Obama's Lucky Trillion Dollar Coin

January 15, 2013 2:45 PM EST Send to a Friend

Yes It's a Real Picture

Following last year's contentious battle over the fiscal cliff, Democrats and Republicans are once again set to face off over the debt ceiling, which in most ways is simply a continuation of previous disagreements. Stakes are high and many fear dire implication if politicians fail to reach agreement. Set against this background, a bizarre and utterly preposterous idea has surfaced, the trillion dollar platinum coin.

The idea behind the trillion dollar platinum coin is that the U.S. Treasury could invoke the 14th amendment, issue a trillion dollar platinum coin, deposit it with the Federal Reserve, and viola, debt ceiling problem solved. The idea drew a massive following, in part because of its simplicity, though critics claimed the idea is preposterous.

Over the weekend the White house shot down the idea, and they were not coy about explaining their rational. They want to force Republicans' hand, and providing an escape hatch, however preposterous, may have emboldened republicans to hold the line on spending cuts.

Despite this, speculation about the platinum coin continues, and some say the White House could still use the trillion dollar coin as last ditch solution allowing them to twist Republicans' arms, forcing a last minute resolution with relatively few compromises.

Commenting on Washington's high stakes poker match, this morning Pimco’s Mohamed A. El-Erian said, "As controversial and, in the case of the coin option, laughable as these approaches are a growing number of people believe they would provide Democrats with credible threats to shift the balance of power."

El-Erian doubts democrats will use the coin in the end. He also doubts Washington will reach a meaningful compromise. The most likely result, in his view, is another 'kick the can' agreement.

However, as push turns to shove leading up to the dramatic conclusion of talks in Washington later this year, the bizarre notion of a trillion dollar coin may yet play a role in history. For now it remains an interesting tale of a strange idea that never saw the light of day. It rests quietly, out of site in the pant pocket of President Barrack Obama. Only he knows for sure if he will be courageous enough, or some would say stupid enough, to use it.


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Forex, Insiders' Blog

Related Entities

Pacific Investment Management Company, LLC (PIMCO), Barack Obama

Add Your Comment