Treasury, Fed kill idea of $1 trillion platinum coins to avert debt crisis

WASHINGTON Sat Jan 12, 2013 6:09pm EST

The U.S. Treasury building is seen in Washington, September 29, 2008. REUTERS/Jim Bourg

The U.S. Treasury building is seen in Washington, September 29, 2008.

Credit: Reuters/Jim Bourg

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WASHINGTON (Reuters) - So much for the $1 trillion platinum coin idea.

The U.S. Treasury Department said on Saturday it will not produce platinum coins as a way of generating $1 trillion in revenue and avoiding a battle in Congress over raising the U.S. debt ceiling.

The idea of creating $1 trillion by minting platinum coins has gained some currency among Democrats in recent days as a way of sidestepping congressional Republicans who are threatening to reject a necessary increase in the debt ceiling unless deep spending cuts are made.

The Treasury Department and the Federal Reserve, both independent of one another, each concluded this was not a viable option.

"Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit," said Treasury spokesman Anthony Coley in a statement.

Congress' refusal in 2011 to raise the debt ceiling unless the White House agreed to large spending cuts brought the United States close to the brink of a debt default and dealt the weak recovery a setback.

Another crisis is brewing as the United States is expected to reach its authorized debt limit of $16.4 trillion in February.

White House spokesman Jay Carney said that with the platinum coin question resolved, the pressure is on congressional Republicans now to act to raise the debt ceiling.

"Congress can pay its bills or they can fail to act and put the nation into default," he said. "When congressional Republicans played politics with this issue last time, putting us at the edge of default, it was a blow to our economic recovery, causing our nation's credit rating to be downgraded."

There was also no change in Obama's opposition to another possible way to get around Congress that some Democrats support - that of invoking a line in the 14th amendment to the U.S. Constitution.

Part of the 14th amendment says the validity of the public debt should not be questioned, which some Democrats take to mean that the president can raise the debt ceiling on his own. The White House says it does not believe that approach would stand up legally.

"Congress needs to do its job," said Carney.

The idea behind the platinum coin was that Treasury would mint a coin or coins from the precious metal and that the value would be placed at $1 trillion.

For the plan to work, the Federal Reserve would have to deposit it in the Treasury account and credit the account $1 trillion that could be used to pay the nation's bills.

But if the Federal Reserve does not believe that the coin is worth $1 trillion and refuses to buy it, then the plan falls apart.

Some liberals, like New York Times columnist Paul Krugman, had supported the idea and a petition submitted to the White House website had thousands of signatures. This kind of momentum prompted both the Fed and the Obama administration to consider the concept, and they ultimately decided it would not work.

(Reporting By Steve Holland; editing by Doina Chiacu and Philip Barbara)

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Comments (86)
Fill wrote:
As interesting as it sounded, it came across as an ugly hack to begin with. Glad it officially got shot down.

Jan 12, 2013 5:15pm EST  --  Report as abuse
rokid wrote:
Rep. Boehner – the ball is in your court. No, the President is not going to let you and the TPers off the hook with a platinum coin or an invocation of the 14th Amendment.

Jan 12, 2013 5:25pm EST  --  Report as abuse
usagadfly wrote:
Good news! We must honestly face our financial problems, which are a mush greater threat to the USA than Al Qaeda.

For starters, to make the current situation clear, we must immediately ban all “black” or secret funding through the US Treasury. No one, other than a small handful of Federal politicians, if even they, knows how much deceptive money is spent by the US Government. This is money for projects and purposes some powerful people feel should be concealed from the American people. An unknown amount, perhaps over $1 trillion, is not accounted for at all or is listed as being spent on social programs like Medicaid and Medicare while it is used to fund, say, assassination drones over Pakistan and Afghanistan or secret prisons in Romania or secret invasions via mercenaries (“contractors”), such as perhaps Syria. Some estimates are that, in total, perhaps as much as $2 trillion per year is being secretly spent on military type programs and accounted for as social spending.

The Cold War has been over for more than 20 years. Such financial games are a good deal of what has put us in fiscal trouble. Time to be straight with the American people and make such programs, in the absence of a declaration of war by Congress with a recognized foreign government, a Federal felony requiring life in maximum security prison and forfeiture of all pay and benefits from the date of the infraction. Such crimes should be beyond Presidential pardon powers.

Time for truth, not lies.

Jan 12, 2013 5:32pm EST  --  Report as abuse
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