The Platnium Option

By Jason Colella, FPP Co-founder and Sr. Political Editor

We adverted a cliff, but now there is a problem of a ceiling. In a few months, Republicans will undoubtedly hold the world’s economy hostage with a Debt Ceiling Debate. They will threaten defaulting on the National Debt in order institute massive spending cuts that they so long for. However, many would argue that crisis can be adverted by at least two different options.

The first is widely known because of the Debt Ceiling Debacle of 2011 is simply invoking a little used and under looked portion of the 14th amendment. It states “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion shall not be questioned.” This would be a wise option for the President because minimally it would raise the Debt Ceiling until the guaranteed court challenge to the invocation could be resolved.

But, a more interesting option has recently begun to pick up steam; I really like this one because it combines two of my favorite activities politics and numismatics (coin collecting). It has been dubbed the Platinum Option, and it is a great piece of monetary and macroeconomic policy. It was first posted to a blog over a year ago but has recently gained the respect of many famous economists most notably the Nobel Prize winning Paul Krugman. The idea is simple. In the 1990s, congress approved a bill to allow the mint to produce platinum coins. The catch is the legislation did not specify the face value of the currency to be minted (this was done to allow a wide array of collectible coins to be produced). This means that President Obama could order the minting of an extraordinarily high value coin. It is must often cited as one trillion dollars. The Treasury Department would then deposit this new coin in the US Government’s bank account at the Federal Reserve. As it would be legal US tender, the Feds would be forced to accept it and trade it for cash on hand. It is unlikely to fuel inflation, given that the economy is currently depressed.This would be one interesting and bizarre way to solve the debt ceiling debate.