Yellen rejects trillion-dollar coin for debt limit as 'gimmick'

Treasury Secretary Janet Yellen appearing before the House Financial Services Committee in Washington on Sept 30, 2021. PHOTO: NYTIMES

WASHINGTON (BLOOMBERG) - United States Treasury Secretary Janet Yellen said she opposes a US$1 trillion coin to cope with the debt ceiling, saying it is a "gimmick".

The concept of the US minting a trillion-dollar platinum coin in order to avoid a default on federal debt has gripped some quarters of markets and Washington amid political brinkmanship over the debt ceiling.

The Biden administration has consistently dismissed it as an option, insisting that the debt ceiling be raised by Oct 18 through bipartisan action.

"I'm opposed to it and I don't believe that we should consider it seriously. It's really a gimmick," Dr Yellen said of the platinum coin, speaking in a CNBC television interview on Tuesday (Oct 5).

Dr Yellen said issuing the coin would be "equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt. It compromises the independence of the Fed conflating monetary and fiscal policy, and instead of showing that Congress and the administration can be trusted to pay the country's bills, you're really going to do the opposite".

The Treasury secretary echoed President Joe Biden's message from Monday, warning that the US government is at risk of running out of options to stay within the legal limit on its debt.

Mr Biden blamed Senate Republican Leader Mitch McConnell for what he described as a "meteor" headed for the economy.

White House press secretary Jen Psaki said on Monday that alternative options for avoiding the debt ceiling like minting the coin were not "viable, either because they wouldn't be accepted by the Federal Reserve, by the guidance of our Treasury secretary, or just by legal restrictions".

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