But in terms of like the appetite to say, you know what, don't come to us with the negotiation,

don't stall, we have a coin that we can mint and we're not going to talk about this. Are there, is this something that in different environments, maybe there would have just been more willingness to roll over the opposition by invoking the coin option earlier? Alexander Hamilton? It's the only one that comes to mind. I don't know of any secretary who would have wanted to pursue this option unless his or her back was to the wall. And if it comes down to the nation defaulting on its debts or mending a trillion dollar coin, I think there are a lot of secretaries of the Treasury who would have considered it.

And if it was the only viable option, it's just the estimate is the defaulting on the national, debt would eliminate $15 trillion in wealth in this nation. Now, if that's a choice or a trillion coin, easy choice. And I think the secretary of the treasury would do the same thing. And I think it's an easy decision. Fifteen trillion dollars of wealth created or a coin that's a little gimmicky. You would not think that that that is a hard choice. At least I wouldn't, but apparently, you know, you think that's an easy call. Well, it's not an easy. call. If there's no other option, there is another option that I think is a viable option, and that is the 14th Amendment. I think the 14th Amendment is a clear option here. And, you know,

I don't think the, obviously, I don't think the trillion dollar coin is a gimmick, but it is subject to criticism as a gimmick. The Constitution of the United States and the 14th Amendment has no vulnerability to that. It has other weaknesses and vulnerabilities, but that's not one of them. You know, we could go on forever. And honestly, this is such a fascinating discussion to me because even beyond this sort of politics right now and even beyond the sort of legal dimension,

just thinking about like the history of money and the actual operation of how does money get made and then out to the public is such to me like an under-discussed and under-examined topic, We could go on forever, but this was such a treat. Rowan, it was great to have you back and Mint Director Deal. So great to hear from your perspective as having A, been involved in the writing of the law, but just seeing how this all works.

Thank you both so much for coming out on AdLOT. Thanks for having me. It's a pleasure. Thank you. Well, obviously, Tracy wasn't here, so I can't banter with her as I would normally do. But I strongly suspect, you know, I really do think after our first Mint the Quine episode, that Tracy was getting fairly coin-pilled. And I'm convinced that after this one and hearing from former Mint

Director Deal himself, that she would be fully on board. Maybe that's a little presumptuous of me to say, but I really think she would have been sold. Like I said, kind of at the end, there are so many, like, aspects of that discussion that I find, like, genuinely fascinating. Like, you know, there's something I've been thinking about it. It doesn't even really relate to money per se,

but the idea of agency and sub-agency entrepreneurialism And the idea of, as Philip Deal was talking about, let's do this simple thing. Let's do this straightforward thing of expanding our share in the bullion market so that then we can get congressional support for something more ambitious, the 50 state quarters project. Even like thinking about that and how like our sort of government operates super interesting. Also really interested in this idea that like, you know, people at Treasury might be interested in like, big ideas, like big reforms of tax policy, but something sort of like simple and operational, like how do you avoid counterfeiting the $100 bill is not something that people in government maybe get so excited about because it's not as, you know, the ideas aren't as big.

Anyway, so many interesting things from that discussion, it was a real treat to hear from both of them. So, thought further ado, we'll end it there. This has been another episode of the Oddlots podcast. I'm Joe Wisenthal. You can follow me. on Twitter at the stalwart. Follow my co-host on Twitter, Tracy Allaway, at Tracy Allaway. Follow our guests on Twitter. Rowan Gray. He's at Rowan Gray.

Follow Mint Director, Diel, Philip Diel. He's on Twitter at Philip and Deal. Although he hasn't tweeted in a while. I think he should get back to tweeting. He hasn't tweeted since 2014. He should get a little more public, in my opinion. Follow our producer, Laura Carlson. She's at Laura M. Carlson.

And check out all of our podcasts at Bloomberg, under the handle. at podcasts. Thanks for listening.