Time is running out for Republicans and Democrats to agree to raise the US debt limit to prevent the federal government from defaulting.
If an agreement is not reached before June, the government in Washington will not be able to meet its obligations and this could have serious consequencesfor the global economygiven that the US is the main economic engine of the planet.
In recent days, the White House and Republicans in Congress have given signals that negotiations are progressing wellalthough that has not prevented nervousness from spreading.
This has caused some experts and analysts to return to talking about an option – insane for many – of last resort: the issuance of a US$1 trillion platinum coin to save the country from bankruptcy.
And it is that a law of 1997 authorizes the US Secretary of the Treasury. to mint platinum coins of any denomination and for any reason.
Those who defend the minting of this currency say that, given the impossibility of reaching an agreement in Congress to increase the debt ceiling, it would serve to finance the expenses of the US government and avoid bankruptcy.
Treasury Secretary Yanet Yellen has dismissed the idea, as have other officials in the Joe Biden administration, though that hasn’t stopped proponents of the trillion-dollar coin from making their voices heard.
Coins for collectors
The power of the Secretary of the Treasury to mint platinum coins of any denomination was never intended as a solution to increase the US debt limit.
Their goal was to be able to make coins for special editions that they could buy the collectors.
But what if they decided to make the trillion dollar coin?
“They would just have to write $1 trillion in the coin and send it to the Federal Reserve,” Philip Diehl, former head of the US Mint, told NPR public radio’s Marketplace show.
Although many laugh imagining that it would be a gigantic and heavy platinum coin, the truth is that pI would hate be so small withmo a simple common currencyand current of a quarter of a dollar that he keeps in his pocket.
It wouldn’t even need to have all the zeros listed to make it worth 1 trillion. It would be enough for the words to indicate that denomination.
A comment started it all
“If you have to choose between defaulting on payments and minting the currency…. the executive branch does not have the right to allow defaults,” Rohan Gray, a law professor at Willamette University in Oregon and one of the main proponents of the idea, told NPR.
The possibility of the 1 trillion dollar coin to avoid the default of the government of Washington appeared written for the first time in 2010 in the comments section of a blog dedicated to unconventional monetary policy.
The commentator was Carlos Mucha, an unknown Atlanta lawyer, considered by some to be the “intellectual creator” of the platinum coin, who had come across the provision of the 1997 Currency Act that allows platinum coins to be minted.
“Interestingly, Congress has already delegated to the Treasury the authority to mint a $1 trillion coin,” Mucha wrote on the forum, not imagining that his comment would end up being discussed in the halls of the White House and Capitol Hill.
“The best thing was receiving an email from Phil Diehl, a former director of the Mint,” the lawyer told the Vox portal in an interview.
In it, Mucha recounted, the economist told him that his proposal “would really work.”
it went viral
Like a snowball, the blog comment began to gain followers. But it was not until 2011 that it entered the public debate, in the midst of the debt limit crisis that occurred during the first government of Barack Obama.
In those days, a letter was published with the support of 7,000 signatures, including those of some leading economists, such as the Nobel laureate Paul Krugman and his own Philip Diehlpromoting the initiative.
It even came to have a hashtag on Twitter: #MintTheCoin (something like #mint the coin).
The idea, however, did not prosper, although every time the political and economic drama of the debt limit is unleashed, as it is now, it resurfaces.
“In my opinion it is ato ruse“
In the midst of the current crisis, the Joe Biden government does not consider it a possible alternative.
“In my opinion it is a ruse,” said the head of the Treasury Department, Janet Yellen, a few days ago.
Some experts argue that the idea of a US$1 trillion coin has been put on the table as one of the weapons of political negotiation of the Democrats in the fight they maintain with the Republicans.
The latter are not willing to approve in Congress the increase in the debt limit requested by the Joe Biden government without first obtaining certain counterparts, such as cutting public spending.
The pulse is about to be defined given that if the parties do not reach an agreement, on June 1 the US will enter into cessation of payments.
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