Treasury Nixes Trillion-Dollar Coin Idea

The Treasury Department announced that it would not mint a trillion-dollar platinum coin and that the Federal Reserve would not accept it anyway.

From the Washington Post:

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. ”Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

This doesn’t mean that all cockamamie ideas about how to short-circuit congressional authorization for raising the debt limit are to be abandoned. But the coin option appeared to have the most support — and now that it’s dead, we can move on to the real showdown.

The administration’s position is that raising the debt limit is Congress’s responsibility until the day that Congress votes to make it the White House’s responsibility, which is a resolution the Obama administration would happily accept. Until then, White House officials say, they will not negotiate over the debt ceiling, and if congressional Republicans attempt to use it as leverage, then the consequences will be theirs to bear.

In other words, a gigantic game of chicken is now about to be played out with the enemy of economic growth — monumental uncertainty — as a sweetener. I don’t know which side is right about the effects of default. Neither does anyone else, and anyone who says they have the answer should be immediately suspected of rank partisanship. Since it’s never happened before, all we can do is guess at the consequences.

What makes Obama’s position especially egregious is that he is abandoning his own responsibilities in favor of a cheap political ploy — cast blame for any untoward consequences of default on his political opponents. He calculates that the voters will side with him in his fight with congressional Republicans — despite his refusal to deal with the budget deficit.

So if Obama won’t negotiate and congressional Republicans won’t raise the debt ceiling without the president helping to address our massive, unsustainable deficits, we seem to be headed for default. It may save the republic. It may destroy the Republican Party. For good, for bad, for worst, unless one side or the other gives in, we will experience in real life the old curse of unknown provenance:

“May you live in interesting times.”