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.

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Emmanuel Macron can win - but so can Marine Le Pen

Macron is the frontrunner, but he remains vulnerable to an upset. 

French presidential candidate Emmanuel Macron is campaigning in the sixth largest French city aka London today. He’s feeling buoyed by polls showing not only that he is consolidating his second place but that the voters who have put him there are increasingly comfortable in their choice

But he’ll also be getting nervous that those same polls show Marine Le Pen increasing her second round performance a little against both him and François Fillon, the troubled centre-right candidate. Her slight increase, coming off the back of riots after the brutal arrest of a 22-year-old black man and Macron’s critical comments about the French empire in Algeria is a reminder of two things: firstly the potential for domestic crisis or terror attack to hand Le Pen a late and decisive advantage.  Secondly that Macron has not been doing politics all that long and the chance of a late implosion on his part cannot be ruled out either.

That many of his voters are former supporters of either Fillon or the Socialist Party “on holiday” means that he is vulnerable should Fillon discover a sense of shame – highly unlikely but not impossible either – and quit in favour of a centre-right candidate not mired in scandal. And if Benoît Hamon does a deal with Jean-Luc Mélenchon – slightly more likely that Fillon developing a sense of shame but still unlikely – then he could be shut out of the second round entirely.

What does that all mean? As far as Britain is concerned, a Macron or Fillon presidency means the same thing: a French government that will not be keen on an easy exit for the UK and one that is considerably less anti-Russian than François Hollande’s. But the real disruption may be in the PR battle as far as who gets the blame if Theresa May muffs Brexit is concerned.

As I’ve written before, the PM doesn’t like to feed the beast as far as the British news cycle and the press is concerned. She hasn’t cultivated many friends in the press and much of the traditional rightwing echo chamber, from the press to big business, is hostile to her. While Labour is led from its leftmost flank, that doesn’t much matter. But if in the blame game for Brexit, May is facing against an attractive, international centrist who shares much of the prejudices of May’s British critics, the hope that the blame for a bad deal will be placed solely on the shoulders of the EU27 may turn out to be a thin hope indeed.

Implausible? Don’t forget that people already think that Germany is led by a tough operator who gets what she wants, and think less of David Cameron for being regularly outmanoeuvered by her – at least, that’s how they see it. Don’t rule out difficulties for May if she is seen to be victim to the same thing from a resurgent France.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.