Yellen dismisses minting $1T platinum coin to avoid US debt ceiling as ‘gimmick’


Treasury Secretary Janet Yellen has dismissed the idea of ​​minting a $1 trillion platinum coin to keep the US from defaulting on the national debt as a “trick” the Federal Reserve is unlikely to go along with, dealing a blow to advocates’ hopes of use as a final around Congress amid the debt limit debate.

Progressive economists and some Democratic lawmakers have been pushing for the Treasury Department to mint $1 trillion in platinum coins and deposit them with the Federal Reserve to raise the debt ceiling, then use the space created by the maneuver to finance more government spending. This would exploit a legal loophole that allows the Treasury to mint platinum coins of any denomination.

“It should by no means be taken for granted that the Federal Reserve is going to do it, and I think especially with something that’s a gimmick,” Yellen told the Wall Street Journal in an interview on Sunday. “There is no requirement for the Fed to accept it, there is no requirement on the part of the Fed. It’s up to them what to do.”

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US Treasury Secretary Janet Yellen

U.S. Treasury Secretary Janet Yellen attends a bilateral meeting with Chinese Vice Premier Liu He in Zurich, Switzerland on Wednesday, Jan. 18, 2023. ((Michael Buchholzer/Keystone via AP) / AP Newsroom)

Yellen — who served as Federal Reserve chair for four years from 2014 to 2018 — made the remarks after the U.S. reached its debt ceiling on Thursday, prompting the Treasury Department to begin using “emergency 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 will hardly come as a surprise: During a previous 2021 debt limit impasse, Yellen discussed the idea of ​​minting a $1 trillion coin, saying: “I don’t think we should to take it seriously.”

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Treasury Building

The Treasury Building is seen in Washington, DC on August 29, 2022. ((Photo by DANIEL SLIM/AFP via Getty Images)/Getty Images)

The White House joined Yellen in pushing back on calls for the coin, as press secretary Karin Jean-Pierre told reporters earlier this month that “we are not considering any measures that would bypass Congress.”

While the idea is often floated as a way to break congressional gridlock during the impasse over the debt limit, it has also been floated as a means of funding sweeping spending plans. Progressive Rep. Rashida Tlaib (D-Mich.) previously proposed a bill to mint $2 trillion in platinum coins to finance recurring monthly stimulus payments during the COVID-19 pandemic.

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The Federal Reserve Building in Washington, DC

FILE – This May 4, 2021 file photo shows the Federal Reserve Building in Washington. (AP Photo/Patrick Semansky, File/Associated Press)

Although the Federal Reserve hasn’t weighed in on the merits of the idea, the central bank has long tried to keep its efforts focused on monetary policy and avoids meddling in fiscal policy matters that are typically handled by Congress and the president.

Critics of the plan to mint a $1 trillion coin note that it will further fuel inflation by injecting additional fiscal stimulus into the economy. It could also cause anxiety in bond markets as participants begin to doubt the US government’s ability to deal with its fiscal problems and make debt payments. This, in turn, could push up interest rates and hurt areas of the economy that rely on finance, such as housing markets, while raising the government’s cost of servicing existing debt.

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With the $1 trillion coin likely off the table, lawmakers in Congress will need to reach a bipartisan compromise with the Biden administration to address the debt limit before the Treasury emergency measures expire this summer.

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