Yellen rejects minting $1T platinum coin to avoid US debt ceiling as a ‘gimmick’

Treasury Secretary Janet Yellen rejected the idea of ​​creating 1 trillion dollars to save the US from paying the national debt as a “gimmick” that is unlikely for the Federal Reserve to go along with it, dealing a blow to the hopes of representatives to use it. as an end around Congress amid the debt ceiling debate.

Progressive economists and other Democratic lawmakers have pushed for the Treasury to create a $1 trillion platinum coin and deposit it with the Federal Reserve to raise the debt ceiling, then use the headroom created by the mover to fund more government spending. It could exploit a legal loophole that allows the Treasury to mint platinum coins of any denomination.

“It’s really not any conceivable way that the Fed would do that, and I think it’s more of a tricky thing,” Yellen told the Wall Street Journal in an interview on Sunday. “The Fed doesn’t have to accept it, there’s no need on the part of the Fed. It’s up to them what to do.”

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US Debt Claims TREASURY IN ‘UNUSUAL CONDITIONS’

US Treasury Secretary Janet Yellen

US Treasury Secretary Janet Yellen attends a bilateral meeting with Chinese Vice Premier Liu He in Zurich, Switzerland on Wednesday, Jan. 18, 2023. ((Michael Buholzer/Keystone via AP)/AP Newsroom)

Yellen – who served as the chairman of the Federal Reserve for four years from 2014 to 2018 – made a speech after the US reached the credit limit on Thursday which caused the Treasury Department to start using “extraordinary measures” that give Congress until immediately. In June to raise the credit limit.

Her opposition to the desire to create a $1 trillion coin is unlikely: During the previous debt moratorium in 2021, Yellen discussed the idea of ​​creating a $1 trillion coin and said, “I don’t think we should take it seriously.”

SOVEREIGN DEBT REPRESENTS THE RISK THAT ENERGIZES THE ‘TOLERANCE’ OF OUR ECONOMY.

The White House has joined Yellen in returning calls for the coin, as press secretary Karine Jean-Pierre told reporters earlier this month that “we are not looking at any steps that would go around Congress.”

While the idea has been floated as a way to shut down the grid in Congress during the failure of the debt ceiling, it has been suggested as a way to finance broader spending plans. Rep. Rashida Tlaib (D-Mich.) previously proposed a bill to create $2 trillion in platinum coins to fund ongoing monthly stimulus payments during the COVID-19 pandemic.

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The Federal Reserve Building in Washington, DC

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

Although the Federal Reserve has not weighed in on the merits of the idea, the central bank has long tried to keep its efforts focused on monetary policy and has shied away from involvement in monetary policy matters controlled by Congress and the president. .

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Critics of the $1 trillion stimulus plan note that it will drive up inflation by injecting additional monetary stimulus into the economy. It could cause concern in bond markets as participants begin to doubt the US government’s ability to meet its financial obligations and make debt payments. That, in turn, could cause interest rates to rise and hurt areas of the economy that depend on funding such as the housing market, while also increasing the government’s debt servicing costs.

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With a $1 trillion coin potentially off the table, lawmakers in Congress will need to reach a bipartisan deal with the Biden administration to fix the debt limit before Treasury’s extraordinary measures end this summer.

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