EDITORS NOTE: As the debt ceiling debacle rages on in Congress, the idea of minting a $1 trillion platinum coin to help put the Treasury department on firmer financial ground is gaining steam. Reuters reports that “some progressive commentators and Democratic lawmakers have suggested minting one or more $1 trillion coins to break an impasse in which Republicans have refused to support an increase in the $28.4 trillion debt ceiling.” This sounds like a ludicrous idea, and Treasury Secretary Janet Yellen agrees. She recently told CNBC, “I'm opposed to it and I don't think we should consider it seriously. It's really a gimmick." She also said that instead of solving the country’s financial problems, it would create more by “showing that Congress and the administration can be trusted to pay U.S. bills.”
U.S. Treasury Secretary Janet Yellen on Tuesday said it was “utterly essential” for Congress to lift the federal debt limit ahead of an Oct. 18 deadline to avoid U.S. default, but added that she opposes using a loophole in U.S. currency law to resolve the crisis.
Yellen told CNBC in an interview that she opposes the minting of a $1 trillion platinum coin to resolve the crisis.
The idea comes from a legal loophole that allows the Treasury to mint platinum coins in any denomination it chooses. Some progressive commentators and Democratic lawmakers have suggested minting one or more $1 trillion coins to break an impasse in which Republicans have refused to support an increase in the $28.4 trillion debt ceiling.
“I’m opposed to it and I don’t think we should consider it seriously,” Yellen said. “It’s really a gimmick.”
Yellen said such a move “is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt. It compromises the independence of the Fed, conflating monetary and fiscal policy.”
She added that it would “do the opposite” of showing that Congress and the administration can be trusted to pay U.S. bills.
Asked if she would back a process called “reconciliation” for getting the limit increased without any Republican support, Yellen said: I support getting it done... We have to raise the debt ceiling as a routine matter whenever the country runs budget deficits.”
Yellen added that it was up to Democratic House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer “to figure out” how to raise the debt ceiling in Congress. “What I can tell you is that it’s utterly essential that this be done.”
She said she continues to regard Oct. 18 as a deadline for raising the debt ceiling. That is when the Treasury will exhaust its extraordinary borrowing capacity and will have limited cash reserves that will be expended very quickly. A default would be “catastrophic” and cause a recession, she said, putting the reserve status of the dollar at risk.
Originally posted on Reuters.com