If it's going to come down to a trillion-dollar platinum coin, we might as well understand what it is and isn't. I see it as that moment in the movies when the priest, dealing with the devil incarnate, holds up his little cross. The devil then evaporates or melts or something else that costs about a trillion in special effects and makes little boys incredibly excited.
The coin isn't actually through-and-through platinum, weighing a ton, carried by federal employees in a shrouded van (accompanied by noisy police cars) to the Federal Reserve and credited to our account there. Instead it's a Constitutional special effect in which the president accepts the Constitutional opportunity to mint a "commemorative" coin worth a conceptual trillion dollars as a bailout for a group of legislators who refuse to take up their normal responsibilities. It's a fake toad in a real garden.
In case you’re wondering, no, this wouldn’t be an inflationary exercise in printing money. Aside from the fact that printing money isn’t inflationary under current conditions, the Fed could and would offset the Treasury’s cash withdrawals by selling other assets or borrowing more from banks, so that in reality the U.S. government as a whole (which includes the Fed) would continue to engage in normal borrowing. Basically, this would just be an accounting trick, but that’s a good thing. The debt ceiling is a case of accounting nonsense gone malignant; using an accounting trick to negate it is entirely appropriate.
But wouldn’t the coin trick be undignified? Yes, it would — but better to look slightly silly than to let a financial and Constitutional crisis explode. ...Paul Krugman, NYT
It's fully within the president's powers to do this. If we're talking about right now, it's also a reproof -- in the guise of some theatre of the absurd -- aimed at a group in Congress that didn't do its job. As Krugman points out, a stark reality lies behind all this craziness.
Under the Constitution, fiscal decisions rest with Congress, which passes laws specifying tax rates and establishing spending programs. If the revenue brought in by those legally established tax rates falls short of the costs of those legally established programs, the Treasury Department normally borrows the difference.
Lately, revenue has fallen far short of spending, mainly because of the depressed state of the economy. If you don’t like this, there’s a simple remedy: demand that Congress raise taxes or cut back on spending. And if you’re frustrated by Congress’s failure to act, well, democracy means that you can’t always get what you want. ... Paul Krugman, NYT
In this case, because Congressional Republicans haven't... Oh, well. You know.
There are other ways of dealing with the problem of a fake cliff in a real America.
... The platinum coin may not be the only option. Maybe the president can simply declare that as he understands the Constitution, his duty to carry out Congressional mandates on taxes and spending takes priority over the debt ceiling. Or he might be able to finance government operations by issuing coupons that look like debt and act like debt but that, he insists, aren’t debt and, therefore, don’t count against the ceiling.
Or, best of all, there might be enough sane Republicans that the party will blink and stop making destructive threats.
Unless this last possibility materializes, however, it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin! ...Paul Krugman, NYT
Wish I'd said it that way:
The argument for the coin is basically that whether we go into default or avert it with the coin, either way we’re going through a banana republic-style crisis, so better to do that without also going through a massive financial meltdown. I still don’t believe the GOP’s default threat is anything but an empty ruse. ...Greg Sargent, WaPo
Which, I mean to say, above, is why the platinum coin concept is so delicious. It's meeting an empty ruse with a humorous gesture. If, as some say, Obama has moved into his Lee Atwater phase, then one could also see the platinum coin as a reminder to Republicans that Obama stands ready to hand them the suicide pistol.