Believe it or not, some economists and legal experts are floating an outlandish idea that could be the magic bullet in solving the U.S. government's impending debt-ceiling crisis. Instead of wrangling with Congress on a $2 trillion debt-limit extension and risking a default with global implications, President Barack Obama could order the U.S. Mint to create two platinum coins, each worth $1 trillion.
Those coins would be deposited at the Federal Reserve, which would then move this money into the accounts of the U.S. Treasury. And just like that, the Treasury would have an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt.
Crazy? You betcha. Legal? Seems so.
Thanks to a strange loophole in the current law, the U.S. Treasury is allowed to mint as many platinum coins as it wants and can assign them whatever value it pleases. In this case, it would be producing two coins at $1 trillion each.
Armed with two simple — but very pricey — coins, the President would be able to diffuse what could be a messy political showdown in the Congress.
Jack Balkin, a professor at Yale Law School, explained that there’s a limit to how much paper money the United States can circulate at any one time, and there are rules that limit how many gold, silver and copper coins the Treasury can mint. But there’s no such limit when it comes to platinum coins.
“I like it,” Joseph Gagnon of the Peterson Institute for International Economics, told The Washington Post. “There’s nothing that’s obviously economically problematic about it.”
Critics of the idea say that the original law was intended to set rules regarding commemorative coins, not to finance the operations of the government. They expect that the result of a trillion-dollar-coin strategy would be a blowback of complicated litigation.
If nothing else, Congress may be forced to compromise on a deal, knowing that the platinum coins are available as the President's fallback measure. Stay tuned.