The trillion-dollar platinum coin

By: Miguel A. Rodriguez

16:49, 06 October 2021

The pandemic's effects on the US economy are starting to get more intense, with extreme payment measures considered to be enforced

Things are starting to heat up at an economic level, as Congress' decision to lift the federal debt limit before the October 18th deadline is still uncertain.

In the past few days, the possibility of minting a $1 trillion platinum coin has been acclaimed for potentially resolving the crisis. Various progressive commentators and Democratic lawmakers suggested the idea of minting one or more $1 trillion coins to overcome the impasse the Republicans supported by refusing to increasethe $28.4 trillion debt ceiling. The suggestion comes from a legal loophole that allows the Treasury to mint platinum coins in any denomination it chooses.

As stated in a CNBC interview, US Treasury Secretary Janet Yellen opposes the minting. She said: "I'm opposed to it, and I don't think we should consider it seriously. […] It's really a gimmick." According to her, this move is the same as asking the Fed to print money to cover deficits Congress doesn't want to protect by issuing debt.

Yellen added that it is up to the House Speaker Nancy Pelosi and Senate Majority Leader Check Schumer to develop a solution on how to raise the debt ceiling in Congress. The Treasury will exhaust its extraordinary borrowing capacity if Congress doesn't raise the limit by October 18th. Following this, the Treasury will have limited cash reserves to operate, expected to be spent very quickly.

A default will cause a recession, putting the reserve status of the dollar at risk.

Sources: reuters.com, wsj.com

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This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided.