Looming Debt Ceiling Crisis: Will the US Treasury Use the $ 1,000 Billion Platinum Coin Option?
(Kitco News) The United States will run out of money in October if the debt ceiling is not raised. But instead of relying on politicians to solve the problem, the Treasury Department has another surprising option – to strike a $ 1,000 billion platinum coin.
This idea gained popularity during the previous great debt ceiling debate ten years ago, but was ultimately rejected by the Obama administration.
There is a loophole in the law that dictates the minting of coins, potentially allowing the Treasury Department to mint platinum coins of any denomination and deposit them with the Federal Reserve in exchange for US federal debt.
You can find the wording for this in subsection (k) of 31 USC 5112, which governs “part names, specifications, and design.”
The clause reads: “The Secretary may mint and issue Platinum Bullion Coins and Platinum Evidence Coins in accordance with such specifications, designs, varieties, quantities, denominations and inscriptions as the Secretary, at his discretion, may prescribe from time to time. to other. “
Theoretically, US Treasury Secretary Janet Yellen can order the platinum coin to be minted and avoid a government shutdown if the debt ceiling is not raised in time.
In the past, this option has always been excluded. Here’s what former President Barack Obama told Crooked Media in 2017:
“We had these conversations with Jack Lew [the treasury secretary at the time] and others on the options actually available, as this had never happened before, ”said Obama. “There were all kinds of wacky ideas about how you could potentially have this huge room. “
Obama described imagining a very large coin. “It was a bit primitive… it was out of the Stone Age,” Obama said. “I imagined myself rolling in a coin.”
But it doesn’t have to be a giant coin, because it doesn’t technically need to be made out of $ 1 trillion of platinum.
The United States is not on a gold or platinum standard. And while the coin will require platinum to be used, it can be as small as a dime, with the US Treasury assigning it any value, including $ 1,000 billion.
“As is the parody version of #MTFC. The coin doesn’t have to be massive. It just takes platinum and has $ 1,000 billion printed on it,” tweeted podcast co-host Odd Lots. Joe Weisenthal in 2017.
– Joe Weisenthal (@TheStalwart) Jan. 19, 2017
In terms of the inflationary impact the $ 1 trillion platinum coin could have, Weisenthal assured his readers that this type of Treasury QE would not be the same as the massive fiscal stimulus spending that the US economy has. experienced during the COVID-19 pandemic.
“Making money from minting high denomination coins seems strange and inflationary. But that only seems inflationary for the same reason people thought QE would be inflationary in 2009. As my colleague Ed Harrison says, you can think of the coin as a kind of QE from the Treasury. It would simply be an exchange of assets. The Fed receives a coin to keep on its balance sheet. The Treasury collects the repaid debt. The effect on the real economy is marginal at best, ”he wrote in a post on Wednesday. “There are no new spending. No new money for goods. Just different branches of government making accounting changes.”
Treasury officials have said in the past that minting platinum coins is not the solution to the debt ceiling problem and instead urged Congress to do its job.
This time around, official thinking has not changed.
“There is only one viable option for dealing with the debt limit: Congress must raise or suspend it, as it has done about 80 times, including three times in the last one. administration, “White House spokesman Mike Gwin said in a statement to Insider. .
Former Treasury secretaries sent a letter to Congress on the debt ceiling on Wednesday, stressing the urgency of the situation.
“As former Treasury Secretaries, we write to express our deep sense of urgency that the leaders of Congress, together with the administration and the President, act quickly to initiate and complete a viable legislative process necessary to increase the debt ceiling, ”the letter reads. “Failure to meet the debt limit and allow unprecedented default could cause serious damage to the economy and national security. “
The warning comes after several urgent statements made by Yellen in August and September.
In a recent Wall Street Journal editorial, Yellen noted that the United States will run out of money and will not be able to pay its bills as early as October.
“We are finally emerging from the pandemic crisis. Let us not immerse ourselves in a financial crisis,” she wrote.
The idea for the $ 1,000 billion platinum coin was heavily debated on social media this week under the hashtag #mintthecoin, with figures like Weisenthal backing the idea.
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