While we have avoided the fiscal cliff for now, the next major financial debate in Washington will be about how to go about paying off the outstanding US Debt.
Some say, however, the problem could be solved by a very expensive coin.
When the United States again reaches the maximum borrowing amount from foreign nations (also known as the debt ceiling) in February, the House of Representatives and Senate will decide whether to raise it again or to find another solution for the US Debt crisis.
One idea that has been thrown around recently may seem farfetched, but is entirely feasible: to mint a few trillion dollar platinum coins.
While the US can’t just print unlimited money or mint enough gold, silver and copper coins to cover the debt, there are no restrictions on minting platinum coins.
“There are limits on how much paper money the U.S. can circulate and rules that govern coinage on gold, silver and copper,” said analyst Chris Krueger from Guggenheim Securities’ Washington Research Group. “BUT, the Treasury has broad discretion on coins made from platinum.”
“Although the Treasury can’t just create money out of thin air to pay its bills, there is a technicality in the law that says the Treasury has special discretion to create platinum coins of any denomination, and the thinking is that [Secretary of the Treasury] Tim Geithner could make the coin and walk it over to the Federal Reserve and deposit it in the Treasury’s bank account,” adds Joe Weisenthal of Business Insider.
While the idea may sound crazy, it has been one of the most talked about options this year as far as the US Debt crisis is concerned, and members of Congress have already endorsed it.
“It sounds silly but it’s absolutely legal,” Rep. Jerrold Nadler (D-New York) tells New York Capital this week. ”There is specific statutory authority that says that the Federal Reserve can mint any non-gold or -silver coin in any denomination, so all you do is you tell the Federal Reserve to make a platinum coin for one trillion dollars, and then you deposit it in the Treasury account, and you pay your bills.”
So is it possible that the solution was directly under our nose this whole time? We’ll see whether or not this will be gone through with by Congress, but Krueger did say to the American Enterprise Institute that this option has a “VERY low probability” of happening.
James Gilbert | Elite.