Scratch The Platinum Coin Idea

“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,” a spokesman for the US Treasury said today.

No detailed explanation was provided.

Economist Tim Duy explains, in essence, that the reason is not that the scheme wouldn't work - the reason not to do it is that it would.

Duy explains: "Bottom Line: The platinum coin idea was ultimately doomed to failure because neither the Federal Reserve nor the Treasury could allow for even the remote possibility it might be successful. Its success would not just alter the political dynamic by removing the the debt ceiling as a threat. The success of a platinum coin would fundamentally alter the conventional wisdom about the proper separation of fiscal and monetary policy and the need to control the debt immediately."

The explanation is a little complicated, but Duy spells it out here. In essence, when interest rates are at zero and the monetary authority can't make them any lower and the economy persistently stagnates, there is NO DIFFERENCE between money and debt. And there is no reason to feel any urgency about reducing debt right NOW, NOW, NOW.

Pay no attention to the man behind the curtain.