US rejects platinum coin to pay off debt

Some analysts had speculated the US would mint the coins to avoid a battle over the debt ceiling.

The US Treasury has said it will not mint platinum coins as a way of averting a looming political confrontation over the country's debt ceiling.

The idea of producing a coin or coins with the value of $1 trillion was initially raised last year but the concept had started to gain traction in recent days among financial analysts and Democrats.

In theory, the Treasury could mint the coin and deposit it into its own account at the Federal Reserve, which would allow the government to write down or cancel $1 trillion of its $16.4 trillion debt pile.

But the Treasury today rejected producing the coins as a viable method of tackling the debt ceiling.

"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," Treasury spokesman Anthony Coley said.

Markets around the world have been buoyed by the New Year's Day approval of a compromise deal on the so-called "fiscal cliff" - tax rises and spending cuts that threatened to push the US into recession.

However, investors are now starting to focus their attention on the US debt ceiling, the nation's borrowing limit, which the country reached on December 31. Since then, the Treasury has been using extraordinary measures to finance the government, which are expected to run out next month.

White House spokesman Jay Carney said that with the issue of platinum coins out of the way, pressure is mounting on Republicans in Congress to lift the debt ceiling.

"Congress can pay its bills or they can fail to act and put the nation into default," he said. "When congressional Republicans played politics with this issue last time, putting us at the edge of default, it was a blow to our economic recovery, causing our nation's credit rating to be downgraded."