Yellen rejects minting $1 trillion platinum coin to avoid US debt ceiling as a ‘gimmick’

Treasury Secretary Janet Yellen He dismissed the idea of ​​minting a trillion-dollar platinum coin to prevent the US from defaulting on the national debt as a “gimmick” the Fed is unlikely to go along with, dealing a blow to advocates’ hopes of using it as an end-run around Congress amid the debt-limit debate.

Progressive economists and some Democratic lawmakers pushed the Treasury Department to mint a $1 trillion platinum coin and deposit it in the Federal Reserve to raise the debt ceiling, then use the leeway created by the maneuver to fund more. government spending. It would use a legal loophole that would allow the Treasury to mint platinum coins of any denomination.

Yellen said Wall Street Journal In an interview on Sunday. “The Fed is not required to accept it, and there is no requirement on the Fed’s part. It is up to them what they do.”

US Treasury Forces Debt Ceilings in ‘Extraordinary Measures’

US Treasury Secretary Janet Yellen

US Treasury Secretary Janet Yellen attends a bilateral meeting with Chinese Vice Premier Liu He in Zurich, Switzerland, on Wednesday, January 18, 2023. ((Michael Buholzer/Keystone via The Associated Press/The Associated Press Newsroom)

Yellen – who served as chair of the Federal Reserve for four years from 2014 to 2018 – made the remarks after the United States reached its debt limit on Thursday, prompting the Treasury Department to begin using “extraordinary measures” that grant Congress until at least earlier. . June to raise the debt limit.

Her opposition to pushing for a $1 trillion coin mint is unlikely to come as a surprise: During the previous debt-reduction showdown in 2021, Yellen mooted the idea of Minting a coin worth $1 trillion “I don’t think we should take it seriously,” he said.

A high debt ceiling presents the risk of a “self-inflicted” downturn for the US economy

Treasury building

The US Treasury Department building in Washington, D.C. on August 29, 2022. ((Photo by Daniel Slim/AFP via Getty Images)/Getty Images)

The White House has joined Yellen in pushing back on calls for the coinage, with press secretary Karen Jean-Pierre telling reporters earlier this month that “we’re not considering any measures that would circumvent Congress.”

While the idea is often floated as a way to avoid gridlock in Congress during debt-limit deadlocks, it has also been proposed as a way to fund broad spending plans. Progressive Rep. Rashida Tlaib (D-Michigan) earlier proposed a $2 trillion platinum coin mint bill to fund repeated monthly stimulus payments during the COVID-19 pandemic.

BUDGET CAP BATTLE BREWEEN BETWEEN GOP, DEMS AS A DEBT LIMIT

Federal Reserve Building in Washington, D.C

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

although Federal Reserve He did not consider the merits of the idea. The central bank has long tried to keep its efforts focused on monetary policy and shied away from meddling in fiscal policy matters that are usually handled by Congress and the president.

Critics of the $1 trillion coinage plan noted that it would increase inflation by injecting additional fiscal stimulus into the economy. It could also cause concern in the bond markets as participants begin to doubt the ability of the US government to address its fiscal issues and make debt payments. This, in turn, could cause interest rates to rise and hurt areas of the economy that depend on financing such as the housing markets, while increasing the cost for the government to service its existing debt.

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With the prospect of a $1 trillion coin off the table, lawmakers in Congress will have to strike a bipartisan compromise with the Biden administration to address debt limits before the Treasury Department runs out of extraordinary measures this summer.

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