« Fed Watch: Safe Assets and the Coordination of Fiscal and Monetary Policy | Main | Fed Watch: On The Disruptiveness of the Platinum Coin »

Saturday, January 12, 2013

'Treasury: We won’t Mint a Platinum Coin'

Ezra Klein:

Treasury: We won’t mint a platinum coin to sidestep the debt ceiling: The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.
That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said. ...

Republicans are now free to take the economy hostage if they so desire. The question is whether Obama can make them pay for it politically if they decide to invoke this threat.

But maybe they've kept a card up their sleeve? Paul Krugman:

So What Will You Do, Mr. President?: If I’d spent the past five years living in a monastery or something, I would take the Treasury Department’s declaration that the coin option is out as a sign that there’s some other plan ready to go. Maybe 14th Amendment, maybe moral obligation coupons or some other form of scrip, something.
And maybe there is a plan.
But as we all know, the last debt ceiling confrontation crept up on the White House because Obama refused to believe that Republicans would actually threaten to provoke default. Is the WH being realistic this time, or does it still rely on the sanity of crazies? ...[D]efault ... would risk a huge collapse of confidence.
So is there a plan, or will it just be another case of tough talk followed by a tail-between-the-legs retreat?
As I said, if we didn’t have some history here I might be confident that the administration knows what it’s doing. But we do have that history, and you have to fear the worst.

Yep -- hard to be confident that "there's some other plan ready to go," and it's also hard to be confident that Obama can win the battle politically -- make the political cost so high that Republicans back off on any threats. So here we are again.

    Posted by on Saturday, January 12, 2013 at 01:48 PM in Budget Deficit, Economics, Politics | Permalink  Comments (49)

          


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.