Treasury Secretary Janet Yellen dismissed the idea of minting a $1 trillion platinum coin to prevent the US from defaulting on the national debt as a “trick” the Federal Reserve is unlikely to agree to, striking a blow to the hopes of advocates to use it as a kill off Congress amid the debt limit debate.
Progressive economists and some Democratic lawmakers have pushed for the Treasury to mint a $1 trillion platinum coin and deposit it with the Federal Reserve to raise the debt ceiling, then use the leeway created by the move to fund more. government spending. It would use a loophole that allows the Treasury to mint platinum coins of any denomination.
“It should in no way be taken for granted that the Fed would do it, and I think especially with something that is a gimmick,” Yellen told the Wall Street Journal in an interview on Sunday. “The Fed is not required to accept it, there is no requirement on the part of the Fed. It is up to them what to do.”
Yellen, who served as Federal Reserve chair for four years from 2014 to 2018, made the comments after the United States hit its debt limit on Thursday, prompting the Treasury Department. to start using “extraordinary measures” that give Congress until at least early June to raise the debt limit.
Her opposition to the push to mint a $1 trillion coin is unlikely to come as a surprise: During an earlier showdown over the debt limit in 2021, Yellen discussed the idea of mint a $1 trillion coin and said, “I don’t think we should take it seriously.”
The White House joined Yellen in rejecting calls to mint the coin, as press secretary Karine Jean-Pierre told reporters earlier this month that “we are not considering any measures surrounding Congress.”
While the idea is often floated as a way to circumvent gridlock in Congress during deadlocks over the debt limit, it has also been suggested as a means to finance sweeping spending plans. Progressive Rep. Rashida Tlaib (D-Mich.) previously proposed a bill to mint $2 trillion worth of platinum coins to fund recurring monthly stimulus payments during the COVID-19 pandemic.
Although the Federal Reserve has not weighed the merits of the idea, the central bank has long tried to keep its efforts focused on monetary policy and shied away from intervening in fiscal policy issues that are normally handled by Congress and the president.
Critics of the plan to mint the $1 trillion coin point out that it would further boost inflation by injecting additional fiscal stimulus into the economy. It could also cause concern in bond markets, as participants begin to doubt the US government’s ability to address its fiscal problems and make debt payments. That, in turn, could cause interest rates to rise and hurt areas of the economy that depend on financing, such as housing markets, while raising the cost of government to service its existing debt.
With the $1 trillion coin likely off the table, lawmakers in Congress will have to reach a bipartisan compromise with the Biden administration to address the debt limit before Treasury’s extraordinary measures run out of steam this summer.