U.S. Debt Ceiling: Platinum and Gold Are Not the Answer
In the last press conference of his first term, President Barack Obama warned Congress that it must raise the debt ceiling to avoid disastrous side effects. He goes on to claim that failure to raise the ceiling could cause delays in Social Security benefits and checks for veterans. As usual, the two political parties are not expected to resolve their bickering before the last possible moment, which is creating a debate over bandaid solutions. However, ridiculous platinum coins and the nation’s gold reserves appear to be off the table.
The United States started the new year by hitting its record debt ceiling of $16.394 trillion. In the final days of 2012, Treasury Secretary Timothy Geithner sent a letter to Congress warning of the inevitable event and said the Treasury Department will take “extraordinary measures” to provide approximately $200 billion in headroom. The tricks will give the bobble-heads in Washington roughly until the beginning of March to work out a deal.
The first so-called temporary solution to the current debt ceiling fiasco was an idea that began a couple years ago. Due to a law intended to allow the Treasury Department to produce commemorative coins for collectors, the Treasury could theoretically mint a platinum coin with a face value of $1 trillion. In theory, the Treasury could order the West Point Mint to produce a one ounce $1 trillion platinum coin and have it sent to the Federal Reserve. Since it is legal tender, the central bank would be obligated to accept it. The coin could then be used to wipe out $1 trillion in debt or even be credited to the Treasury’s checking account at the Fed, allowing Washington to deploy another $1 trillion without issuing more debt. This bandaid was scrapped before it was even removed from the box.
No platinum or golden bandaid…
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