There has been lots of back and forth in the financial press about the wisdom of the US Treasury minting a platinum coin to get around the debt limit. All the “clever” folks think it is a brilliant strategy to defang the idiot Republicans.
But here is why the coin will never be minted. It’s a gimmick. The reason it has not been done on the countless times in the last century when there have been fights over the debt limit is that no US president has been crazy enough to employ such parlor trick to get around a Congressional mandate.
Aside from the obvious constitutional gray area, the use of such a strategy would be viewed very, very negatively by financial markets. Rather than even paying lip-service to deficit reduction, a move to mint the coin would be the clearest possible signal that the US is fundamental serious about getting its financial house in order.
Would I love to see the Obama Treasury strike a big ol’ trillion dollar piece with his picture on it? Hell, yes! It would be great for business. Would it be a good policy? Hell, no. The dollar and bond markets would get hammered on such an outcome as faith in the “full faith and credit” of the US government evaporates in an instant.
Update: A similar sentiment from the esteemed Mike Casey at the WSJ.
