The Treasury department will hit the $16.4 trillion borrowing limit in February. The last time the debt ceiling had to be raised, Congress waited until the very last minute so that our debt could receive its first downgrade ever.
There’s an easy solution. All President Obama has to do is show up with two platinum coins, each worth $1 trillion.
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It sounds preposterous. But current law actually allows the Treasury to mint as many platinum coins as it wants. It can also assign whatever value to those coins it wishes.
Conceivably, the President could order the Treasury to make the $2 trillion coins and deposit them into the Federal Reserve. Voilà! The US has an extra $2 trillion to pay its debts!
And no new debt will have been issued. Joseph Gagnon of the Peterson Institute for International Economics says he sees nothing economically problematic with the idea.
Wait a minute! Isn’t this the same as the Treasury printing money? Gagnon says the government would use the money to keep spending at current levels so it wouldn’t create any extra inflation.
The platinum coin idea is legal. And it was raised as an option by Yale Law Professor Jack Balkin during the 2011 debt-ceiling crisis.
Current law limits the amount of paper money the US can circulate at any one time as well as how many gold, silver, and copper coins can be minted.
But the US legal code says specifically that the secretary of the Treasury can mint and issue platinum bullion coins pretty much in whatever fashion he or she wishes.
Yes, there is a caveat. Congress could argue that the intention of the law applies only to commemorative coins and the political ramifications would be significant. The platinum coin idea is not the only out-of-the box solution under consideration.
It’s been suggested that, under the 14th Amendment, the President could declare the debt ceiling unconstitutional. The Treasury could also start selling off its gold reserves to pay its bills until Congress decides to do something.
If Congress doesn’t get its act together about the fiscal cliff, then some of these ideas
may seriously come to the table to resolve the debt ceiling issue.