Treasury Secretary Janet Yellen trashes minting a $1 trillion coin as solution to debt-ceiling crisis as US inches toward default

• Yellen slammed the idea of minting a $1 trillion platinum coin to prevent a US default.
• "I'm opposed to it, and I don't believe we should consider it seriously," Yellen said Tuesday.
• The idea has gained support among some economists to prevent ruinous global economic consequences.

Treasury Secretary Janet Yellen trashed the idea of minting a $1 trillion coin to defuse the debt-ceiling crisis as the US veered toward what could be a devastating default on its debt payments.

"I'm opposed to it, and I don't believe we should consider it seriously," Yellen told CNBC on Tuesday. "It's really a gimmick, and what's necessary is for Congress to show the world can count on America paying its debts."

She added: "The platinum coin is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt.

"It compromises the independence of the Fed, conflating monetary and fiscal policy."

Yellen said minting a platinum coin would undercut faith that the US "can be trusted to pay the country's bills."

Her remarks throw more cold water on an idea that's gained traction, particularly among left-leaning economists, as the US inches closer to what could be an economically devastating default.

The law that covers the types of coins the US can mint allows the Treasury to create a $1 trillion platinum coin and deposit it at the Federal Reserve to continue paying its bills as normal. Proponents say preventing a debt-ceiling breach far outweighs the risks of a silly-sounding approach to sidestep staunch GOP opposition.

"Extraordinary times call for extraordinary gimmicks," the economist Paul Krugman, who has a Nobel Memorial Prize in Economic Sciences, wrote in a tweet on Friday.

He wrote a recent New York Times op-ed urging the Biden administration to take unilateral action to mint the coin to avoid a US default.

Still, the White House has not been swayed, even as Republicans firmly dig in on their insistence that Democrats must lift the borrowing cap on their own.

"We obviously look at a range of options, and none of those options were viable, either because they wouldn't be accepted by the Federal Reserve, by the guidance of our Treasury secretary, or just by legal restrictions," White House press secretary Jen Psaki said Tuesday.

At least one former Obama-era official shared Yellen's assessment.

"We studied the platinum coin during the Obama administration and concluded it was not legally viable," Jason Furman, a former top economist for the Obama administration, said in an interview with Insider last month. "The uncertainty around it would cause many of the same problems you would get from default. There is no other option here than Congress raising the debt ceiling."

Furman, now a Harvard University professor, said one concern raised during the Obama administration was the threat of lawsuits and dragging the Federal Reserve into a high-stakes political battle. The Fed is considered an independent institution.

"In general, we didn't think it was legal," he said. "It creates its own hosts of problems."

Democrats set up a vote on Wednesday to suspend the debt limit through the end of next year, but it's poised to crash into a blockade from Senate Republicans.

Yellen said in the same CNBC interview that she "fully" expected a recession if the US defaulted.