For what seems to many to be a ludicrous idea, the concept of the $1 trillion platinum coin is getting a lot of attention.
As it stands, the law says the Treasury cannot print money to cover government debt. Only the Fed can do that.
There’s one exception: the Treasury can issue all the platinum coins it wants, assigning it any value it wishes. The concept is so intriguing, some are beginning to consider it as possible solution to the country’s debt problems.
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Granted, most consider it an terrible idea but they have little legal clout against it.
The economic resistance to the idea is more plausible but the economic ramifications are also more manageable.
The best arguments against the minting of the coin are that it lacks dignity and it would be a premature move since Congress has almost two more months to strike a deal.
Issuing the coin would definitely be better than defaulting on our debt. And it would be much less provocative than the President declaring that the debt limit is unconstitutional.
The coin would serve as a political bargaining chip; the declaration would cause political mayhem.
The ludicrous nature of the idea is what has filled the media gap from the fiscal cliff deal. And there are no $1 trillion transactions done by the federal government.
So, if platinum ends up saving the day, the Treasury should issue multiple coins of lesser value.
The largest Treasury bond transactions are $25 billion so the Treasury could issue one $25 billion coin at a time on an as-needed basis.
This would take the place of bond auctions.
Issuing coins in denominations of millions instead of billions would also aid the Fed in private transactions and would certainly be less ridiculous.
The best solution, of course, would be for Congress to reach a bi-partisan solution. But the coin idea—as ridiculous as it seems—could end up being the bargaining instrument
that would force that to happen.