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

YELLEN

Treasury Secretary Janet Yellen dismissed the idea of ​​minting a $1 trillion platinum coin to prevent the US from defaulting on the national debt as a “gimmick” the Federal Reserve is unlikely to go along with, dealing a blow to the advocates’ hopes of using it. as a final run to Congress amid the debt limit debate.

Progressive economists and some Democratic lawmakers pressured the Treasury to mint a $1 trillion platinum coin and deposit it with the Federal Reserve to raise the debt ceiling and then use the room created by the maneuver to fund more government spending. . He would use a legal loophole that allows the Treasury to mint platinum coins of any denomination.

“It really is by no means a given that the Fed would do that, and I think especially with something that is a gimmick,” Yellen told the Wall Street Journal in an interview on Sunday. “The Fed is not obligated to accept it, there is no requirement on the part of the Fed. It’s up to them what to do.”

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US Treasury Secretary Janet Yellen attends a bilateral meeting with China’s Vice Premier Liu He in Zurich, Switzerland, Wednesday, January 18, 2023. ((Michael Buholzer/Keystone via AP) / AP Staff)

Yellen – who served as chairman of the Federal Reserve for four years from 2014 to 2018 – made the remarks after the US hit its debt limit on Thursday, prompting the Treasury Department to start using “extraordinary measures” that give Congress until at least early June to raise the debt limit.

Her opposition to the $1 trillion coin mint effort is unlikely to come as a surprise: during an earlier standoff over the 2021 debt limit, Yellen discussed the idea of ​​minting a $1 trillion coin and said, “No. I think we should take this seriously.”

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Treasury Building

The Treasury Department building is seen in Washington, DC, on August 29, 2022. ((Photo by DANIEL SLIM/AFP via Getty Images) / Getty Images)

The White House joined Yellen in delaying requests to mint the coin, as press secretary Karine Jean-Pierre told reporters earlier this month that “we are not considering any measures that bypass Congress.”

While the idea is often touted as a way to get around deadlock in Congress during deadlocks over the debt limit, it has also been suggested as a means of funding broad spending plans. Progressive Representative Rashida Tlaib (D-Mich.) previously proposed a bill to mint $2 trillion in platinum coins to fund recurring monthly stimulus payments during the COVID-19 pandemic.

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Federal Reserve Building in Washington, DC

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

While the Federal Reserve has not weighed in on the idea’s merits, the central bank has long tried to keep its efforts focused on monetary policy and avoid meddling in fiscal policy issues that are normally handled by Congress and the president. .

Critics of the plan to mint the $1 trillion coin note that it would further fuel inflation by injecting additional fiscal stimulus into the economy. It could also raise concerns in bond markets as participants begin to doubt the US government’s ability to handle its fiscal issues and make debt payments. This, in turn, can cause interest rates to rise and hurt areas of the economy that depend on financing, such as the housing market, while raising the cost of servicing the existing debt for the government.

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With the $1 trillion coin likely off the table, congressional lawmakers will have to reach a bipartisan agreement with the Biden administration to address the debt limit before the Treasury’s extraordinary measures end this summer.

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