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
