By December 10, 2012 4 Comments Read More →

The Coin Analyst: Trillion-Dollar Platinum Coins and San Francisco Eagle Set Number Released

by Louis Golino for CoinWeek ……

Trillion-Dollar coins?

A provocative idea is currently being discussed in the mainstream press that you may not be familiar with. With the prospect of another fight in Washington over raising the federal debt limit coming up in February, right on the heels of the current fight over the fiscal cliff, a strange but technically legal idea is getting some attention.

The idea is that because of an odd loophole in the U.S. Code, the Treasury Secretary has the legal authority to issue platinum coins in whatever denomination he chooses.

When it comes to coins made of other metals, like gold and silver, the denomination for those coins are set by laws passed by the Congress.

But, according to subsection (k) of 31 USC 5112, which governs “Denominations, specifications, and design of coins”:

trillion currency The Coin Analyst: Trillion Dollar Platinum Coins and San Francisco Eagle Set Number Released“The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”

So based on this legal authority the Treasury Secretary could theoretically direct the Mint to issue to platinum coins with a denomination of $1 trillion each. The coins would then be deposited with the Federal Reserve and could be used to cover the amount needed to raise the debt limit to cover federal spending over the past year. Remember that the limit is not increased to cover future spending, but actually applies to money already spent.

This would be the ultimate seigniorage play since the coins could be made of an ounce of platinum that costs about $1600.

This proposal has been discussed before, but it appears to be getting more attention this time. Experts argue that it would not be the same as printing money, which is inflationary, because the new money would only be used to keep spending at existing levels, according to Joseph Gagnon of the Peterson Institute for International Economics, who was quoted in the December 7 issue of the Washington Post.

I highly doubt this would actually happen. I do believe it is possible that like in August 2011, the U.S. will come very close to defaulting on its debt as the gamesmanship in Washington plays out.

But before issuing trillion dollar coins I think other options would be considered such as invoking the 14th amendment, which says the validity of the public debt shall not be questioned. More likely, the President would begin shutting down parts of the government, and public pressure on the GOP to agree to raise the limit would continue to mount until an agreement would be reached, and hopefully prior to another credit downgrade like we received the last time this happened.

It’s interesting that given the odd legal loophole on platinum coins, no platinum bullion coins have been minted since 2008. Only one ounce proof platinum coins are currently made.

Some people believe that FDR’s executive order banning the private ownership of gold, because he believed that going off the gold standard would end the Great Depression, provides a precedent for the trillion dollar platinum coins. But I don’t think one can really compare today’s economic crisis with the depths of the depression, and surely there would be huge public outcry over this move even if it is technically legal.

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San Francisco silver eagle set comes in at 224,981

On December 6 the U.S. Mint notified the numismatic media of the final, unaudited number of 2012-S San Francisco American silver eagle proof sets sold this year, which is 224,981. The previous figure, released on July 6, was 251,302.

Collectors and buyers have been eagerly awaiting this number for months because it helps determine the secondary market value of the sets.

Because the number has not been audited, which will take place sometime next year, it could technically change, but probably not by much.

The number is significant for several reasons, but don’t expect an instant rise in prices now that we know there were about 25,000 cancelled orders in part because collectors were angry to learn that one of the coins in the set, the 2012-S proof silver eagle, was being sold in another set, the 2012 Making American History coin and currency set.

As I have explained before , even with the extra coins made for those sets, and assuming they sell the maximum authorized 100,000 coin and currency sets, which is unlikely, the 2012-S proof will still be the second lowest mintage proof silver eagle in the series after the rare and expensive 1995-W coin, a coin that costs a minimum of about $3,000.

The 225,000 number is mainly significant because it is 23,000 lower than the 20th anniversary silver eagle set issued in 2006 and because the 2012 reverse proof coin now has the second-lowest mintage of the three reverse proof silver eagles after the 2011 at 100K. And it is now the fourth lowest mintage coin in the entire silver eagle series unless one counts the 2008-W with reverse of 2007 coin, which would push it down to fifth lowest.

