The Seattle Times:
If President Obama wants to avoid an economic calamity next year, he could always show up at a news conference bearing two shiny platinum coins, each worth … $1 trillion.
That sounds wacky, but some economists and legal scholars have suggested that the “platinum coin option” is one way to defuse a crisis if Congress cannot or will not lift the debt ceiling soon. In theory.
The U.S. government is facing a real problem. The Treasury Department will hit its $16.4 trillion borrowing limit by February at the latest. Unless Congress reaches an agreement to lift the debt ceiling, the government will no longer be able to borrow enough money to pay all its bills.
Last year, Republicans in Congress resisted raising the debt ceiling until the last minute — and then only in exchange for spending cuts. Panic ensued.
What happens if there is another showdown this year?
Enter the platinum coins. Under current law, the Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.
Under this scenario, the U.S. Mint would make a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
Obviously, the only downside to this plan is the inflation, but it’s not like the government is serious about that, seeing as how the dollar has lost over 95% of its value in the last 99 years. I suppose it would be technically better to use the trillion dollar coins to buy back US debt and retire it, thereby monetizing the debt-inflation that has already occurred. However, in the grand scheme of things, it doesn’t really matter. What matters is that we extend and pretend for another year until Krugman and the Neo-Keynesians finally Figure Out How To Solve The Economy For Good This Time (We Really Really Mean It)™.