Another debt-ceiling standoff is upon us, which means a bizarre-sounding idea is once again in circulation: Mint a $1 trillion coin to pay the nation's debts. Treasury chief Janet Yellen, however, suggests advocates should forget it because the nation's central bank probably would not accept such a coin, reports the Wall Street Journal. “It truly is not by any means to be taken as a given that the Fed would do it, and I think especially with something that’s a gimmick,” she tells the newspaper. “The Fed is not required to accept it, there’s no requirement on the part of the Fed. It’s up to them what to do.”
As Seeking Alpha explains, the idea stems from a loophole in a 1996 law that gives the Treasury secretary the authority to mint platinum coins of any denomination. The spirit of the law applies to commemorative coins, but the actual text doesn't specify any limitations. Thus, it's not illegal, but the "the accounting ploy has been frowned upon as it could threaten the checks and balances of Congress and open a Pandora's box about all of public finance," per Seeking Alpha. Yellen has been warning of catastrophic consequences in a matter of months if Democrats and Republicans in Congress can't agree to lift the debt ceiling and allow the US to borrow more money to pay its bills. (More Janet Yellen stories.)
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