Through a hypothetical Oval Office meeting, a Yale law professor describes a platinum solution to the debt ceiling problem. The basic idea is that if Treasury can get the money to cover government spending without borrowing then it does not need to exceed the debt ceiling maximum. How? Just use 2 platinum coins.
At this hypothetical meeting, Secretary of the Treasury Geithner explains to the President, Vice President and Harry Reid, that an obscure provision in “31 U.S.C. Section 5112(k) says that we can print platinum coins in any denomination at our discretion…”
Geithner continues, “So we told the Mint to make a couple of trillion dollar platinum coins. Then, if the President gives the order, the Mint deposits the two coins in its account at the Federal Reserve. The coins are legal tender. We direct the Federal Reserve to move this money into the Treasury’s accounts, and we are up around two trillion dollars.”
That means the Treasury has an extra $2 trillion to spend and does not need to have the debt ceiling raised.
While no one takes the idea seriously, it could happen.
Please note that Bloomberg says Secretary Geithner has indicated he will be leaving Treasury before the next debt ceiling crisis strikes. He has already notified lawmakers (posted here at econlife) that we have hit the ceiling but not to worry because he can manipulate spending for approximately 2 months to avoid a default. And by then, he will be gone.
One question: Whose picture should appear on the coin?
A 2009 $100 Platinum Coin From the US Mint:
A Platinum Coin Can Have Its Face Value Determined by the Treasury
Sources and Resources: Since Yale Law Professor Jack M. Balkin described the idea here in his hypothetical Oval Room meeting, it has spread through countless blogs and new articles. A summary of the comments on the platinum coin solution is here and recent articles from The Washington Post and Businessinsider are here and here. For my information on Secretary Geithner’s departure, I used this Bloomberg column.
Note: The title of this note has been slightly edited.