The Biden administration can mint a $1 trillion coin at the last minute if Treasury Secretary Janet Yellen should decide to use that option to safeguard the nation’s debt as the clocks ticks toward default.
Yellen called the coin a ‘gimmick’ in an interview with CNBC.
But Congress has been unable to come to an agreement on a way to raise the coutry’s debt limit. And time is running out toward October 18, the date the Treasury Department said it would run out of money.
A trillion-dollar coin could serve as a temporary stop-gap measure if the Treasury needs a way to keep the government from going into default – something the government has never done in modern history. The US Mint would only need a few days notice from Yellen to produce one.
Philip Diehl, the director of the US Mint from 1994 to 2000, told Axios there is no shortage of platinum blanks to mint the coint – the law requires it to be made of that material.
The mint already produces a platinum ealge coin. Printing a trillion-version of it would merely require the denomination to be changed to a 1 with 12 zeros.
‘This could be quickly executed on the existing plaster mold of the Platinum Eagle,’ Diehl said.
The coin would be produced at the US Mint in West Point, New York, then flown by helicopter to the Federal Reserve branch in New York City.
It would have to be deposited because the Treasury can’t introduce new currency into circulation – only the Fed can do that.
But if the coin sits in the bank, its value would be added to the Treasury’s general account and can be used for the nation’s bills.
Yellen has made her opposition clear.
‘I’m opposed to it, and I don’t believe we should consider it seriously. It’s really a gimmick, and what’s necessary is for Congress to show the world can count on America paying its debts,’ she told CNBC.
But senators are no closer to a deal to raise the debt limit. Senate Majority Leader Chuck Schumer has teed up another vote on the matter Wednesday afternoon but it’s destined to fail due to a lack of Republican support.
Options are getting more limited as October 18 approaches.
Is a trillion-dollar coin legal?
Legally, the Treasury secretary can produce coins of any denomination without congressional approval as long as they’re platinum.
The US Code reads: The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
Critics would argue securing the national debt is not the intent of the code, which allows the Treasury Department to mint commerative coins for collectors.
The Treasury is limited by law on how much paper money and gold, silver and copper coins it can circulate.
But there’s no limit on how many platinum coins it can circulate (see above US Code) or on their value.
Has as trillion dollar coin ever been minted?
No but Barack Obama considered it during his presidency.
Obama, in his final days in office, told the Pod Save America podcast that during his own debt ceiling standoff, which he called the ‘scariest’ moment of his presidency, his administration considered minting the coin.
‘We were having these conversations with [then Treasury Secretary] Jack Lew and others about what options in fact were available, because it had never happened before,’ Obama said. ‘There were all kinds of wacky ideas about how potentially you could have this massive coin.’
Would the trillion dollar coin be massive?
No. Size does not reflect value.
See dime versus penny.
Is there a down-side to minting a trillion dollar coin?
There are concerns it would result in an increase in inflation due to a trillion dollars suddenly existing when it didn’t before.
Others, however, argue the trillion coin could be used by Treasury to buy back $1 trillion in debt from the Fed and retire it, thereby wiping the books of $1 trillion o the national deficit in what’s essentially an accounting trick.
And because it’s a swap of funds between two government agencies, no new money would enter the economy and thereby not cause inflation.
Are there other options than printing a coin or waiting on Congress?
Some have suggested invoking the 14th Amendment’s guarantee that the ‘validity of the public debt of the United States, authorized by law … shall not be questioned.’
There are constitutional scholars who argue that could be used to override the debt limit.
White House press secretary Jen Psaki said Monday the administration has looked at other options and ‘none of those options were viable.’
‘So, we know that the only path forward here is through Congress acting,’ she said.
What happens if the US government defaults?
Some fear a global economic recession if the United States’ can’t be trusted to pay its debt.
There would also be a partial shutdown as the government would have to close non-essential services – such as national parks – as it no longer has enough money to pay its bills.
Essential services, such as the military and air-traffic control, would still run.