The platinum coin is killed as America careens toward default

The platinum coin is dead, long live the debt ceiling.

On Saturday evening, the Washington Post's Ezra Klein dropped a bombshell: The platinum coin gambit – the plan to circumvent the American debt ceiling by minting a trillion-dollar coin and depositing it in the Federal Reserve – is dead. Klein writes:

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.

The Treasury's take on the law is one thing; but the Federal Reserve, as a quasi-independent body, is really what's put the kibosh on the whole plan. If it doesn't believe that using a platinum coin to circumvent the debt limit would be legal, that's it. The lynchpin of the plan was that the Treasury, after using powers granted to it through a loophole in a law intended to let it mint commemorative coins for collectors, would be able to deposit the coin in its account in the Fed. If the Fed won't take it, the plan's bust.

Joe Weisenthal, the most consistent advocate of the platinum coin, points out that it's hard to work out what point of law the Fed was actually trying to apply here:

It seems odd that the Fed would decide that there's some legal tender that it will recognize, and some legal tender that it wouldn't recognize.

Paul Krugman, who became a high-profile advocate of minting the coin last week, asks what the administration's plan is now, but also somewhat unfairly places the blame on Obama. Given the White House's comment to Buzzfeed focuses on the Fed, it seems like they weren't exactly behind the move to pre-emptively remove the bargaining chip from the table.

Regardless, the administration's position now is clear. The debt ceiling must be lifted, and they will offer no "concessions" to do so. With the platinum coin out of the equation – and with the so-called "constitutional option", where the President cites the 14th amendment's command that the validity of the public debt "shall not be questioned" and ignores the debt ceiling, ruled out by the White House last month – the Republicans can be under no illusions that if they fail to concede, America will definitely have a messy government shutdown, and will likely enter technical default on its public debt. The only question that they have to answer is whether they have an ounce of rationality left, or if they'll take the whole system down, themselves included.

Past experience suggests that the latter is worryingly possible. For one thing, conservative economists like John Cochrane have been minimising the effect of hitting the ceiling. Cochrane casts doubt on possibility of default by rightly pointing out that the Treasury has enough income to make debt repayments even if the ceiling is hit. But by ignoring the practical aspects of hitting the ceiling, he bypasses an important point. The treasury pays its bills with a vastly complex, automated system. It is not clear it has the technology to "prioritise" debt repayments, nor is it clear that to do so would be legal.

And even worse, those GOP members who do understand the likelihood of a default aren't too concerned. Politico's Jim Vandehei, Mike Allen and Jake Sherman write:

GOP officials said more than half of their members are prepared to allow default unless Obama agrees to dramatic cuts he has repeatedly said he opposes…

“For too long, the pitch was, we’ll deal with it next time,” said Rep. Jason Chaffetz, a conservative from Utah. He said GOP lawmakers are prepared to shut things down or even default if Obama doesn’t bend on spending. “No one wants to default, but we are not going to continue to give the president a limitless credit card.”

If the US did default on its debt – even just by paying a coupon a day late – the international knock-on effects would be massive, and unprecedented. Now that every option for preventing that has been taken off the table save for negotiating with the most radical congress ever, the financial community may start to take note.

Photograph: Wikimedia Commons

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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The campaign to keep Britain in Europe must be based on hope, not fear

Together we can show the world a generous, outward-facing Britain we can all be proud of.

Today the Liberal Democrats launched our national campaign to keep Britain in Europe. With the polls showing the outcome of this referendum is on a knife-edge, our party is determined to play a decisive role in this once in a generation fight. This will not be an easy campaign. But it is one we will relish as the UK's most outward-looking and internationalist party. Together in Europe the UK has delivered peace, created the world’s largest free trade area and given the British people the opportunity to live, work and travel freely across the continent. Now is the time to build on these achievements, not throw them all away.

Already we are hearing fear-mongering from both sides in this heated debate. On the one hand, Ukip and the feuding Leave campaigns have shamelessly seized on the events in Cologne at New Year to claim that British women will be at risk if the UK stays in Europe. On the other, David Cameron claims that the refugees he derides as a "bunch of migrants" in Calais will all descend on the other side of the Channel the minute Britain leaves the EU. The British public deserve better than this. Rather than constant mud-slinging and politicising of the world's biggest humanitarian crisis since the Second World War, we need a frank and honest debate about what is really at stake. Most importantly this should be a positive campaign, one that is fought on hope and not on fear. As we have a seen in Scotland, a referendum won through scare tactics alone risks winning the battle but losing the war.

The voice of business and civil society, from scientists and the police to environmental charities, have a crucial role to play in explaining how being in the EU benefits the British economy and enhances people's everyday lives. All those who believe in Britain's EU membership must not be afraid to speak out and make the positive case why being in Europe makes us more prosperous, stable and secure. Because at its heart this debate is not just about facts and figures, it is about what kind of country we want to be.

The Leave campaigns cannot agree what they believe in. Some want the UK to be an offshore, deregulated tax haven, others advocate a protectionist, mean-hearted country that shuts it doors to the world. As with so many populist movements, from Putin to Trump, they are defined not by what they are for but what they are against. Their failure to come up with a credible vision for our country's future is not patriotic, it is irresponsible.

This leaves the field open to put forward a united vision of Britain's place in Europe and the world. Liberal Democrats are clear what we believe in: an open, inclusive and tolerant nation that stands tall in the world and doesn't hide from it. We are not uncritical of the EU's institutions. Indeed as Liberals, we fiercely believe that power must be devolved to the lowest possible level, empowering communities and individuals wherever possible to make decisions for themselves. But we recognise that staying in Europe is the best way to find the solutions to the problems that don't stop at borders, rather than leaving them to our children and grandchildren. We believe Britain must put itself at the heart of our continent's future and shape a more effective and more accountable Europe, focused on responding to major global challenges we face.

Together in Europe we can build a strong and prosperous future, from pioneering research into life-saving new medicines to tackling climate change and fighting international crime. Together we can provide hope for the desperate and spread the peace we now take for granted to the rest of the world. And together we can show the world a generous, outward-facing Britain we can all be proud of. So if you agree then join the Liberal Democrat campaign today, to remain in together, and to stand up for the type of Britain you think we should be.