Here’s how it would work. The Mint, under the direction of Treasury Secretary Tim Geithner, would strike a $1 trillion platinum coin and then deposit it with the Federal Reserve. In exchange, the Federal Reserve would print $1 trillion, which it would give to the Treasury, allowing the Treasury to continue spending money without borrowing and hitting the debt ceiling.
Tucked into a 1996 omnibus spending bill is language authorizing the treasury secretary to “mint and issue” platinum coins. Unlike most coin legislation, this legislation gives the Treasury broad authority to determine denominations and specifications. That’s why the coin would have to be platinum — the restrictions on silver and gold coins are too numerous. So this much is clear: the Treasury could legally mint a $1 trillion platinum coin. And it would not have to be $1 trillion worth of platinum. In fact, it could contain little more than platinum dust.
What is less clear is whether that coin could be deposited with the Federal Reserve. The law states that the Treasury can “mint and issue” platinum coins. The question is whether “issue” can mean “deposit.” At best, that’s a stretch, and one that could be litigated. Even the proponents of the $1 trillion coin admit that it was never Congress’ intent to allow the executive branch to deposit $1 trillion platinum coins with the Fed. A court could very well read “issue” to mean “broadly distribute to the general public.” So the Treasury could try selling its $1 trillion coin to the general public. Maybe the Chinese would be interested. Or it could try selling lots of platinum coins worth a total of $1 trillion.