It will take time for this news to be disseminated throughout the numismatic community, and I don’t anticipate a sudden dramatic rise in prices, especially for raw sets, but the number should help drive prices higher over time, provided that lower mintage coins are not issued in the future.

At the same time, 70-graded versions of these sets, as I have discussed before, , especially those that are PCGS 70 first strike sets, will continue to be the ones that perform the best.

In general 70’s are actually becoming much cheaper and more common when it comes to the bullion silver eagle than they were years ago. More are being graded, and production standards have increased. For example, the Mint is looking at ways to eliminate the issue of so-called milk spots on the coins.

I have seen companies offering pre-orders for the 2013 silver eagles that will be released in early January for as low as $70, which is what it would cost to buy a raw coin at current silver prices and have it graded with no guarantee of a 70.

But the situation is very different for PCGS 70 first strike sets. Take a look at e-Bay on any given day, and you will generally not see more than about a half dozen listings for PCGS 70-graded sets. This appears to be due to their relative scarcity, and perhaps the fact that because owners know they are scarce, they are waiting for even higher prices before selling. Recent prices have been in the range of $550-$600.

Certainly coins with a mintage of 225,000 are not technically rare, though very few modern coins really are rare. People often confuse this issue by comparing rarity in classic coins with rarity in modern coins, which is like apples and oranges.

But given the millions of people who collect silver eagles compared to, for example, the much smaller number who collect first spouse coins, there should be decent demand for these sets going forward. And with new silver eagle collectors coming on board all the time, there will always be more people who want a set than the number of sets available, which is a prescription for higher prices for those who are patient.

golino portrait thumb The Coin Analyst: Trillion Dollar Platinum Coins and San Francisco Eagle Set Number ReleasedLouis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

About the Author:

Louis Golino is a numismatic journalist and writer specializing in modern coin issues. He has been writing a weekly column for Coin Week since May 2011 called "The Coin Analyst," which focuses primarily on modern U.S. and world coins and developments at major world mints, and is also a contributor to two magazines, American Hard Assets and the Numismatist, the American Numismatic Association's monthly publication. His work has also appeared in Coin World, Numismatic News, and various coin web sites. He collects classic and modern U.S. coins and modern world coins from a number of different countries. He first joined the ANA in the 1970's. He has also worked for the Congressional Research Service of the Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of publications. He has been writing professionally since the early 1980's.

4 Comments on "The Coin Analyst: Trillion-Dollar Platinum Coins and San Francisco Eagle Set Number Released"

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  1. Koichi Ito says:

    Trillion dollar platinum coins can erase off national deficit. So how about issuing alternative currency like “Federal Hour or Credits” just like the Bitcoin could also can erase off debt too?

  2. Hi Louis,

    Thanks for throwing some much needed light on the potential values of the San Francisco set. While I think it would have been smarter for the US Mint to use a different silver eagle to boost sales of the coin & currency, I agree that the increase in mintage is small enough that it shouldn’t impact long-term values of the San Francisco set.

    I sometimes think the eBay flipper mentality has crept too much into coin collecting – that is, an expectation of an instant surge in value the moment a product sells out and an assumption of worthlessness of any product that fails to surge in this manner. I am much more inclined to believe the San Francisco set will do very well once several years pass for the reasons you cited.

    On the issue of the one trillion dollar platinum coins, I remember the last time this was brought up and am no more confident that this is a good idea now. I am having a hard time buying the arguments that production of such a coin would not be inflationary. Fortunately, we are unlikely to attempt a move like this.

    • Louis says:

      Thanks for sharing your insights, CO. I very much agree on the flipper mentality. Coins, modern or classic, should generally be held for years. The value of the SF sets will be mainly driven by the reverse proof coin. As long as the Mint does not issue too many, they should remain keys to the series. I think they should try something different for the next anniversary set.

      The trillion dollar coins will obviously never be issued. It reminds me of Weimar Germany or Zimbabwe, which had to issue such denominations because of hyper-inflation. But I mainly wanted to draw attention to the curious legal provision on platinum coins.

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